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Keywords:

  • carbon tax;
  • policy uncertainty;
  • decision making;
  • electricity prices
  • H23;
  • D04;
  • D21;
  • D22;
  • D62

In this brief update on analysing the economic costs associated with carbon policy uncertainty, we outline the public policy processes commenced by the Commonwealth Government following the publication of Nelson et al. (2010). We also summarise the research completed by other economists testing the hypothesis that there are material economic costs associated with ongoing carbon policy uncertainty. Independent studies by Frontier Economics (2010), Deloitte (2011) and Sinclair Knight Merz (2011) all conclude that climate change policy uncertainty will result in sub-optimal capital investment within the electricity sector. In turn, this sub-optimal investment will manifest itself in unnecessary increases in electricity prices.