Green Tax Reform and Employment Double Dividend in Australia Should Australia Follow Europe’s Footsteps? A CGE Analysis

Abstract

Australia has one of the highest per capita carbon emissions, and its energy sector contributes significantly to the country’s carbon emissions. Renewable energy and climate change call for a shift from fossil fuels to low-carbon technologies for energy production. Policies aiming to reduce carbon emissions are perceived by many people as leading to higher living costs, but changes in energy policies can also lead to economic gains in the presence of revenue recycling. This article applies a computable general equilibrium approach to study the effect of energy tax in the Australian economy. Four different scenarios of green tax reform (GTR) are simulated to test the employment double dividend (EDD) potential. All four scenarios simulate changes in energy tax and one of four tax revenue recycling policies including (a) value added tax reduction, (b) payroll tax reduction, (c) goods and services tax (GST) reduction and (d) a mixture of all three recycling policies. The results show strong EDD potential of GST and payroll tax reduction when used along with energy tax in a revenue-neutral GTR approach. The study also presents a comparison of an optimal EDD inducive policy design between the European and Australian GTR approaches. JEL classifications: H23, C68, H21, Q48

Australia’s green energy development strategy

“…The other article proves this position, based on the labor market (Boromisa et al 2015) -in case it's underdeveloped, the country won't be able to manage green energy facilities and infrastructure normally. The Australian case and the question on whether the country should start green energy transformation is raised in (Maxim and Zander 2020). It's notable that the authors prove that the financial measures do have a significant potential in green energy promotion, but don't estimate whether this promotion is needed.…”