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Western Australia's Domestic Gas Reservation Policy: The Elemental Economics
Author(s) -
Neill Kelly
Publication year - 2017
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/1759-3441.12166
Subject(s) - reservation , economics , international economics , value (mathematics) , deadweight loss , international trade , market economy , political science , welfare , machine learning , computer science , law
Western Australia's domestic gas reservation policy nominally requires new gas export projects to supply the equivalent of 15 per cent of their exports to the domestic gas market. This export restriction suppresses the domestic price below the export netback price. A theoretical model shows that a binding reservation policy always causes a deadweight loss, and clarifies the source of this loss. Western Australia's reservation policy is estimated to cause losses with a present value of between $6.9 and $22.9 billion, depending on export netback prices.