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Delayed Carbon Policy Certainty and Electricity Prices in Australia *
Author(s) -
Nelson Tim,
Kelley Simon,
Orton Fiona,
Simshauser Paul
Publication year - 2010
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/j.1759-3441.2010.00084.x
Subject(s) - electricity , renewable energy , certainty , economics , electricity generation , electric power industry , natural resource economics , environmental economics , electricity retailing , emissions trading , electricity market , industrial organization , microeconomics , business , power (physics) , greenhouse gas , engineering , ecology , philosophy , physics , epistemology , quantum mechanics , electrical engineering , biology
The power industry has been grappling with regulatory uncertainty in relation to carbon since late 2004 when Australian state governments committed to the introduction of an emissions trading scheme. This article estimates the additional cost to electricity users associated with the sub‐optimal introduction of new power generating capacity given regulatory delays. We find the costs to be significant; under a business‐as‐usual electricity demand growth scenario, prices in 2020 would be about $8.60/MWh higher than necessary. We also find that costs to consumers are lower where complementary policies are introduced to encourage energy efficiency and renewable energy.