Carbon pricing and electricity markets — The case of the Australian Clean Energy Bill |
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| Affiliation: | 1. Institute of Sustainable Energy, Boston University, Boston, MA, United States;2. Department of Electrical & Computer Engineering, Aristotle University of Thessaloniki, Greece;3. Department of Mechanical Engineering, University of Thessaly, Volos, Greece;1. Department of Asian and Policy Studies, Education University of Hong Kong, 10 Lo Ping Road, Tai Po, New Territories, Hong Kong;2. Department of Technology Management, Jack Baskin School of Engineering, UC Santa Cruz, CA 95064, USA;3. Energy and Environmental Economics, Inc. (E3), 101 Montgomery Street, Suite 1600, San Francisco, CA 94104, USA;4. Independent SAS Analyst, Flat H, 16/F, Block 3, Wing Fai Centre, Fanling, New Territories, Hong Kong;1. Erasmus School of Economics and Affiliated Researcher at IEB (Institut d''Economia de Barcelona), The Netherlands;2. Erasmus School of Economics, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR, Rotterdam, The Netherlands;1. Jinan University, Guangzhou 510632, China;2. IPAG Business School, IPAG Lab, 184 Boulevard Saint-Germain, 75006 Paris, France;3. Université Paris 8, LED, 2 avenue de la Liberté, 93526 Saint-Denis Cedex,Cedex, France;4. Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, China |
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| Abstract: | We examine the impact of the Clean Energy Bill on the price behavior of electricity futures contracts in the Australian National Electricity Market. First, we compute ex-ante forward risk premiums in the pre-tax period (until June 2012), then derive market-implied expectations about additional costs of the Carbon Pricing Mechanism (CPM) on generators as well as pass-through rates during the carbon tax (July 2012–June 2014) and post-tax (after July 2014) periods. Our results suggest that the observed carbon premiums became increasingly higher, once the carbon tax had been proposed and subsequently legislated in 2011. During periods where market participants could be relatively certain that the tax would be effective, we find expected carbon pass-through rates between 67% and 150%, which seem to be inversely related to emission intensities in the regional markets. Our results are also a clear indication of strong policy uncertainty with regards to the CPM and suggest that in the future a stable and long-term policy framework would be required for a carbon pricing mechanism to have its full effect. |
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