Australia’s carbon pricing scheme commences

The long debate surrounding carbon pricing in Australia entered a new phase on Sunday, 1 July 2012 with the commencement of Australia’s carbon pricing scheme at a $23/tonne CO2-e starting price. Both economic theory and electricity futures markets have pointed towards a relatively large share of the carbon price being passed through into wholesale electricity prices at the commencement of the scheme. Based on NEM market prices on the first day of carbon pricing, this expectation has held true.

Danny Price, Managing Director of Frontier Economics (Australia) commented
“We estimate that the $23/tonne carbon price was passed-through at just over 100% on the first day of trading in the NEM, resulting in a $23.04/MWh estimated increase in the daily average pool price across New South Wales, Queensland and Victoria. This reflects a 66% increase in the daily-average wholesale price as the result of carbon.”

Frontier (Australia) discusses the first day of carbon pricing in this paper.

For more information, please contact Marita O’Keeffe at m.okeeffe@frontier-economics.com or call on +61 (0)3 9620 4488.

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