Carbon Pricing

Carbon Pricing

Early Experience and Future Prospects

Edited by John Quiggin, David Adamson and Daniel Quiggin

In 2012, Australia took the major step of introducing a carbon price, involving the creation of a system of emissions permits initially issued at a fixed price. Carbon Pricing brings together experts instrumental in the development, and operation, of Australia’s carbon policy who have played a significant role in the broader debate over climate change policy. Together they have achieved an in-depth analysis of Australia’s policy stance on pricing carbon and its implications for the wider economy.

Chapter 5: How I learned to stop worrying and love the RET

John Quiggin

Subjects: economics and finance, environmental economics, environment, climate change, environmental economics, environmental politics and policy, valuation, politics and public policy, environmental politics and policy


The Renewable Energy Target (RET) is one of Australia's most durable policy measures directed at mitigating climate change, dating back to 2001. It has survived changes of government and a series of policy reviews. Economists, however, have rarely found much of merit in the RET. It is seen as a high-cost way of achieving reductions in emissions that could better be pursued through a price-based mechanism such as either an emissions-based trading scheme or a carbon tax. Since the introduction of a carbon price in July 2012, criticism of the RET has intensified. The covering letter from The NSW Independent Pricing and Regulatory Tribunal (IPART, 2012), in its submissions to the Climate Change Authority inquiry into the RET articulates the wider concerns of economists, stating: In our view, the introduction of the carbon price and a move towards an emission trading scheme (ETS) removes the need for the RET (and ultimately electricity customers) to continue to subsidise investment in the renewables sector. The RET is not complementary to the carbon price and does not cost effectively address any other significant market failure. In this chapter, it is argued on the contrary that the RET is not merely complementary to the carbon market, but rather is a welfare-improving policy, even after the introduction of the carbon price.

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