International Handbook on the Economics of Energy
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International Handbook on the Economics of Energy

Edited by Joanne Evans and Lester C. Hunt

As an essential component for economic growth, energy has a significant impact on the global economy. The need to meet growing energy demand has prompted cutting-edge innovation in clean technology in an attempt to realise environmental and cost objectives, whilst ensuring the security of energy supply. This Handbook offers a comprehensive review of the economics of energy, including contributions from a distinguished array of international specialists. It provides a thorough discussion of the major research issues in this topical field of economics.
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Chapter 29: Emissions Trading and the Convergence of Electricity and Transport Markets in Australia

Luke J. Reedman and Paul W. Graham


Consistent with most developed economies, Australia’s greenhouse gas (GHG) inventory is dominated by energy-related GHG emissions. In 2005, stationary energy, transport and fugitive emissions accounted for around 70 per cent of total GHG emissions (AGO 2007). In the absence of new measures, continued growth in energy demand is projected to lead to national emissions rising to 127 per cent of 1990 levels by 2020. This growth will be driven primarily by the stationary energy sector, where emissions in 2020 are projected to be 84 per cent higher than 1990 levels (Prime Ministerial Task Group on Emissions Trading 2007). Despite the large share of GHG emissions attributable to the stationary energy sector, it is generally accepted that an emissions trading scheme (ETS) that has universal coverage of all economic sectors, is best placed to locate lowest-cost abatement opportunities. The recent report from the Prime Ministerial Task Group on Emissions Trading (2007) endorsed this principle, but recommended that measurement uncertainties and compliance cost issues meant that agricultural and land-use emissions be initially excluded from an ETS. Similarly, the National Emissions Trading Taskforce (NETT) recently expanded its terms of reference to consider an economy-wide scheme beyond its original scope of the stationary energy sector (NETT 2007). To determine the extent of least-cost abatement opportunities in the energy sector, we employ a model of the energy sector to investigate the proportion that...

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