Australia's Future Tax System

Architecture of Australia's tax and transfer system

12.2 Broad distributional price impacts

The Australian Government's Carbon Pollution Reduction Scheme Green Paper provided an outline of the scheme's impact on distributional price impacts.

The overall price impact of the scheme on an individual household's welfare will always be difficult to quantify. It will depend on many factors including:

  • the carbon price (or the price of permits);
  • the extent to which the carbon costs are reflected in individual retail prices;
  • individual consumption patterns;
  • individual households' levels of disposable income;
  • the assistance provided to households by the Government to manage the impacts of the scheme; and
  • the ability of households to adjust consumption patterns in response to higher carbon prices. For example, those households with higher disposable incomes can more readily access capital markets to undertake energy efficiency home improvements. This is not necessarily the case for households on lower incomes or with greater debt.