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Australian economic modelling of policy options to reduce greenhouse gas emissions has to date given little attention to (i) crafting policy scenarios that use emissions revenues to target significant existing tax distortions, (ii) quantifying the effects of policy on the price and affordability of energy products, and (iii) communicating policy impacts on living standards relative to current levels, as well as relative to future levels in the reference case. Building on modelling undertaken for the Australian Business Roundtable on Climate Change - which found that real consumption and income continue to grow strongly with emission reductions - we find that smart tax reform could significantly reduce the economic impact of emissions reductions, particularly in the initial years; and that the affordability of energy products improves over time despite marked increases in prices.


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