Abstract
Using an environmentally extended social accounting matrix as well as a computable general equilibrium model, this study gauges the economic and environmental impact of Australian carbon tax, with an emphasis on the tourism industry. The results of the simulation show that a carbon tax of US$23 per tonne is very effective in achieving emissions reduction but also causes a mild economic contraction. Although the nominal value of tourism expenditure registers an insignificantly positive growth as a consequence of the carbon tax, the real expenditure value shows a significant decline in both inbound and domestic tourism demand. The household compensation package stimulates domestic tourism considerably but discourages inbound tourism further by contributing to a significant appreciation of the Australian dollar.
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