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Carbon Taxation, Prices and Household Welfare in New Zealand - WP 04/23

Publication Details

  • Carbon Taxation, Prices and Household Welfare in New Zealand
  • Published: Dec 2004
  • Status: Current
  • Authors: Creedy, John; Sleeman, Catherine
  • JEL Classification: D57; H23; H31
  • Hard copy: Available in HTML and PDF formats only.

Carbon Taxation, Prices and Household Welfare in New Zealand

New Zealand Treasury Working Paper 04/23

Published December 2004

Authors: John Creedy and Catherine Sleeman


This paper examines the effects on consumer prices of a range of carbon taxes in New Zealand, using information about inter-industry transactions and the use of fossil fuels by industries. The resulting effects on the welfare of different household types and total expenditure levels are examined. The excess burdens of the carbon tax are computed for the different household types. Finally, overall measures of inequality are reported.


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Table of Contents

List of Tables

List of Figures

1 Introduction

2 A Carbon Tax and Prices

  • 2.1  Carbon Intensities
  • 2.2  Effective Tax Rates

3 Application to New Zealand

  • 3.1  Fuel use and carbon content
  • 3.2  Household Demands
  • 3.3  Taxes and Prices

4 Welfare Analysis of a Carbon Tax

  • 4.1  Welfare Changes
  • 4.2  Inequality Measures

5 Conclusions

Appendix A: The Data

Appendix B: Welfare Changes and Demand Elasticities

  • Equivalent Variations
  • Money Metric Utility
  • Total Expenditure Elasticities
  • Demand Elasticities
  • Price Changes


twp04-23.pdf (327 KB) pp. 1–40

List of Tables

List of Figures


We should like to thank Statistics New Zealand, in particular Jeremy Webb, for making available its monetary and physical estimates of fuel use by industry. This information is from the Statistics New Zealand Energy Flow Account report that will be published in March 2004. We are also grateful to Iris Claus for help with the Input-Output data, and Peter Wilson for comments on an earlier version.


The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the authors. They do not necessarily reflect the views of the New Zealand Treasury. The New Zealand Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in this Working Paper. The paper is presented not as policy, but to inform and stimulate wider debate.

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