Question 5 and 6

Energy generation is a significant source of CO₂ emissions. As the climate warms, there are both costs and benefits, but there is agreement that the costs of unchecked climate change outweigh the benefits. For the energy market, the issue is that the full cost to society of energy generation from fossil fuel sources is not reflected in the price of energy. Environmental economists that study these issues call the problem one of market failure and have identified two main ways to tackle the problem. One solution is to impose a tax on CO₂ emissions at power stations. The tax rate is set at a level that reflects the cost to society not currently captured in the market price of electricity. The other solution is to use a cap-and-trade system that limits the total quantity of CO₂ emissions. Each system has strengths and weaknesses, but both an externality correcting tax, and a cap-and-trade system can be effective solutions. Australia is currently pursuing neither of these approaches.

While we wait for sensible policy to arrive, agencies are still working on measures that will be useful in the future. One such measure is the Industry Benchmark Emission Index (IBEI). The Index provides an indication of the extent of CO₂ emissions per megawatt hour of electricity generated, taking into account network emissions losses. To answer the questions you do not need to know the formula for calculating the Index, but for completeness the formula is shown in Box 1. To access the relevant data for this question, follow the data link below.

DATA LINK:

https://www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Data/Settlements/Industry-Benchmark-Emission-Index

Download the data for 2023. The index values are the "ADJUSTED_INTENSITY_INDEX" values. Use the daily observations for January 2023 as representative of emissions in Summer and the daily observations for July as representative of emissions in Winter. The focus is on comparing emissions as measured by the index values across states (NSW, Qld, and Vic.) and seasons (Summer and Winter)

For this question there is a support screen recording. The screen recording was created for a different context, but covers accessing the data and details how to use the pivot table function in Excel to organize the data for analysis. When you access the data the time date stamps on the files will be a little different to those in the video, but the steps you need to follow are unchanged. Most people will benefit from watching the video recording.

To answer the questions you will need use "ADJUSTED_INTENSITY_INDEX" data for NSW, Qld, and Vic. You will need to:

Calculate the actual mean IBEI value for each state season combination

Test for heteroskedasticty using a state season group structure

Conduct an appropriate Anova test

Establish the appropriate pair-wise comparisons to make, and conduct the pair-wise comparisons using the Tukey method

Box 1. Extract from the Australian Energy Market Operator

Methodology for constructing Industry Benchmark Emission Index

The IBEI is a NEM-wide emission index adjusted for marginal loss factors. The IBEI is calculated according to the following formula: