Regulatory Uncertainty in the National Electricity Market: Sustainable Decision Making and Climate Change Law

Despite the fact that more than half of Australia’s greenhouse gas emissions are generated by the stationary energy sector, express environmental considerations have not featured in the recent sweeping reforms of the Australian Energy Market’s legislative and regulatory framework. On the contrary, current energy market laws, rules and regulations are devoid of any express environmental or sustainability provisions. This is in stark contrast to energy market developments in the European Union and the United Kingdom, where environmental considerations – greenhouse gas emissions and climate change – are fast becoming an integral part of energy market regulation. In 2008 for instance, the UK Parliament successfully enacted several pieces of complementary legislation directed towards supporting the UK’s long term energy and climate change strategy, including the Energy Act, the Planning Act and the Climate Change Act. Remarkably, the UK Government has committed to achieving an 80 per cent reduction on emissions, by 2050. Another interesting feature of the UK Climate Change Act 2008 is the introduction of carbon budgets, which set a legally binding cap on the total volume of permissible greenhouse gas emissions from the UK, measured over five year periods up to 2050. As noted by the UK Government, the ‘Climate Change Act creates a new approach to managing and responding to climate change in the UK, by setting ambitious, legally binding targets, taking powers to help meet those targets, strengthening the institutional framework, enhancing the UK’s ability to adapt to the impact of climate change, and establishing clear and regular accountability to the UK Parliament and to the devolved legislatures’. In light of the environmental deficiencies in the current NEM legislative and regulatory framework, questions arise as to the ways in which the Australian energy market legislative and regulatory framework could be reformed to take adequate account of environmental externalities such as climate change. How, for instance, should current energy market practices be modified to enable sustainability based decision making? What kinds of energy market framework amendments will be necessary to assist with moving the NEM market towards a lower carbon intensive future? Answering these kinds of questions involves, in part, giving consideration to existing measures and responses – direct and indirect – to the climate change challenges faced by energy markets and their participants. In particular, greater attention needs to be given to the possible role of key energy market regulators, namely the AEMC and the AER, in assisting Australian energy markets transition towards a low carbon future. In view of that, the extent to which sustainable regulation and decision making features in the NEM legislative and regulatory framework is the primary focus of the discussion in this chapter. In addition to considering possible amendments to the NEM legislative framework, especially the powers and functions of the two central key market regulators, the AEMC and AER, the role of Courts and Tribunals and the emergence of a body of climate change law is also considered.status: publishe