Environmental Regulation of Australian Energy Markets: Are Mandatory Renewable Targets Effective in reducing Greenhouse Gas Emissions?

The Australian energy sector is characterized by an abundant, diverse mixture of primary and secondary energy resources. Plentiful supplies of traditional primary energy sources such as gas, coal, and uranium are supplemented by signifi cant oil resources and a variety of readily available renewable energies including hydro, wind, solar, and biomass. Secondary, or final, energy sources such as electricity and refined petroleum fuels are also produced by the Australian energy sector. In economic terms, the energy sector has been a major contributor to the country’s overall prosperity. While adding significantly to the sustained success and strength of the Australian economy in the last few decades, the energy sector has wreaked havoc on the Australian environment. Energy production and consumption constitute the single largest source of greenhouse gas emissions in Australia. Present emissions data demonstrate that almost 70 per cent of greenhouse gas emissions in 2003 were directly attributable to the combined energy sectors. Given energy’s pivotal role in the current and future prosperity of the Australian economy, achieving significant reductions in greenhouse gas emissions and securing long term energy supply are vital to ensuring a long term, sustainable, and profitable energy sector, and ultimately, a prosperous national economy. The important role renewable energy can, and should have in such circumstances warrants detailed attention by Australian governments and policy makers, energy market participants, and domestic end-users. Continual reform and restructuring of the national energy market has been central to the Federal Government’s implementation and realization of its policy decisions in the context of energy sector greenhouse gas emissions. In addition to accelerating national energy market reform and establishing the national electricity market, the Federal Government embraced renewable energy technologies and increased uptake of renewable energies sources as part of its long-term strategy to reduce energy sector greenhouse gas emissions. In 2000, the national energy market reform agenda led to the introduction of national legislation aimed at facilitating increased use of renewable energies. Through the Renewable Energy (Electricity) Act 2000 (Cth) the Federal Government sought to reduce greenhouse gas emissions produced by electricity generation by the imposition of a mandatory renewable energy target (the MRET). Since 2001, retailers and large consumers in the national electricity market have been subjected to a mandatory target. As the MRET operates within the Australian national energy market framework, section B of this chapter will ommence with a brief review of the Australian national energy market, the establishment of the national electricity market, and recent legislative and regulatory reforms. The environmental impact of energy production and consumption in Australia will then be outlined in section C, by reference to the latest National Greenhouse Gas Inventory and various government policy responses to date. In section D, the discussion will focus on the main national climate change measure operating in Australian energy markets, namely, the MRET. The extent to which this instrument has proved to be an effective mechanism for environmental regulation of the national energy markets will be evaluated in section E. In addition to discussing positive outcomes to date, various failings of the scheme will be outlined with reference to the success of this mechanism in reducing the Australian energy sector’s increasingly high greenhouse gas emissions levels. A range of challenges currently facing the MRET and Australian energy markets in general will be identified and discussed in section F. Concluding remarks on the MRET’s future in regulating the environmental impact of the Australian energy sector will be set out in the final section of the chapter.status: publishe