Analysis of energy Poicies in the EU & Australia

GUMTWERO JUSTINE OLAL MONASH UNIVERSITY AUGUST 2013
Analyses of the policy differences between EU’s energy sector and other
economies especially, Australia.
Introduction.
Understanding the rapid shift in energy policies in most developed economies and infact
globally, begs a question in three key areas: energy reliability and security, energy and socio-
economic development; and energy and its impact on the environment.1
The equities or
inequities arising from any given use of energy resources; whether at extraction, generation,
transmission, storage or use will invariably impact on humans’ ability to co-exist with his/her
environment, his/her ability to engage sustainably in economic development and his ability to
peaceably co-exist one with another. The energy crisis2
or the energy challenge3
seems to
have resulted in a global urgency created by the worrying extent of exploitation of energy
resources (fossil fuels) and the effects they have created. Infact, inspite of the creation of the
International Energy Agency (IEA) by developed countries in 1974 with express mandates
‘to promote energy security through collective responses to physical disruptions in oil supply,
and providing authoritative research and analysis on ways to ensure reliable, affordable and
clean energy,’4
the world continues to face damning effects of energy use. The shocking
extent of global warming, the increasing lack of energy reliability, and political instability
inspired by the desire to control energy resources,5
are out to attest to this.
The IEA estimates that greenhouse gas (GHG) emission has reached 80% of global carbon
dioxide allowable under a scenario that keeps atmospheric greenhouse gas concentration
under 450 parts per million of CO2 and global warming under 2C.0
Such scenario is deemed
1 Lillian Wylie, Pascaline Winand (eds) Energy and the environmental Challenge: Lessons from the European
Union and Australia (P.I.E Peter Lang 2011) 13.
2 Newton E. David, The World Energy Crisis: Contemporary World Issues (ABC-CLIO, LLC 2013) in its
preface looks at the paradox of the world energy crisis stating that on one hand, there is ample evidence of huge
deposits and supply of fossil fuels yet there is uncertainty over its sustainability given the spiralling demand as
the world population eclipses the 7 billion mark within a very short time and the projection over the next
40years where population is estimated to stand at a staggering 9billion people
3 Thomas B. Johansson, Anand Patwardhan, Nebojsa Nakicenovic, Luis Gomez Echeverri, The Global Energy
Assessment: Towards a sustainable future (Cambridge University Press 2012) 4.
4 Simon Muller, Adam brown, Samantha Olz, Renewable energy: Policy Consideration for Developing
Renewables (IEA 2011).
5 In his first National Security Statement to the Australian Parliament, Prime Minister Kevin Rudd articulated
Australia’s long-term security challenges, noting the integral role of energy security to national security. (Erin
Hurley, “Securing Australia’s Energy for the Future” 10 (2009) Kakoda Foundation Paper 1.)
0 International Energy Agency, Deploying Renewables: Best and future policy practices 2011a 56.
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catastrophic if no measures are put in place to avert it. The IEA notes that solutions must be
found in a portfolio of technologies, fuel and energy efficiency measures that can be
retrofitted to existing capital stock;6
in other words, calling for an industrial and technological
renaissance that accommodates and promotes “energy wisdom.”
A number of factors are instrumental in compounding these adverse socio-economic,
atmospheric and environmental threats. Firstly, the extent of human activities on the
environment, resulting from the disproportionate energy production and consumption
intensity across geographical divides, continues unabated.
Secondly, dependence on fossil fuel (Coal, Oil and Gas) for power generation means that
colossal amount of emission from combustion is released to the atmosphere accentuating the
dangers and risks of global warming.
Thirdly, the increase in human population to over 7billion7
at the turn of the century and a
projected 9billion by 20508
will mean less secure, inequitable and unreliable supply of
energy.
It is therefore not inordinate to see the kind of global responses and actions geared towards
answering the energy challenges. As the matter become increasingly paradoxical, scholars
have hypothesised whether the world could continue with unclean fossil energy and pay the
price of global warming or change to clean energy and suffer the consequence of
intermittency and insecurity.9
The answer to this rhetoric probably lies in an energy mix10
adopted by respective economies; although energy choice will always be dictated by the core
national interest of a particular economy.
Both the EU and Australia pursue a balance between energy security and GHG emissions but
scholars have consistently questioned the latter’s commitment to the environment11
noting
6 Ibid.
7 http://www.worldpopulationstatistics.com/category/world/ as at 12th
June 2013.
8 Thomas above n 3, xv-[1].
9 Buchan David, Energy and Climate Change: Europe at the Crossroads (Oxford University Press 2009) 79-[2].
10 European Commission, Directorate General for Energy’s Market Observatory KEY FIGURES for Energy of
June 2011, 11, reveals that fossil fuel constitute ¾ of EU total consumption and the remaining ¼ is taken by
renewable energy. Australia energy mix meanwhile is dominated by black and brown coal, accounting for
around 37 per cent of total primary energy supply in 2009–10. This is followed by oil (35 per cent), gas (23 per
cent) and renewable energy sources (5 per cent). (See Australian Government- Department of Resources, Energy
and Tourism, Bureau of Resources and Energy Economics (BREE); Energy in Australia
February 2012, 3.www.bree.gov.au/documents/energy
11 Wayne Gumly, “Using Tax Reform to Promote Sustainable Energy Supplies in Australia” in Lillian Wylie,
Pascaline Winand (eds) Energy and the environmental Challenge: Lessons from the European Union and
Australia (P.I.E Peter Lang 2011) 161-[5].
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that Australia’s domestic legislative and policy frameworks before 2006 revealed a slack
policy approach to the environments.12
As focus is directed at measuring the effects and
extent of interventions of various actors in the global energy arena, it is important for us to
understand the unique interests and challenges of each jurisdiction before embarking on
comparison of their policies on energy. For example, whereas the EU consumes 44% of
global energy,13
it faces acute lack of energy resources and alarming energy turbulence within
its internal markets. Imported oil accounts for 70% of its total energy.14
By 2009, the EU
energy dependence on imports stood at a staggering 52% and it also registered an energy
related carbon emission of 878 Million metric tons.15
Australia meanwhile has huge stock of energy resource reserves especially in brown coal
(estimated reserve for 517yrs,) black coal (128yrs), coal seam gas (175yrs), liquefied
petroleum gas(LPG 38yrs), uranium(135yrs) conventional gas(66yrs), oil(9yrs),16
and among
the world’s leading energy related carbon emitters. Clearly, from such stark differences,17
there is bound to be significant divergence in policy objectives.
That notwithstanding, the EU and Australia share some common jurisdictional challenges
created by diversity in sovereign powers vested in states and the spatial area involved. Under
the Australian federal constitution, there is lurking want of competences over a broad set of
issues that includes energy.18
The Creation of the Council of Australian Government (COAG)
and Australian Energy Market Agreement, are attempts to circumvent this gaping lacuna and
has enabled parties to embark on cooperative governance. The EU on the other hand operates
through treaties,19
Directives and Regulations to try to create a seamless framework for
energy governance. The challenge with this kind of cooperative governance system is the
possibility of intractability and non-commitment of member states to comply with common
12 See Rowena Cantley Simth, “Demanding More: The Role of Demand Management and Improved End-use
Efficiency in Australian Electricity Markets” in Jacqueline Cottrell, Janet E Milne, Hope Ashiabor, Larry
Kreiser, Kurt Deketelaere (eds), CRITICAL ISSUES IN ENVIRONMENTAL TAXATION: International and
Comparative Perspectives Vol V1 (OXFORD UNIVERSITY PRESS 2009) 439, 462-[2], where she argued that
Australia’s energy policy falls short of having an environmental objective in its overall policy agenda hence the
kinds of actions taken by government in addressing environmental challenges.
13 Dewar Kher, Energy Law and Policy (PENTAGON PRESS 2009) 58-9.
14 Sascha M. Kraenner, Energy Security: Re-Measuring the World (Earthscan London 2008), 77.
15 Ibid 58.
16 Australia Energy White Paper 2012, 15, citing Bureau of Resources and Energy Economics (BREE 2012a)
17 Lillian Wylie above n1, 19-[3].
18 Section 51 of the Constitution Act 1901 (Cth) does not give legislative power to parliament over energy.
19 The two main treaties are, The Consolidated Treaty of the creation of the European Union, and The Treaty on
the functioning of the European Union respectively.
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position20
as was the case in the EU21
in pursuance of its directives.22
However, the question
that lingers is “what will the EU do to energy competences that remain largely a state affair”?
This problem seems rather tamed under the Australian intergovernmental arrangement.
It is therefore my argument that Australia and the EU possess different stakes and motivations
in drawing up their energy policy frameworks. Whereas, the EU is particularly guided by the
need for a functional and integrated policy aimed at achieving competitiveness in its internal
energy market, promoting environmental sustainability and ensuring security of supply to
serve her half a billion population, hence her role in the new age agenda for energy security,
energy efficiency and Greenhouse gas emission reduction, Australia on the other hand is
driven by market motives to get the best out of her enormous coal resources within a
competitive national energy market and to galvanize her position as a strong player in the
energy export market by strengthening capacities for critical energy resources. This alone has
affected her commitment to climate change initiatives under international arrangements
accounting for a weak domestic legal framework on the environment. In broad terms
however, the energy policies in the two economies are identical but differ only in their
internal dynamics.
1. Energy Policy trends in Australia and the European Union
The Australian energy sector has a long history of reforms. Undergoing substantial changes
over the last 30years23
which also included the liberalization of the energy sector to a great
extent. The Australian government acknowledges that the future of the energy industry will
be built on a strong foundation of reforms of the past24
that have enabled creation of a
competitive national energy market. Under COAG initiatives for energy market reforms, a
national framework for electricity and gas has been adopted and reflected in the
Intergovernmental Australian Energy Market agreement.25
Between the 1993 Hilmer Review
of national competition policy and the commencement of the National Energy Customer
20 Jan Frederik Braun, “EU Energy Policy under the Treaty of Lisbon: Rules Between a new policy and
business as usual” Working Paper 31, European Policy Institutes Network, February 2011, 2. Saying with no
legal obligation on members, solidarity remains weak.
21 European Commission, May 2013 infringements package. Renewable Energy: Belgium and Estonia called
upon to comply with EU renewable energy rules [MEMO/13/470]
http://ec.europa.eu/energy/infringements/index_en.htm
22 European Commission, Press release. Brussels, 20 June 2013 “Energy efficiency in buildings: Commission
refers Portugal to Court for failing to transpose EU rules” http://europa.eu/rapid/press-release_IP-13-
579_en.htm , http://ec.europa.eu/environment/legal/law/press_en.htm .
23 Australian Energy Market Operator, “Australian Energy future” August 2012, 1.
24 Australia Energy White Paper 2012, xviii
25, ibid 22.
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Framework of 1 July 2012, over 18 policy actions and improvements were done.st
Key among
these are the1995 creation of Australia Competition and Consumer Commission and National
Competition council, the 1998 creation of National Electricity Market (NEM) in (QLD,
NSW, VIC, ACT, SA), the 2001 creation of the Ministerial Council on Energy, the 2002
Parer Review: “Towards a truly national and efficient energy market,” and the establishment
in 2005 of Australian Energy Market Commission (AEMC), the same year which saw
Australian Energy Regulator (AER) formed and Tasmani join the National energy market.
Others include the Gas market review of 2006, the 2007 Energy Reform Implementation
Group Review, the enactment in 2008 of the National Gas Law and National Gas Rules
together with the establishment in the same year of the Gas Market Bulletin Board; followed
by the formation in 2009 of the Australian Energy Market Operator. The 2010 Gas Short-
Term Trading Market in NSW and SA and the 2011 Gas Short-Term Trading Market in QLD
were created, followed suit by the enactment of the National Energy Customer Framework
legislations in 2011 before its eventual commencement on the 1 July 2012. The 20 years of
actions to improve on the existing energy legislative, policy and regulatory infrastructures,
along with international commitments under the UNFCCC,st
the Kyoto Protocol26
and
domestic efforts27
to tackle climate change, provided wide grounds for the formulation of the
energy policy. The result is the Australian Energy whitepaper 2012, which sets out the policy
framework for the transformation of the energy resource sectors. Primarily, the framework is
built on the frontier of delivering reliable supply of energy to consumers while minimising
future price pressures, commitment to carrying out unfinished market reforms, providing a
clear set of actions to address the immediate energy priority and longer-term changes, and to
ensure that energy security needs in global energy market are met.28
The environment largely
remains inconspicuous in this policy agenda which is built mainly around market benefits.
In the EU, a long term European policy objectives were first mooted in the 1995 ‘White
Paper on Energy Policy for the EU' (COM(95) 682).29
It required EU energy policy to form
the basis of its economic policy based on integration and deregulation. It sought to limit
st Ibid 109.
st The United Nations Framework Convention on Climate Change, Opened for Signature 9th
June 1992, 1771
UNTS 165(entered into force 21 March 1994 [31 ILM 848].
26 An international agreement that sets binding targets for countries and communities to reduce greenhouse gas
emissions, opened for signatures 16th
March 1998
27 The Garnaut Climate Change review 2008. In his report, Prof. Ross Garnaut observed that growth in
emissions is expected to have a severe costly impact on Agriculture, infrastructure, biodiversity and ecosystem.
It was also on this report that the carbon pollution reduction scheme was premised on a medium term target of
5-15% below 2000 levels by 2020.
28 Australian Energy Whitepaper 2012, ix.
29 European Commission, “Factsheet on the European Union 2013, Energy Policy general principles,” 2.
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public intervention to what is considered necessary for safeguarding public interest and
welfare, sustainable development, consumer protection, and economic and social cohesion.30
However, a clear radical shift in energy policy was echoed in the two principal treaties of the
European Union31
with particular reference to energy and the environment. Article 194(1) of
the Treaty on the functioning of the European Union (TFEU) is explicit on its aims:
i) To ensure functioning of the energy market;
ii) To ensure security of supply in the Union
iii) To promote energy efficiency and savings, and to develop new and renewable
forms of energy; and
iv) To promote the interconnection of energy networks.
Again, under the treaty establishing the EU (TEEU), Article 174(1) laid the basis for
environmental principles. It provided:
a) That the community’s policy on the environment shall contribute to the pursuit of
preserving, protecting and improving the quality of the environment…promoting
measures at international level to deal with regional or worldwide environmental
problems.
b) 174(2) is to the effect that the community policy on the environment shall aim at a
high level of protection taking into account the diversity of situations in the various
regions of the Community. It shall be based on the precautionary principle and on the
principles that preventive action should be taken, and environmental damage should,
as a priority, be rectified at source and that the polluter should pay.
In themselves the treaties do not give the Union absolute powers over energy governance and
the environment since they are shared competences under article 4(2)(e) &(i). It is however to
be noted that TFEU places energy at the core of EU activities and effectively gives the EU a
new legal basis that was lacking in the previous treaties.32
Further, through a host of market
based fiscal and technological tools, the EU has striven to achieve its energy policy through
use of energy efficiency measures under the Energy Efficiency Directives (EED), taxes
30 Ibid.
31 The consolidated Treaty for the creation of the European Union and the Treaty on the functioning of the
European Union
32 http://europa.eu/legislation_summaries/energy/european_energy_policy/index_en.htm
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incentives and subsidies, carbon emissions trading strategies and community-wide financial
instruments all geared towards bolstering the goals of the energy policy.33
In 2006, it became apparent that an ambitious energy policy for Europe was inevitable in the
face of growing challenges in the field of energy.34
So, in January 2007, the Commission put
forward clear strategic objectives35
born out of a conviction that energy production and use
were the main sources of GHG emission; hence the resultant integrated climate and energy
policy36
in March 2007.37
This particularly focused on:38
i) Ensuring the competitiveness of European economies and the affordability of energy
supply by working with member states to complete the opening of the internal market
for electricity and gas for all consumers;
ii) Promoting environmental sustainability by adopting an action plan on energy
efficiency, continuing the development of renewable energies and implementing a
biomass action plan;
iii) Increasing security of energy supply through the development of a common external
policy approach and dialogues with member states and partners;
The EU has hitherto committed itself to achieving the 2020 objectives for GHG emission,
renewable energy and energy efficiency,39
and shares a long haul40
with Australia in the
journey towards the current policy frameworks on energy.
2. Ensuring the Competitiveness and affordability of energy supply-through
the internal energy market.
33 Ibid.
34 http://www.europarl.europa.eu/aboutparliament/en/displayFtu.html?ftuId=FTU_4.13.1.html
35 Ibid.
36 Council of the European Union, Brussels 2nd
May 2007, CONCL 1, 12
37 European Union: European Commission, Communication from the Commission to the European Parliament
and the Council, 10th January 2007- An energy policy for Europe COM(2007) 1 final.
38 ibid
and the Council, 10th
January 2007- An energy policy for Europe COM(2007) 1 final.
40 Both regulatory and market reforms preceded and underpinned the current policies in place in the two
economies with emphasis on the environment and security(EU) and a commercial motives in Australia.
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With a population of 504 million people,41
a projected 65 per cent energy reliance on
imported hydrocarbons by 203042
and shared competences over energy matters43
across the 27
member states, the challenge for ensuring a smooth, functional and competitive internal
energy market has been a daunting one for the EU. Observers feared that with a 1.5% annual
increase in electricity demand; 44
an import of oil and gas to the tune of €350 billion every
year45
and an 80% GHG emission from the energy sector in 2007,46
there would be no turning
back if the EU continued with “business-as-usual” approach. The energy strategy for Europe
adopted in March 2007 boasted a strong environmental focus and was designed to help
Europe evolve into a low carbon economy at the same time securing its competitiveness.47
Price volatility48
and price rises on the international energy market and a concentration of
hydrocarbon reserves in few hands fostered an EU oriented goal of building a fully integrated
market for gas and electricity. In 2009, the EU passed new Directives concerning common
rules for the internal market in electricity49
and common rules on natural gas plus a number of
Regulations50
establishing Agency for Corporation of Energy Regulators (ACER), creating
condition for access to the networks for cross border exchange in electricity51
and a
regulation52
on conditions for access to natural gas transmission networks. The policy aims
were efficient, interconnected and transparent EU internal market availing consumers with
choices between different companies supplying gas and electricity and a degree of certainty
on market accessibility for suppliers.53
Further still, it intended to offer affordable prices and
improved quality of services to end-customers and a solid basis for investments within a
stable and predictable regulatory framework. Two fundamental principles on the internal
market that the framework captured were that the EU internal energy market is complex and
41http://www.epp.eurostat.ec.europa.eu/statistics_explained/index.php/European_population_compared_with_w
orld_population
42 European Communication above n 41, COM(2007) 1 final.
43 Article 4(2)(i) TFEU
44 European Commission above n 41, COM(2007) 1 final.
45 European Commission, Energy: Sustainable, secure and affordable energy for Europeans 2013, 4.
46 European Commission above n COM(2007) 1 final, citing European Environment Agency.
47 Severin Fischer, Oliver Geden “Updating the EU’s Energy and Climate Policy: New Targets for the Post-
2020 Period” Friedrich Ebert Stiftung, 2013, International Policy Analysis 3.
48 OPEC is the main supplier of Energy to the EU especially of Hydrocarbons , its sometimes plagued by price
hikes which results to price instability in the European internal markets.
49 The two key Directive 2009/72/EU of 13th
July 2009 replacing Directive 2003/54/EC and Directive
2009/73/EC replacing Directive 2003/55/EU
50 Regulation (EC) No713/2009 of 13th
July 2009
51 Regulation (EC)No. 714/2009 of 13th
July 2009, repealing Regulation (EC) No. 1228/2003
52 Regulation (EC) No. 714/2009 of 13th
July 2009, repealing Regulation (EC) No. 1775/2003
53 European Commission’s Press Release “Internal Energy Market…” 27th
February 2012, Brussels
http://ec.europa.eu/energy/gas_electricity/index_en.htm
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still under development.54
It is also built principally around supply of hydrocarbons, which
constitute about 80% of EU primary fuel mix.55
It was equally necessary that the policy does
capture the spirit of bilateral and international cooperation and agreement under Articles 216-
218 of TFEU to give a foundation upon which the external aspect of EU energy policy could
be built since most energy projects of European interest56
have external dimensions. This, in
addition to other competences in respect of developing trans-European networks under
Articles170-172, competences on adoption of preventive measures in support of member
states in the face of severe difficulties under article 122, enabled the EU to take actions to
create a harmonized, integrated and deregulated Internal energy Market.57
The third energy package in particular espoused principles on the proper functioning of the
market. Its aim is to address issues of stimulation of market competition and new rules on
unbundling of networks, the strengthening of independence and powers of national regulators
and rules on the functioning of retail markets- enlisting clear benefits to customers such as
more protection, low energy prices, offering companies a chance to compete on a level
playing field while pursuing energy sustainability through efficiency.
The European parliament and council weighed on these aspects and agreed on true
interconnection in the internal energy market, integration of energy from various renewable
sources and an enhanced security of supply in the internal market.58
In short, the EU energy
policy framework on the internal market for gas and electricity takes special note of the need
for implementing intelligent metering systems with an 80% target by 2020 and putting the
rights of citizens at the centre of the market. Member states were obligated to: (i) protect
vulnerable energy customers, (ii) increase transparency on network operations and supply,
(iii) guarantee equal access to pricing information; and (iv) to effectively separate production,
generation and sale of energy from transmission i.e. unbundling. It also required increasing
cross-border investments and collaboration with new EU Networks for Transmission System
Operators (ENTSO) and grid operators to develop common commercial and technical codes
54 Andris Piebergs-EU Energy Commissioner, “External Projection of the EU internal Energy Market, Opening
Speech at External Energy policy Conference, 20th
November 2006, Brussels
55 Ibid.
56 European Commission, “Factsheet on the European Union 2013, Energy Policy general principles,” 2 noted
that projects like such as Nabucco and Desertec had an external dimension that was necessary for the
strengthening of the internal market through cross border collaboration.
57 In line with EU’s competences under article 114 TFEU.
58 European Commission, Energy Green Paper 2030, 6.
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on security standards; and to forge a more pragmatic regulatory oversight through
independent and competent National Energy Regulators.59
In Australia, the internal dimension of the market, as we shall later on see is adequately
addressed under National Energy Customer Framework (NECF). My focus at this point is the
Gas market driven by a strong conviction to compete at the global market. Acknowledging
the demand contestation between domestic and export markets, the Australian government
seeks to achieve a timely development of this resource by pursuing an active development of
offshore gas resources. A number of mechanisms are considered necessary to achieving the
goal; all built around reforms in land use framework to promote co-existence between actions
for coal seam gas (CSG) and liquefied natural gas (LNG).60
Central to the market reform are
security of supply and open market arrangements with minimal government intervention. The
benefit of federal competence over offshore resources means national regulatory frameworks
pose relative ease of adoption than in the case of onshore resources. The government
continues to pursue dialogue to set the agenda for longer-term objectives and direction for the
gas market.61
Roles are distributed among key agencies in the energy market like the Standing
Council on Energy and Resources (SCER), concerned with policy and the Australian energy
market Commission (AEMC), in charge of rulemaking. The use of these market bodies in
both the gas and electricity market is good for rules’ harmonization and maximization of
technical expertise. Like in the EU, the objectives here remain the achieving of better
interconnection, competitiveness, affordability and reliability of supply in an efficient and
flexible gas market having access to better market information and price transparency to
boost investments in gas development, processing, transmission and distribution. The
challenge facing this sector is the confidential nature of bilateral agreements and spatial
distribution investments required to supply the market amidst state competences over onshore
gas resources, which militates against market harmony.
The EU faces similar challenges, in that gas is virtually a national affair of member states, the
consequence therefore is exemplified in the gas crises experienced in EU, while in Australia
the spatial distribution challenge has created a number of market segmentation to wit:
western, northern and eastern markets. The challenges in market approaches highlighted are
almost similar in both economies except that Australia is more export oriented while EU is
59 European Commission, “EU adopts new rules strengthening the Internal Energy Market” Brussels 25th
June
2009, IP/09/1038.
60 Australia’s current LNG resources equal 70% of the world’s LNG and this means they comfortably drive the
market.
61 Australia Energy whitepaper 2012, 134.
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more import oriented. Therefore, for Australia to surmount these challenges, it seeks to
strengthen its regulatory framework to match the global energy trends by adopting regular
and strategic assessment of key policies. It proposes a 4yearly strategic review effective 2016
to afford herself the opportunity to assess overall progress in meeting national energy goals.
There is a ray of scepticism though as to the correctness of such policy proposition in the
general energy sector in the face of emergent issues of global warming.62
Of course, this can be legitimately challenged based on Australia robust market conditions,
which were largely responsible for its buoyancy throughout the Global financial crisis. It is
however, not remote to get attracted to this scepticism given the abrasive and hard-line
bipartisan legislative and regulatory processes obtaining in Australia. Overall, if the proposed
market reviews are pursued, coupled with the two yearly energy scrutiny assessments and the
national energy audit as part of the energy security assessment to test for effectiveness of
response mechanisms, there should be success in the end. The reason for this lies in using the
resilient Regulatory Impact Assessment procedure underpinning regulatory processes in
Australia.
2.1. Environmental sustainability.
The EU’s policy on environmental sustainability is in line with its principles under the treaty
for the establishment of the European Union (TEEU)63
and commitment under the United
Nations Framework Convention on climate Change (UNFCCC) 1992,64
which set out a
framework for international and intergovernmental climate change action and GHG
emissions negotiations.65
Under the UNFCCC framework,66
a commitment to GHG emission
reduction outlines specific emissions limitation and reduction goals as well as market
mechanisms set against a baseline of 1990.67
As mentioned earlier EU adopted a
‘precautionary principle’68
embedded in the Maastricht treaty,69
to assuage jitters for
62 Gary Banks, “Evidence Based Policy Making: What it is, how do we get it” ANZSOG/ANU Public Lecture
series, February 2009, 7 & 17.
63 Article 174(1) of TEEU provides that the community policy on the environment shall contribute to the
pursuit of preserving, protecting and improving the quality of the environment…promoting measures at
international level to deal with regional or worldwide environmental problems.
64 The convention became the first international agreement that was legally binding in terms of addressing
climate change.
65 Damien Lockie, Clean Energy Law in Australia, (LexisNexis Butterworths 2012) 45
66 The Kyoto Protocol on GHG emissions allocates rights to emit GHG among nominated developed countries
by setting up signed amounts for emissions limitation and reduction commitments upto 31st December 2012,
See Damien above n 64, 44.
67 Damien above n 66, 47.
68 Buchan David, Energy and Climate Change: Europe at the Crossroads (Oxford University Press 2009) 111.
69 The 1992 treaty of the European Community stipulated under Article 130R that the community’s policy on
environment shall adopt precautionary and preventive principles of action.
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unforeseeable environmental consequences by making reasonable preparedness to address
them.
By employing three basic approaches, the EU seeks to:
a) Reduce GHG emission to 20% below 1990 level by 2020;
b) Increase share of renewable energy in energy consumption; and
c) Achieve an improved energy efficiency by 20%
The EU also committed to a 30 % collective reduction of GHG emissions based on
international community’s commitment with a view to an overall emissions reduction of 60%
to 80% by 2050 compared to 1990 levels.70
2.1.1. Reducing Greenhouse Gas Emission:
There is a number of policy measures by which EU seeks to achieve a 20% reduction of
GHG emission below 1990 levels.
Under Directive 2009/29/EC,71
the EU underlined an ambitious plan to combat climate
change through an EU- Emissions Trading Scheme (EU-ETS) for trading GHG emissions
allowances. Divided in three phases, the scheme works on a “cap and trade” principle where
limits are set on total amount of certain greenhouse gases that can be emitted by factories.
The cap is reduced overtime so that total emission falls. By 2020, the ET-ETS sectors expect
a 21% emission lower than 2005 limit.72
The current ETS covers power stations, oil refineries
and factories making cement, glass, lime, bricks, ceramics, and pulp. A number of changes
have been made under the new EU directive, which signified EU commitment to GHG
emission abatement. They include use of a single EU-wide cap on emission vis-à-vis national
caps, auctioning of allowances in allocation process, use of harmonized allocation rules for
free allowances and inclusion of more sectors and gases.73
Every year, an EU-ETS company
must surrender enough allowance which it can trade-off. A limited amount of international
credits is also available from emissions saving projects around the world. The intention is to
reduce on available number of credit in order to guarantee value. There is an international
dimension to the EU-ETS allowing other international companies to use EU allowances to
and the Council, the European economic and social committee and the committee of the regions, 10th
November
2010, COM(2010) 639 final 3.
71 Directive of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87/EC
72 http://e.europa.eu/clima/policies/ets/index_en_htm
73 http://ec.europa.eu/clima/policies/ets/monitoring/index_en.htm
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meet liabilities under their national ETS obligations.74
Besides, such linkages strengthen EU
position under the International Carbon Action Partnership (ICAP), which brings together
countries and regions that are actively pursuing the development of carbon markets through
implementation of mandatory cap-and-trade systems.75
The above efforts have been augmented by a number of measures such as, ‘Effort Sharing
Decision (ESD) No 406/2009/EC,76
which sets national targets for GHG emissions in sectors
not covered by ETS at an aggregate target of 10% emission in 2020 compared to 2005 levels.
Geological storage of CO2 under Directive 2009/31/EC,77
and other legislative and policy
measures targeting CO2 emissions from cars.78
In addition, through the specification of petrol,
diesel and gas-oil and introducing a mechanism to monitor and reduce greenhouse gas
emissions under Directive 2009/30/EC.79
EU-ETS therefore is the cornerstone of EU strategy for cutting GHG emissions at the least
possible cost.80
This is rather ambitious and broader than what obtains under the Australian
system, as we shall later see.
2.1.2. Renewable energy targets
A 20% increase in the share of renewable energy constitutes part of the EU ambitious strategy
for 2020 adopted in 2007.81
Based on mandatory national targets,82
the aim of the strategy is
to enable the EU meet twin objectives of increasing security of energy supply and reducing
74 http://ec.europa.eu/clima/policies/ets/linking/index_en.htm#australia
75 http://ec.europa.eu/clima/policies/ets/linking/index_en.htm#australia
76 Decision of the European Parliament and of the Council of 23 April 2009 on the effort of Member States to
reduce their greenhouse gas emissions to meet the Community's greenhouse gas emission reduction
commitments up to 2020. Also see EU Energy Green Paper 2030, 4.
77 Directive of the European Parliament and of the Council of 23 April 2009 on the geological storage of carbon
dioxide and amending Council Directive 85/337/EEC, European Parliament and Council Directives
2000/60/EC, 2001/80/EC, 2004/35/EC, 2006/12/EC, 2008/1/EC and Regulation (EC) No 1013/2006
78 Under Regulation (EC) No 443/2009 of the European Parliament and of the Council of 23 April 2009 setting
emission performance standards for new passenger cars as part of the Community's integrated approach to
reduce CO2 emissions from light-duty vehicles
79 Directive of the European Parliament and of the Council of 23 April 2009 amending Directive 98/70/EC as
regards the specification of petrol, diesel and gas-oil and introducing a mechanism to monitor and reduce
greenhouse gas emissions and amending Council Directive 1999/32/EC as regards the specification of fuel used
by inland waterway vessels and repealing Directive 93/12/EEC
80 http://ec.europa.eu/clima/policies/ets/monitoring/index_en.htm .
81 European Commission above n 71,(COM (2010) 639 final and a foreword by Commissioner Günther
Oettinger, 4.
82 Article 13 of Directive 2009/28/EU. Bioenergy and Food Security Criteria Indicators (BEFSCI) “EU
Renewable Energy Directives” (RED), 1st
February 2010; Ismail, M., Rossi, A. 2010. A Compilation of
Bioenergy Sustainability Initiatives. Rome: Food and Agriculture Organization of the UN (FAO).
Page 13 of 23

greenhouse gas emissions.83
The EU renewable energy policy addresses 7(Seven) key areas:
mandatory national targets; national renewable energy action plans; flexibility between
member states; reduction of administrative and regulatory barriers; grid access rules;
information and training and sustainability regime for biofuels.84
Directive 2009/28/EC),85
of April 2009 set to achieve a 20% share of energy from renewable
sources in the EU's final consumption of energy, and a 10% share of energy from renewable
sources in transport sector by 2020. The same Directive also established sustainability criteria
for biofuels and bio-liquids86
(defined as “liquid fuels for energy purposes other than for
transport including electricity, heating and cooling, produced from biomass). It required
subjecting biofuel and bio-liquids; whether obtained from within the community or imported
to certain criteria87
before they can be considered for purposes of measuring compliance
under the Directive and eligibility for financial support.
In order to monitor the national performance process under this objective, the EU initiated
National Renewable Energy Action Plans (NREAP) upon which members are to report to the
Commission on their national progress every two years.88
Members have a timeline89
to
transpose the Directive90
into provisions in their national laws and inform the Commission on
its progress and progress in reaching national targets every two years from December 2011
upto 2012. Upon their report, the commission is obligated to report91
to Council and
Parliament every two years from 2012 to 2022 on progress in Renewable Energy Strategy
(RES) objective within the community and may propose corrective measures.92
As a matter of
83 http://europa.eu/
84 Joachim Balke, “Renewable energy and CCS policy European Commission – Energy” DG ENER, Unit C.1,
4.
85 Directive 2009/28/EC of The European Parliament And of The Council of 23rd
April 2009 on the promotion
of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC
and 2003/30/EC.
86 Under Article 17 of the Directive, two sets of sustainability criteria for biofuels are defined.
87 A broad range of Criteria in environmental, economic and socio developmental issues which, Biodiversity,
the protection of rare and endangered species, GHG emissions’ savings, aspects of significant source of raw
material for biofuels, impact of social sustainability of community biofuel policy and availability of foodstuff
and land-use rights.
88 http://www.erec.org/, The Submission of NREAPs commenced on 30th
June 2010 setting out how each
member aims to achieve its national target in the three sectors of heating, cooling and transport.
89 By December 2010 member states were supposed to have transposed the Directive into provisions in their
national laws.
90 Directive 2009/28/EU set clear rules pertaining to administrative procedures, integration, training and
information, certification of installers, access to electricity grid, infrastructure development, and sustainability
criteria for biofuels and cooperation mechanisms.
91 Other reporting procedures are, the commission to report on evaluation of implementation of Directive as of
13th December 2014, and in 2018 the commission is to propose a new renewable energy roadmap for post 2020
period.
92 Client Earth, “Reporting obligation under the Renewable Energy Directive (RED) and the fuel Directive: An
analysis of Social sustainability requirements and wider issues” June 2011
Page 14 of 23

policy importance, the Commission must report first on the social sustainability criteria under
Articles 17(7) & 23(1), (3) RED, and 7(b) & (e) Fuel Quality Directive.
Renewable energy was expected to achieve greenhouse gas emission reductions of at least
35% relative to fossil fuels by mid-2010 with this target rising to 50% in 2017 and 60% in
2018 for fuels produced in 2017 or later. By 2020, the CO2 reduction due to RES is estimated
at 728 Mt/year representing a decrease of 17.3% of the total GHG emissions from 1990
level.93
Coupled with fuel saving of 1,576 Mtoe,94
€443 billion95
worth of energy cost savings
and a projection of 2.2 million jobs by 2020,96
renewable energy strategy (RES) represented a
very ambitious policy for Europe compared to the Australian mechanism premised on power
generation only.
2.1.3. Energy efficiency improvement by 20%
An EU policy on energy efficiency seeks to achieve a smart, sustainable and inclusive growth
and transition to a resource efficient economy.97
It addresses climate change,98
improving
energy security, achieving the Lisbon objectives and costs reduction within the European
Union. Through broad approaches targeting buildings,99
products,100
co-generation,
financing;101
evaluation of the European action plan for energy efficiency and international
93 http://www.erec.org/fileadmin/erec_docs/Documents/Publications/EREC_Targets_2020_def.pdf
“Renewable Energy target for Europe, 20% by 2020,” 15.
94 Ibid 13.
95 Ibid 14 at Euros2004.
96 Ibid 15
97 European Commission: Communication from the Commission to the European Parliament, the Council, the
European economic and Social Committee and the committee of the regions, 8th
March 2011, COM(2011) 109
final, Energy Efficiency Plan 2011.
98 Improving energy performance is seen as a critical step in reaching CO2 emission by 80% if measures such
as better insulation of existing and new buildings are adopted; saving around € 4 billion and 25 million tonnes of
CO2 every year.( http://www.europarl.europa.eu/sides/getDoc.do?language=en&type=IM-
PRESS&reference=20091201BKG65738#title3)
99 Measure for energy efficiency in the building sector: The European Commission sought to eliminate a
threshold of 1000 m2 for existing buildings when they undergo major renovation and that the requirements
concerning energy performance be applied to a larger number of buildings.
100 Setting of ecodesign requirements for energy related products, efficiency rating and labelling,
101 EU financing includes European Energy Efficiency Fund (EEE F); Intelligent Energy – Europe; ELENA
Facility; Mobilising Local Energy Investments (MLEI); Cohesion policy and FP7 Funding. It also makes
available financial support to members to implement EU policy programs. This includes European Energy
Efficiency Fund (EEE F) launched on 1st July 2011 worth €265for energy projects. EEE F aims at financing
bankable projects in energy efficiency (70%), renewable energy (20%) and clean urban transport (10%) through
innovative instruments and in particular promoting the application of the EPC. Intelligent Energy-Europe has
EUR 730 million is available for this scheme and focuses on removal of non-technological barriers to energy
efficiency and renewable energy market uptake26 between 2007-2013; ELENA Facility was launched in 2009
under IEE II, this initiative provides technical assistance grants (of up to 90% of eligible costs) to local and
regional authorities for development and launch of sustainable energy investments. So far, some EUR 31 million
assigned to 17 projects should trigger investments nearing EUR 1.6 billion, within the 3-year duration of
Page 15 of 23

cooperation,102
the energy efficiency strategy is deemed quite comprehensive. The scope
extends to strategies for behavioural change called the “Changing Energy Behaviour”: This
encourages good energy habits amongst the public at large; like school competition for best
energy efficiency practices, awarding prizes for pupils’ knowledge of energy efficiency and
sustainability. On the other hand, public bodies like the European Commission are to commit
to showing leadership in energy efficiency in their building, vehicles, office supplies, and
adoption of energy savings-procurement guidelines. In particular, the Commission is to
ensure that all its buildings are certified under the EU Eco-management and audit scheme
(EMAS).103
Directive 2012/27/EU104
provides indicative national energy efficiency targets for 2020 under
articles 1 and 3 but allows states to exceed the minimum targets. It obliges states to report to
the Commission their progress on set targets under article 24(1) expressed in terms of
primary energy consumption. The building measures under Directive 2010/31/EU105
requires
member states to draw up national plans for increasing the number of nearly zero-energy
buildings. The plans are to include application in practice of the definition of nearly zero-
energy and intermediate targets for improving the energy performance of new buildings by
2015106
and other aspects of renovation of buildings under article 4. The renovation
requirements are limited to central government-owned and occupied buildings with a floor
area of 500m,which will eventually fall to 250m2 2
as of 9th
July 2015.107
Part of the policy also is to see a transformation in the EU energy under a program called
Improving Energy Transformation (IET) to be implemented closely with the energy supply
and distribution industry and Council of European Energy Regulator (CEER) and the
European Regulators Group for Electricity and Gas (ERGEG).108
This is in addition to the
EU-ETS and use of combined heat and power program (CHP) or co-generation, which
involves the simultaneous rather than separate production of heat and power, thus presenting
ELENA contracts. For Cohesion Policy programs EU has about EUR 9.4 billion (2007-2013, of which
approximately EUR 5.1 billion is targeted at improving energy efficiency.
http://ec.europa.eu/energy/efficiency/financing/financing_en.htm
102 Using its foreign trade and policy relations, the EU and US agreed on energy Star for labelling office
equipment. European Commission, Directorate-General for Energy and Transport, BE-1049 Brussels 11,
http://ec.europa.eu/dgs/energy_transport/index_en.html,
103 Ibid 10.
104 Energy Efficiency Directive of the European Union.
105 EU Directive on Energy Performance of Buildings.
106 http://ec.europa.eu/energy/efficiency/buildings/implementation_en.htm
107 http://ec.europa.eu/energy/efficiency/eed/eed_en.htm
108 European Commission, Directorate-General for Energy and Transport, BE-1049 Brussels 7,
http://ec.europa.eu/dgs/energy_transport/index_en.html,
Page 16 of 23

a very complex policy framework for energy efficiency. The challenge with this is the
difficulty in achieving the overall objectives because its focuses on too many areas; the cost
implication and adoption at national levels might prove hard to implement and evaluate.
2.2. Security of Supply of Energy
Security of supply is intricate to the EU energy market because of the way it affects other
sectors of the EU economy. The EU recognises that whereas the role of the internal market is
to achieve affordable, cost reflective and reliable supply, a functional internal market built
based on sufficient transmission and storage infrastructure, guarantees security.109
A policy on
security of supply was clearly highlighted by the Commission in 2007.110
Some of the policy
concerns addressed were:
a) Diversification of supply under the Gas security Directives;111
b) The EU's strategic oil stocks mechanism;112
c) Electricity interconnections;113
d) Building energy relations with the EU's neighbours under the European
Neighbourhood Policy (ENP) in the field of energy;114
e) Proactive management of threats of possible disruptions or physical destruction of
critical energy infrastructure beyond the EU borders;115
f) Engaging in bilateral and multilateral negotiations with key players in the energy
market like Russia, energy producers and transit countries in the OPEC and the Gulf
Cooperation Council,
g) Lastly strengthening Africa-Europe Energy partnership.116
109 EU Commission: Directorate General for Energy, “Energy 2020: A strategy for Competitive, Sustainable
and Secure Energy” 15.
110 European Commission above n 41, COM(2007) 1 final
111 Directive 2004/67/EC of the European Parliament and the Council of 26 April 2004 concerning measures to
safeguard security of natural gas supply of 29th
April 2004 (OJ L 127, 29.4.2004, 92.)
112 COM(2007) 1 final above n 102, 11-[2]
113 Ibid 11-[3]
114 The Commission aimed to pursue a possibility of an EU-ENP energy Treaty with her neighbours in the long
run; to strengthen an emerging regional energy market, and seeking to gradually extend beyond the EU and the
Western Balkans.
115 Through an exchange of best practice with all relevant EU partners and international organizations based on
the actions for the internal infrastructure outlined in the European Program for Critical Infrastructure Protection,
COM(2007) 1 final above n 102, 23-[4].
116 COM(2007) 1 final above n 102, 24-[2]
Page 17 of 23

It further stressed the importance of new energy sources like renewables and biofuels,
particularly tackling the risk of nuclear proliferation, safety and security and lastly pursuing a
robust investment agenda in the energy sector.
While a number of progresses have been made under the 2007 framework, the EU has an
outlook to 2020 in the area of security of supply. The Commission has already proposed to
the EU Council and Parliament117
measures to be adopted to achieve better energy policy for
2020 under five strategic headlines, which specifically prioritise empowering customers and
achieving the highest level of safety and security. Particularly, the 2020 framework is clear on
strengthening the Gas regulation to provide sufficient safety net to vulnerable customers in
time of crises. It combines fostering competition and diversification through interconnections
across member states to protect the EU from the risk of energy production and transport
vagaries, through a developed safe system for nuclear power production, radioactive
substance conveyance and nuclear waste management. The international aspect adopts
collaboration on nuclear safeguards as a means of ensuring nuclear security plus additional
measures under gas and oil installation to guarantee safety and liability in the oil and gas
sector framework.118
3. Further Aspects of EU and Australia’s energy Policies
Indeed the Australian energy policy contained in the Energy white paper 2012 articulates a
very broad and ambitious prognosis that enlists the expertise of key actors and bureaucratic
structures,119
fiscal and market mechanisms for its achievement. The market alone represents
twin quests for domestic and export capabilities, driven by a global competition for energy
market and the need to ensure a robust domestic market. With a remarkably smaller domestic
market compared to the EU, and a relatively secure energy source coupled with astute
regulatory culture120
backed by intergovernmental collaboration,121
and market structures built
117 COM(2010) 639 final above n 62, 13.
118 EU Commission: Directorate General for Energy above n 101, 16.
119 The Council of Australian Governments COAG), Standing Council on Energy and Resources (SCER), the
Australian Competition and Consumer Commission(ACCC), the Productivity Commission, the Australian
Energy Regulator(AER), and the energy Ombudsman (usually state based), are some of the powerful agencies
at the fore of the Australian energy market reforms and competitiveness.
120 The ACCC core mandate is to prevent any anti-competitive conducts such as Anti-competitive agreements
Cartels, Collective bargaining & boycotts, exclusive dealing, imposing minimum resale prices, misuse of market
power, predatory pricing, price signalling, refusal to supply products or services and unconscionable conduct.
Page 18 of 23

around competition and decartelization,122
there is little doubt that the policy objective of
delivering better market outcomes will deliver much for Australia. The linkages provided by
COAG business advisory forum (BAF) and standard business reporting (SBR)123
have
ensured that Australia’s policy domain is informed by the business and commercial realities
of the time hence creating a unique balance between the welfare interests of consumers and
the economic interest of businesses. Though the policy framework seeks a strong market-
based approach to achieving it thrust of efficiency and flexibility, it recognises that in order to
avoid the dangers of market imperfections, an effective and efficient regulatory regime is
vital to ensure proper functioning.
The objective of delivering better market outcomes for consumers;124
focused on
strengthening of market institution and governance, improving network efficiency and
performance, empowering consumers and ensuring a competitive and efficient wholesale and
retail market, echoes a similar call in the EU. Specifically, to deal with price volatility,
deregulation of markets under article 114 TFEU, unbundling of networks to allow
competition highlighted in the 3 energy package, putting the rights of citizen at the centre of
the market and calling upon member countries to protect vulnerable customers.
Both the EU and Australia believe in a deregulated market, existence of competition,
protection of consumers and incentivising the market to provide better consumer information
and choice. However, Australia has taken this a step further by creating a market framework
for achieving such outcomes in the National Energy Customer Framework (NECF). By virtue
of its capabilities to regulate the retail supply and sale of electricity and gas, detailing specific
protections measures for consumers,rd
fostering increased competition through a single
national retail energy market, NECF represents a model framework for achieving specific
demand-side policy goals for customer protection. In particular, the creation on Retailer of
Last Resort (RoLR) under PART 6 of the National Energy Retail Law ensures that there is
certainty of supply of energy to customers of a failed retailer, at the sametime safeguarding
the integrity of the wholesale market.125
Such arrangements provide safety nets for consumers
121 Under the Australian Energy Market Agreement, the core objective is to ensure that the market operate in
the long term interest of consumers.
122 Cartel is criminalized under The Competition and Consumer Act 2010, which not only prohibits cartels
under civil law, but makes it a criminal offence for businesses and individuals to participate in a cartel
123 http://www.sbr.gov.au/government/alignment-with-existing-government-policies
124 Australia Energy Whitepaper 2012, XVIII
rd Under the NECF, part 3 of National Energy Retail Rules guarantees the right of a hardship customer, Part 6
minimizes risk of de-energization, and Part 7 endures that customers on life support equipment have
uninterrupted supply, and the creation of retailer of last resort.
125 Allen Arthur Robinson, “Retailer of Last Resort- Review of Current Jurisdictional Arrangements and
Development of a National Policy Framework final Report prepared for the MCE Retail Policy Working Group”
Page 19 of 23

in case of energy interruption caused by market failings of a supplier thus deflecting market
shocks.
The idea of a single national retail energy market underpinning NECF;126
as opposed to
separate markets for electricity and gas in the EU, does add to the benefits derived by the
consumers from the diversity: the certainty and predictability it provides. It is more assured to
get reliable supply from a single market with many participants at a competitive price than in
other markets like in the EU, which is still undergoing integration. Although attempts are
being made in the European energy sector to streamline grid access for renewable and
biofuels to ensure a single electricity market, there is likely to be greater benefits under single
market for both gas and electricity as it is in Australia which is already fairly developed.
Worthy of note also is the separation of the energy market in Australia in to wholesale and
retail markets respectively. The segmentation of the market better serves to deliver on the
front of information symmetry in the spot market where supply and demand are
instantaneously matched through a centrally coordinated dispatch process. It also provides a
means for production to be matched with supply which offcourse reduces the risk of energy
loss. However, what makes the spot market even more important in delivering better market
outcomes for consumers is the fact that market forces of supply and demand determine
prices.127
This is realistic in the Australian scenario than it is in the EU which is at different stages of
energy market development. Besides, the EU depends more on import for its energy
supply128
and activities in the OPEC, Russia and Africa especially for petroleum products may
hamper the benefits of a stable price, thus creating price volatility. Because of EU reliance on
imported hydrocarbons, its market strategy is more focused on bilateral relations129
and cross
border cooperation to strengthen its energy supply. Actually, the EU has a more collaborative
outlook as an energy consumer while Australia in more self-reliant except for refined
petroleum for its transport industry.
Again, in the realm of energy security, a major concern for EU policy makers is the question
of control of supply and reducing the risk of supply disruption in the event of unstable
(2009)NERA Economic Consulting 21-24.
126 Energy Whitepaper 2012, 109.
127 http://www.esaa.com.au/policy/australian_electricity_markets_1_1_1
128 Finn R. Aune, Rolf Golombek, Sverre A.C. Kittelsen, Knut E. Rosendahl, Liberalizing European Energy
Markets: An Economic Analysis (Edward Elgar Cheltenham 2008) 1-[2].
129 COM(2007) 1 final above n 102, 24-[2]
Page 20 of 23

markets and politics in countries of origin130
as was the case in the Russia –Ukraine crisis of
2006. Europe took a bold policy stride in developing other sources of energy- the very
rationale for the 20% 2020 energy target and more energy efficient measures- the reason for
the 2020 energy efficiency targets. These two policy strategies, though contemporaneous with
sustainability of energy, have both the salient and subtle antidote to insecurity of supply.
Intrinsic in the EU’s Energy policy,131
is the development and promotion of renewable energy
sources as alternatives to the traditional fossil fuels, while harnessing efficiency to properly
limit wastage from extravagant uses.
I dare say that Australia Clean Energy future initiative132
is not premised on similar objectives
but depicts a more environmental and commercial approach133
than it is “a security of supply”
concern.
On the sustainability question, perhaps the starting point of comparison is the Copenhagen
Accord.134
Both Australia and EU shared a strong conviction to their commitment under the
UNFCCC and expected other leading economies to use the Copenhagen platform to come up
with a legally binding treaty135
although this was not to be. They however became part of an
international agreement to make deliberate efforts to abate global emission required to keep
temperature under 2C.0
Following successive conferences in Cancun and Durban,
mechanisms for monitoring transparency in domestic efforts to reduce emission were created
through technical expertise and reporting guidelines now available and used in both
economies. These necessitated both EU and Australia to revisit their domestic commitments
on emission reduction with the EU exploring option to increase its pledge from 20% by 2020
to 30% by 2020, and Australia from 5% to a 25% by 2020 on 2000 level. In terms of
commitment, Australia is still lagging behind major economies according to 2009 levels of
investment in the fight against emission of US$1bn for Australia against US$35bn for the
EU. Her place as a generator of ¾ of her overall energy from coal contrasts significantly with
the EU commitment to 20% increase of renewable energy in the fuel mix.136
This also affects
130 Finn R. Aune above n 122, 6-[5].
131 Sascha M. Kraenner, Energy Security: Re-Measuring the World (Earthscan London 2008) 93.
132 This provides a framework for ETS, Renewable Energy and Energy Efficiency.
133 The Australian Government Overview of the Clean Energy Legislative Package highlights the fact that the
reform will let Australia take advantage of economic and job opportunities that will come as the world tackles
climate change; it will guarantee support to jobs and businesses and that improving energy efficiency will enable
Australia to achieve same level of economic output using less energy. (See pages 4, 6, 7 and 9 of the Overview
of the Clean Energy Legislative Package).
134 The United Nation Climate Change Conference in Copenhagen 2009.
135 Lillian Wylie above n 1, 13-14.
0 Ibid.
136 Ibid 19.
Page 21 of 23

her commitment to energy efficiency because of the intensive nature of Australian industry.
Significantly, the effects are felt in the level GHG emitted. Australia’s commitment under the
Kyoto Conference was doubted inspite of negotiating an 8% increase in GHG emission above
1990 level to 108%, she still abstained137
from signing the protocol as opposed to the EU’ that
committed to an 8% reduction of GHG emission between 2008-2012. The implication on the
policy progress is that the EU-ETS is at a more mature stage than it is under the Australian
carbon pricing mechanism,138
which focusses only on energy generation sectors and some
limited carbon units from carbon farming.
The Australian Clean Energy approach139
bears near similitude to that of the EU except in
their internal dynamics. For example whereas the renewable energy strategy in the EU is
based on national targets for a broad range of sectors, Australia premises hers on large scale
renewable energy targets and small scale renewable energy schemes in power generation. The
regulator accredits power generators in the clean energy sector to create certificates for every
unit of renewable energy in MWH produced above the baseline. Liable entities140
are then
required to purchase certificates that are eventually surrendered to the regulator at the end of
the year or face a shortfall charge of $65 per large-scale certificate not surrendered. Of the
other initiatives under the clean energy future, it is the carbon pricing mechanism, which is
central to the Australia GHG emission policy with both international and domestic
dimensions.141
Established under The Clean Energy Act 2011(Cth)142
the mechanism is
divided into two parts: a fixed three years charge143
period to run until 2015 June 30 and a
‘cap-and- trade’ emission trading scheme to follow thereafter. Other aspects are underpinned
by the carbon farming initiative, which is an offset scheme that allows farmers and land
managers to earn carbon credit unit by storing carbon or reducing GHG emission on land.
The credit units can be sold to people and businesses wishing to offset their emission
obligations. Both carbon farming and trade rely on carbon brokers and carbon farming
137 The Hon Kevin Rudd, then Prime Minister later signed the Kyoto Instrument on 3rd
December 2007.
138 The Carbon Pricing Mechanism is one in an array of strategies under the Clean Energy Act 2011 (Cth) that
seek to reduce GHG emission. Others are renewable energy, energy efficiency measures and Land use practices
like carbon farming.
139 Damien above n 64,1.
140 According to the Clean Energy Regulator, liable entities consisting mainly of electricity retailers have legal
obligations to buy these certificates and surrender to the clean energy regulatory.(There is an online registry for
certificates where trading takes place)
141 Damien above n 64, 1. (The Dimensions are the Australian commitment under the UNFCCC to reduce
GHG, the targets under the Kyoto protocol and Australia’s internal interest in reducing promoting green energy.)
142 There are other critical pieces of legislation and regulations that provide a framework for the Clean Energy
Future.
143 The price of carbon for the first period called the fixed period is $23 a tonne expected to rise to 24.15 for
2013-2014 and 25.40 for 2014-2015. From 2015-2016, the price is expected to be determined by the market
under the administration of the Clean Energy Regulator.
Page 22 of 23

aggregators, although this is viewed as having modest return on the environment. Such are
the fundamental differences between EU and Australia.
The Productivity Commissionth
however identified some common parameters to the carbon
policies around the world and noted that for most part, electricity generation is the main area
of GHG emission coupled with road transport. Almost all countries studied impose cost on
GHG emission abatement, with EU economies allocating more funding to GHG abatement
than Australia. Besides, the estimated effect of supply-side policies have generally been
modest other than in UK and Germany.
3.1. Conclusion.
Taking a global outlook is necessary in understanding the general policy shift in the energy
obtaining in most economies due to the trans-global commonalities of their nature. The effect
of global warming arising from GHG emission has ensured and necessitated a highly
environmentally oriented policy yet evidence shows spates of slackness amongst some
economies to embrace such approach. That is said to be dictated by the internal national
interest of, in this case, the European Union and Australia. Basically the biggest divide
between the two economies in terms of energy policies is their degree of dependence on
import and export of energy resource. It is suffices therefore that Australia and the EU almost
have identical policies that differ only in their internal dynamics and stage of development as
clearly illustrated in this paper.
th Gary Banks, “Emission Reduction Policies and Carbon Price in Key Economies” Productivity commission’s
Report 2011.
Page 23 of 23

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