Economics Assignment: Transition in Australian Energy Sector
Task: Prepare a detailed economics assignment setting out the specific and actionable policy proposal for achieving the transition for Australian energy sector. Also, outline the theoretical justifications for government interventions that might be necessary for a smooth transition process.
The aim of the report is to analyze the transition opportunities and options that is available to the Australian energy sector for moving from fossil fuel to renewable or sustainable energy. It analyzes different actions taken by government as a part of the transition to renewable energy, actions taken by the partnering and neighboring nations in similar transaction, set up actionable policy proposal for smooth transition and need for government intervention in such transition.
Renewable energy currently comprises of 17% of the total electricity generation and this paved the way for opportunities and realities for Australia to transform from fossil fuel to renewable sources for a complete energy usage. Presently lot of renewable energy in Australia is coming from household and the government aims at making such energy as a major source in the economy. This is because such energy will not only be sustainable, however, it will also be the most affordable energy source.
Setting out actionable policy proposal is important for smooth implementation of the transition taking place in the energy sector of Australia. Various kinds of policy steps are needed for implementing the transition in a smooth way. The policy recommendation is required in the area of innovation, fiscal policy, industrial policy and educational policy. This is because such actionable policies will enable supportive actions towards the energy transition process and enable growth of farm projects that can generate large amount of solar and wind energy projects. It is recommended that the environmental policy should adopt higher research and development in the area of energy sector. Further, the taxation rules need to be considered to implement the transition in an effective manner. Societal policy will be implemented in the form of educational policy where skills for sustainable activities can be expanded and eliminate the shortages in skills that hamper the speed of transition process. Australia has industrial policy related to programs that encourage innovation, commercialization and internationalization. Moreover, intervention from the government is important for huge investment in energy projects due to supports like subsidy, government spending, local government support, agreement formation and others. Intervention of the government helps in maintaining stability and reduce the risk created from the transition in the energy sector.
Set out Actionable Policy Proposal for Achieving the Transition
Setting out actionable policy proposal is important for smooth implementation of the transition taking place in the energy sector of Australia. Actionable policy proposal recommends the policy that needs to be adopted to achieve the transition in the most appropriate manner. Australia is experiencing a huge transition based on renewable energy transition where new pipeline of wind and solar energy is being built to reduce the use of fossil fuel (Teske et al., 2016). An active policy recommendation is important process to address the issue in the most structured way. Sustainable transition in Australia requires actionable policy across various policy areas such as cross cutting policies that will be targeted towards various areas such as innovation policy, fiscal policy, educational policy and industrial policy. Geels et al., (2019) stated that it is important for Australia to establish a stable actionable policy framework for the production and distribution of renewable power generation. This is because it is only through long term investment and relatively stable agreement the economy will be able to implement renewable energy usage in a vast manner. This is because a daily spot market prices for electricity and renewable energy will not be effective in long term decisions and implementation of transition process.
Innovation Policy: Innovation is an important for the transition process and thus actionable policies are required in relation to science, technology and innovation. It is recommended that the environmental policy should adopt higher research and development in the area of energy sector. This will require research and development funding that can be directed towards sustainability objectives. The new funding will enable the adoption of advanced innovative technology in energy sector that can help in accomplishing sustainability transition from fossil to renewable energy sector. The energy sector of Australia should adopt technology development trends, which will be supported by research and development in the environmental policy (Geels et al., 2019). This will help in reducing technical and innovation barriers and start the transition process in a fast and smooth manner.
Fiscal Policy: The fiscal policy will be an important consideration when conducting the transition process in the energy sector. Thus, rules regarding taxation helps in understanding the areas being taxed that can impact the transition. The taxation rules need to be considered to implement the transition in an effective manner. Australia has number of tax reform towards sustainable projects to support investment and consumption of environmental efficient processes (Antoniades, 2011). The transition process in energy sector should consider the National Strategy for Ecological Sustainable Development. Further, the energy efficient taxation policy such as 50% deduction in tax for construction firms for improving energy efficiency of building should will act as an encouraging method to implement transition in the energy consumption from fossil fuel to renewable sources (Teske et al., 2016). Increase in tax related to environmental problems, concessions and emissions will further help in the transition process in the energy sector by moving people more towards renewable sources.
Educational Policy: Social policy is yet another important aspect to be considered when implementing the transition with the aim to increase awareness among the people towards societal value. This will increase the acceptance rate of the renewable energy as it will be visible in daily lives of the consumer. Societal policy will be implemented in the form of educational policy where skills for sustainable activities can be expanded and eliminate the shortages in skills that hamper the speed of transition process (Oecd, 2020). Conducting retraining processes for employees in green energy jobs in the energy sector will initiate better transition process. This is because retraining the employees will help reduce the gaps in skills and bottlenecks in the transition process. It will help widen the knowledge of the employees in energy sector that are involved in transition process. Further, online educational program should be initiated in different social media channels to increase awareness among society about renewable energy sources and increase the use of such sources in daily lives. This will further make the transition process in the energy sector successful.
Industrial Policy: The last area of policy recommendation will include considering industrial policy that will further help achieve transition in energy sector. Australia has industrial policy related to programs that encourage innovation, commercialization and internationalization. Analyzing and studying the existing industrial policy related to energy sector will enable implementation of effective standard in the transition process (Oecd, 2020). Further, the energy sector should take advantage of arising opportunities related to technological changes in industries along with the use of educational and innovation policies.
Justification for Government Interventions for Smooth Transition
Government intervention plays a vital role in smooth transition process for building a sustainable future. Sustainable transition involves diverse policy implementation and consideration. Government of Australia will help in considering and forming new frameworks for fiscal and industrial policy that can further help the energy sector to encourage easy energy transition in the society. Large scale renewable projects that already being implemented in Australia and government can act as a support to these projects by offering the energy firms subsidies and benefits (Teske et al., 2016). This will help increase the number of initiatives in such energy projects on a wider scale and make transition fast. For example, subsidies allow generation of solar, geothermal, hydro and wind energy on a large scale by making it less costly for the energy sector. Further, government that include science and innovation in their national agenda will implement extensive investment in technologies. Government spending plays an important role in effective production of renewable energy on a large scale that support transition process. Further, fiscal policy is the instrument of the government and it has the power to change the taxation policy in support of such renewable energy projects. Further, local governments also act as a driving force to uptake renewables. For example, the Sunshine Coast Council of Australia is a local government that has generated electricity across all their facilities and operations from renewable energy sources by making use of solar farms (Karp, 2020). Such initiative by government encourage the society to take such incentive and help in smooth transition process. Government intervention is thus a major intervention for smooth and stable transition.
Intervention of the government helps in maintaining stability and reduce the risk created from the transition in the energy sector. Further, the energy future of Australia needs collaboration, planning and flexibility by governments in order to help the energy agencies to take up large transition process. Further, the Australian Government is responsible to make several energy agreements that will help in driving decarbonization in transport, export, industrial and stationary energy (Geels et al., 2019). Government is a large agency that will help in driving all other agencies in the energy sector in a smooth way. This is because major policies are driven by government that enable direct investment on such sustainable projects.
Antoniades, H. (2011). The application of taxation benefits and incentives for green buildings. In State of Australian Cities (SOAC) Conference. SOAC.
Geels, F. W., Turnheim, B., Asquith, M., Kern, F., & Kivimaa, P. (2019). Sustainability transitions: policy and practice. Copenhagen.
Karp, P. (2020). Australia to achieve 50% renewables by 2030 without government intervention, analysis finds. the Guardian. Retrieved 29 October 2020, from https://www.theguardian.com/australia-news/2019/may/29/australia-to-achieve-50-renewables-by-2030-without-government-intervention-analysis-finds.
Oecd. (2020). Production transformation policy reviews: identifying actionable policy options to succeed in a changing world. Oecd.org. Retrieved 29 October 2020, from https://www.oecd.org/dev/Identifying-Actionable-Policy-Options.pdf.
Teske, S., Dominish, E., Ison, N., & Maras, K. (2016). Renewable energy for Australia–Decarbonising Australia’s energy sector within one generation.