Chairman of the Australian Energy Market Commission, Dr John Tamblyn, presented a paper on Australian electricity markets and climate change policies to the Committee for Economic Development of Australia (CEDA) in Melbourne, Victoria, on 19 February 2009.
This paper explains why competitive energy markets are integral to the delivery of climate change goals in Australia, and considers whether the current frameworks for energy markets are likely to be up to the task of facilitating at efficient costs the implied transformation in where and how we produce and consume electricity. This transformation is expected to be driven primarily by the explicit pricing of emissions of CO2-equivalent gases through the Australian Government’s Carbon Pollution Reduction Scheme (CPRS) and by the subsidising of investment in new renewable generation capacity through the expanded 20% Renewable Energy Target. The paper describes the potential interactions between these policies and behaviour in energy markets, and discusses the ability of existing mechanisms in energy markets to promote efficient outcomes.
The paper puts this in the context of an ongoing process of reform aimed at promoting competition and which has already seen significant transformation of the market over the past 15 years.