Emissions Pricing, 'Complementary Policies' and 'Direct Action' in the Australian Electricity Supply Sector: 'Lock-in' and Investment

Dr Barry Naughten

CCEP Working Papers from Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University

Abstract: In Australia, carbon emissions pricing is politically contentious. The current Labor government has implemented such a scheme, but the Liberal National Party (LNP) opposition has pledged to repeal the scheme should it be elected. This article accepts the well-established position of emissions pricing as the core and least-cost approach to reducing greenhouse gas emissions. Its main focus is on examining and rebutting some recent LNP arguments to the contrary, notably in regard to the electricity sector under Australian conditions. In so doing, the article considers the problem of locked-in carbon-intensive generating capacity, as highlighted by the IEA. As such, it focusses on use of price signals to reduce carbon intensity of electricity generation and also examines the role of passed-on price in encouraging end-use savings of electricity, including more energy-efficient end-use. Both of these mechanisms can be reinforced by well-designed complementary policies. These two examples of the price mechanisms effectiveness demonstrate longer run impacts of prices and price expectations on investment decisions. This emphasis is appropriate given the context of catastrophic climate change as a long run phenomenon, albeit one also requiring urgent mitigating action in the shorter run.

Keywords: Emissions pricing; complementary policies; carbon 'lock-in'; electricity sector; Australian climate policy options (search for similar items in EconPapers)
JEL-codes: D62 D81 E27 H23 L71 L94 P46 Q41 Q42 Q54 Q58 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:een:ccepwp:1304

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