Green Energy Finance in Australia and New Zealand

Ivan Diaz-Rainey and Greg Sise
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Ivan Diaz-Rainey: Asian Development Bank Institute
Greg Sise: Asian Development Bank Institute

No 840, ADBI Working Papers from Asian Development Bank Institute

Abstract: We explore the history and current status of green energy finance in Australia and New Zealand. Although both countries have enviable renewable energy resources with a 100% renewable mix considered feasible, the two countries present highly contrasting contexts for energy finance. Currently, and largely for historical reasons, renewables make up over 80% of the electricity capacity in New Zealand, whereas in Australia this is 17%. Interestingly, between them and over time, the two countries have employed most of the important policy tools available to incentivize renewables and green energy finance (e.g., carbon taxes, carbon trading, a green investment bank, a green certification market, and feed-in-tariffs). Despite this, we show that between 2004 and 2017 both countries did not meet their potential in terms of renewables and have lower levels of green energy investment relative to gross domestic product per capita than many other developed countries. The Australian and New Zealand context provides many lessons for other jurisdictions—ranging from the need for cross-party and regulatory commitment to energy transition, to the need for policy stability. Indeed, a key issue in Australia and New Zealand is the challenge of designing electricity markets that support energy transition and the investment that it requires. Incumbents in both jurisdictions are fearful of a “death spiral” induced by distributed power, and in Australia political instability and market design issues contributed to a major energy crisis in 2017. However, the crisis, the Paris Agreement, and the associated impetus of new governments in both countries suggest green energy investment is set to increase in the coming years.

Keywords: energy finance; energy transition; green investment bank; feed-in-tariffs; emissions trading; electricity markets; green certificate market (search for similar items in EconPapers)
JEL-codes: F21 G20 H23 O13 Q40 Q42 Q48 Q54 Q55 Q58 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2018-05-03
New Economics Papers: this item is included in nep-ene, nep-env, nep-knm and nep-reg
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