Government, Public Policy and Energy Governance Flashcards
From an economics point of view, discuss the role of government and market in a market economy and explain how government failure occur. (6 marks)
- Government role is to distill social values and preferences on behalf of the community.
- Government is centralised decision making.
- Market role is to facilitate competition and allocate scarce resources efficiently.
- Decentralised decision making
- Market can provide price signals to guide investment, production & consumption
- Government role is to step in when a market failure occurs e.g split incentives, negative externalities, market power, information asymmetry.
- Government failure is when gov’s make things worse than they would have been and can occur due to weak incentives, political short-termism, info asymmetry, regulatory capture.
Briefly describe four current drivers for renewable energy deployment worldwide. (4 marks)
Energy security - RE is an indigenous resource, reduces reliance on fuel imports, abundance, distributed & diversified
Economic Development - relates to energy security, innovation & industry development
GHG Abatement
Localised Air Pollution
Climate change Global agreements Resource price / scarcity Rising sea-levels Air pollution
Briefly explain what is meant by the term “externality” and provide an example of a negative externality related to energy.
Costs or benefits associated with consumption or production. Can be positive or negative. That are not accounted for in market price signals e.g. CO2 emissions
Describe Australia’s energy resource base and explain how this influences Australian energy policies, in relation to:
- Australia’s role in global energy markets
- Domestic patterns of energy use and generation
- Development of renewable energy. (6 marks)
- Australia’s resource base is traditionally fossil fuels e.g. coal & more recently, gas
- This influences our energy policy as our economy is reliant on both exports of these commodities and industry from energy use from fossil fuel generators
- Therefore Australia has a role in global energy markets as an exporter of energy commodities e.g. to China and so policy must reflect the best interests of Australia and its economic prosperity
- Domestically, baseload & peaking generation traditionally supplied by coal & gas respectively. These generators rely on domestic fuel resources. Energy policy has been largely influenced by lobbying from coal mining groups in the past
- Energy in the past was very cheap due to domestic resources. Brown coal
Development of renewable energy has been increasing in recent years due to its economic viability compared to traditional generators, Australia’s good renewable resources and some measure of political & policy influence. - Friction still exists in governments relating to energy policy e.g. NEG as they try to ensure reliability over environmental concerns & other greeny shit.
- Vested interests, poor investment context in Australia’s energy industry
a) Discuss ‘good’ policy making, identifying measurable criteria for policy evaluation and processes for ensuring good outcomes.
For policy making to be ‘good’, policies should be designed to be efficient, effective, equitable, and institutionally feasible.
- Effectiveness in policymaking refers to whether or not the policy was able to achieve its objectives. If a policy is poorly designed, it may not address the market failure at hand, or may cause other failures in its implementation. Effectiveness in RE policy can often be measured in uptake of RE technology (e.g. MW capacity installed/year)
- Efficient policymaking refers to the efficient allocation of resources by a policy in order to achieve its objectives, i.e. is the policy more expensive than it should be, could it have been designed to maximise public good more effectively. Efficiency can be measured in the budgeted funds for a policy design, and by comparison to similar policies in other countries / similar mechanisms within Australia.
- Equity refers to whether or not a policy distributes outcomes fairly across all affected stakeholders. Equity is somewhat difficult to measure, as there can be many relevant parties and externalities involved with policy design. Equity in RE and Energy policy can be measured by looking at policy impacts on low-income households VS. large industry bodies, or on the impact of policy design on RE uptake / grid improvement in developing countries. There is no clear metric for equity analysis.
Describe allocative and dynamic efficiency and discuss these concepts in relation to renewable energy policy outcomes.
Allocative efficiency describes the distribution of benefits throughout a market. A market is considered to be ‘pareto’ optimal (or at maximum allocative efficiency) if no benefits can be reallocated in order to improve overall efficiency.
Dynamic efficiency describes the improvements to market allocative and productive efficiency over time. For RE policy, dynamic efficiency can be observed through the changing application of policy throughout the RE technology lifestyle – using development and implementation incentives at the start of a technology life, and moving towards
Discuss three different types of institutional barriers that might apply to clean energy
No acknowledgement of negative externalities of incumbent fossil fuel generation – positive environmental benefits of RE not recognised in market
Lobbying power of fossil fuel industry in policy-making acts against RE
inertia
a) Discuss the role of a white paper process in policymaking.
Green paper – sets out a range of options under consideration for a policy framework and invites feedback/discussion
White paper – statement of policy which follows green paper consultation
Both are high-level policy documents, which generally do not go into much policy detail. Instead involve structured, institutional examination of policy framework.
