Replacing the policy scattergun with a scalpel: setting energy policy in a greenhouse gas constrained environment

Policy uncertainty is a significant issue for all companies in the energy sector. It is particularly problematic when policy decisions are made to change the nature of the energy sector, both now and during the coming decades. Government climate change policy has the potential to reshape the exploration and development of both oil and gas reserves.The energy sector requires policy certainty to undertake long-term decisions. This can occur only when government makes socially sustainable, robust, and well-reasoned climate change policy. The core challenge is determining the merit of different choices given the magnitude of uncertainty that needs to be dealt with. Quantifying the uncertainty of technological innovation, future greenhouse gas emission costs, and capital and operating costs over time allows for the comparison of alternative policies to encourage the deployment of low-carbon technologies. A reliable and affordable supply of energy is a fundamental component to a vibrant economy. CEDA’s research project, Australia’s energy options, has sought to provide objective evidence for informed decision making. It has involved three policy perspectives examining Australia’s nuclear options: renewables and efficiency; unconventional energy options; and, a reform agenda that would enhance the energy sector’s efficiency, security, and effectiveness. This extended abstract builds on this extensive research and discusses how governments at all levels can deal with the uncertainty of climate change and make long-term decisions that will underpin investment decisions across the energy sector.