Australia's Energy Policy Mix: A Critical Analysis

This assignment explores Australia's evolving energy policy, particularly the government's decision to support new coal plants as part of a balanced energy mix. The analysis delves into the rationale behind this policy, considering its potential impact on energy security, economic growth, and environmental sustainability. It also examines the role of market forces in shaping the energy landscape and the challenges associated with achieving a sustainable energy future.

Running head: ENERGY POLICY IN AUSTRALIA
Energy Policy in Australia
Name of the Student
Name of the University
Author note

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Table of Contents
Introduction......................................................................................................................................2
Essence of the story.........................................................................................................................2
Economic theories and concept.......................................................................................................3
Free market..................................................................................................................................3
Market failure..............................................................................................................................4
Government support policy.........................................................................................................4
Recommendation.............................................................................................................................5
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

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Introduction
Government in Australia gives much concern in efficiently designing energy policy of the
nation. In the last year, the nation suffered from interrupted supply of electricity. Considering
this, government aims at implementing a stable long run policy target. Different layers of
government actively participate in resolving problems in the energy sector. Primary industries
including coal and different minerals, federal and state government intervenes for ensuring
undisturbed supply of power. In a recently published article energy minister in Australia, stresses
on supporting the new coal plants for a secure energy future for Australia. The paper analyzed
the article using economic theories and concept.
Essence of the story
Energy minister Josh Frydenberg in the article gives opinion that there newly build coal
plants runs with the principal of high efficient and low emission can make significant
contribution to the energy mix in Australia. Government is ready to support the newly build
plants. Along with existing base load power plants this newly build, coal plants should give
equal importance (theguardian.com 2017). There are provisions of government intervention to
secure best outcomes in the market for electricity. While intervening in the market, government
will also keep in mind the free market policy and intervene only in areas where it is needed.
Therefore, energy market in Australia will experience a collaboration of free market strategy and
government intervention.
Energy minister announce that given the target for pursuing a clean energy target
government is taking its time before making any decision. The twin objective are supplying

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energy at a reasonable price and keeps the emission at a significantly low level. The target here is
to reduce the emission at the level of 28% of that in 2005 by the year 2030 ( Foran et al. 2016).
The Prime Minister Malcolm Turnbull completely agreed with the view of Energy minister and
recommended for a slow but right policy choice for the electricity sector. The plan here is to
integrate the energy policy and climate aspect when deciding over long-term investment policy.
Environment and Energy minister together reached the decision of energy mix using the new and
existing coal plants.
Economic theories and concept
Free market
Economic system of free market refers to a situation where there is unregulated
interaction between buyers and sellers. Behavior of sellers is reflected by market supply curve
and the behavior of the buyers is captured with the market demand curve. The stable free market
equilibrium is obtained where the demand behavior matches with the supply behavior. The
continuous interaction between buyers and sellers make the necessary adjustment to restore
equilibrium in the market (Baumol and Blinder 2015). In times where demand exceeds supply,
suppliers can balance the demand and supply by increasing the price. On the other hand, in times
of opposite situation that is when there is excess supply in the market, to sell the additional
supply they can reduce the price. Buyers in the market also responses by increasing or decreasing
their demand in response of price change.
In the energy market, the situation of free market is preferred because it ensures best
allocation of resources than hat in the regulated market. This is the reason why government is
thinking repeatedly before intervening in the market (Gillingham et al. 2013).

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Market failure
Market failure is the situation where operation of free market fails to bring efficient
outcome. In times, where market fails to restore natural free market equilibrium neither the
consumers get optimal utility neither the sellers get maximum profit. In this situation,
government intervention is needed to satisfy the interest of consumers and producers. Market
failure resulted from different factors such as presence of externality, weak enforcement of law
and regulation, presence public goods in the market and others (Fike and Gwartney 2015).
With a view that the newly opened coal plants though efficient but may be unable to
perform efficiently in the beginning years, the energy minister thinks of providing support to the
plants in the initial years (Wilensky 2015).
Government support policy
In times of market failure government extends different support policy depending on the
specific situation. Providing subsidy to the producers is one way to improve the situation. When
subsidy given to the producers, it reduces, the effective cost to the producers and hence enable
them to offer the good at an attainable price. The direct price support policy includes the policy
of price ceiling or price floor. In price ceiling, the maximum price is set that is below the
equilibrium whereas in price floor minimum price is set above the equilibrium (Byrnes et al.
2013). Depending on the situation, the government chooses appropriate policy.
Energy minister decided to support coal plants for creating a proper energy mix in the
nation. Without government support, the plants may be found incompatible with the already
established plants.

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Recommendation
Interrupted supply of electricity hampers the daily life of the people as well as in
industrial production. Before making any policy decision, close investigation of the existing
policies are needed. Focus should be given on proper utilization of all the available resources.
Support policies designed by the government often leads to welfare loss. This is the situation
here benefits from such policies exceeds its cost. Therefore, while deciding over the support
policy the cost benefit analysis should be made properly. Along with meeting the energy,
demand the environmental aspect should be considered. Investment should be made on
technologies that lead to minimal emission of harmful gases.
Conclusion
The assignment is designed to critically analyze the energy policy in Australia. The
energy ministry recently aims at designing an energy mix policy combining the old and new coal
plants. Government also agrees to provide necessary support to the new plants. While
government has decided to support the new plants, free market is also given priority. The newly
opened coal plants are expected to give a secure energy future. There is a coalition between the
energy and environment ministry to smoothen the power supply in the nation along with
minimizing emission of harmful substances. To reduce emission innovating technology is being
used in the new plants.

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References
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Cengage
Learning.
Byrnes, L., Brown, C., Foster, J. and Wagner, L.D., 2013. Australian renewable energy policy:
Barriers and challenges. Renewable Energy, 60, pp.711-721.
Chapman, A.J., McLellan, B. and Tezuka, T., 2016. Proposing an evaluation framework for
energy policy making incorporating equity: Applications in Australia. Energy Research & Social
Science, 21, pp.54-69.
Fike, R. and Gwartney, J., 2015. Public choice, market failure, and government failure in
principles textbooks. The Journal of Economic Education, 46(2), pp.207-218.
Foran, T., Fleming, D., Spandonide, B., Williams, R. and Race, D., 2016. Understanding energy-
related regimes: A participatory approach from central Australia. Energy Policy, 91, pp.315-324.
Gillingham, K., Kotchen, M.J., Rapson, D.S. and Wagner, G., 2013. Energy policy: The rebound
effect is overplayed. Nature, 493(7433), pp.475-476.
Karp, P. (2017). New coal plants have a role in Australia's energy future, Josh Frydenberg says.
[online] the Guardian. Available at:
https://www.theguardian.com/australia-news/2017/aug/13/new-coal-plants-have-a-role-in-
australias-energy-future-josh-frydenberg-says [Accessed 17 Aug. 2017].
Wilensky, H.L., 2015. Organizational intelligence: Knowledge and policy in government and
industry (Vol. 19). Quid Pro Books.

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