Australia’s renewable energy policy: the case for intervention

As Australia grapples with increasing renewable energy penetration and the appropriate climate change strategy, renewable energy policy plays an increasingly important role. In recent years the renewable energy policy environment has become increasingly politicised and uncertain. The implications for the industry are significant. In light of this policy environment, this paper sets out the economic theory behind public sector market intervention and contextualises it within the Australian renewable energy context. It highlights the barriers facing renewable energy deployment and explores the current status of Australian renewable energy policy. This analysis reveals market failures and other barriers to deployment as well as entrenched enabling policy, regulatory and institutional frameworks for fossil fuel industries. This context was found to justify government intervention to support the renewables sector and improve overall economic efficiency. Building on this analysis, five observations relevant to the development of future renewable energy policy are outlined.