12.2.1 Promoting integrated energy and water policy
12.2.2 Improving the effectiveness and efficiency of regulation and planning
12.2.3 Effectively managing multiple resource use
Sustainability requires the integration of society’s environmental, economic and social aspirations with the production and consumption of goods and services. The design and implementation of government policies and regulation also plays a key role in this integration.
The evolution in social, business and government thinking on sustainability and environmental management in the past 50 years has been significant. Policy has moved towards transparent and integrated approaches based on scientific evidence and risk management (often drawing on the efficiency of market-based approaches), rather than regulation. Australian consumers are also more environmentally conscious, requiring high environmental and sustainability standards. Corporate social responsibility and environmental management objectives are now integral to modern business planning and practices. There is also a much deeper scientific understanding of ecological systems and impacts and how they might be most effectively managed.
The Australian Government has in place a comprehensive set of environmental regulatory and policy frameworks covering such areas as climate change, water, air quality, waste management, biodiversity protection and conservation, coastal and marine management, and landscape and heritage protection. All intersect in some way with energy policy and energy development.
The governance and legislative mechanisms with the greatest influence on energy-related development and policy implementation include:
- the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act)
- the 2004 National Water Initiative and the Water Act 2007
- marine bioregional planning, including the newly proposed Commonwealth Marine Reserves Network
- the National Environment Protection Measure on Ambient Air Quality and the Fuel Quality Standards Act 2000
- the Clean Energy legislative package.
In addition, the Australian Government's sustainable population strategy, Sustainable Australia-Sustainable Communities, outlines ways to help ensure that future population change sustainably supports the economic, environmental and social wellbeing of the nation (DSEWPaC 2011a). The strategy’s focus is on putting in place the policy settings and governance arrangements needed to maintain and improve wellbeing at the local, regional and national levels by encouraging more effective anticipation of, planning for and responses to the impacts of population changes on our economy, communities and environment.
State and territory governments also maintain environmental and sustainable development regimes that apply to energy and resource development in their jurisdictions. Inconsistency or duplication in regulation at different levels of government is not always successfully avoided. Work currently underway with the Council of Australian Governments (COAG) is aimed at minimising duplication, inconsistency and delays to reduce the regulatory burden and provide greater certainty for business.
Most of the sustainable development issues associated with the production and use of energy in Australia will be managed effectively within current frameworks and measures. However, there are three areas that need further work:
- integrating energy and environmental policies to deliver efficient investment decisions
- improving the effectiveness and efficiency of project approvals and resource development planning
- effectively managing resource use and co-development pressures, including community development and acceptance.
12.2.1 Promoting integrated energy and water policy
Overall, the electricity and gas sector currently accounts for approximately 2% of total water consumption in Australia (ABS 2012d). Around 65% of the generating capacity in the current National Electricity Market depends on fresh water for hydro-electricity generation or for cooling in coal- or gas-fired thermal generation (Smart & Aspinall 2009).
Reductions in the availability of Australia’s hydro-electric capacity during the 2002–2010 drought resulted in higher wholesale electricity prices, as more expensive gas-fired generation was required to replace hydro-electricity’s usual backstop generator role. While critical levels were never reached, the availability of cooling water reserves for thermal generators became a material risk in some regions and a drought simulation by the then National Electricity Market Management Company for the National Water Commission raised some concerns about short-term power supply (Smart & Aspinall 2009). This may become more important if regions in Australia begin to experience sustained reductions in water availability due to the impacts of a changing climate.
Water may also affect energy generation decisions in other ways. For example, uncertainty about future water access may affect project financing by heightening perceptions of risk. Some emerging electricity generation technologies may involve a higher intensity of water use than conventional technologies, and the development of unconventional gas reserves, such as coal-seam gas, involves both the treatment and disposal of significant volumes of groundwater.
The electricity industry has a range of technical options for securing its water requirements or reducing water use. However, most are more applicable to new plants than to existing operations because of the high cost of retrofitting. However, some coal-fired power stations have reduced their water use per megawatt hour generated by up to 15% (Smart & Aspinall 2009).
In the future, there is likely to be a greater need to allow generators and other water users in the energy sector to manage risks and minimise costs flexibly. Giving generators the option to purchase tradeable water rights in open markets can increase flexibility in using water for the production of energy in response to changing water availability. Appropriate pricing will also ensure better location and technology choices for new investments.
The National Water Commission has recommended that, where extraction and consumption of water occurs as an input to electricity or gas generation, governments should seek to ensure that water licensing arrangements, including those relating to pricing and access, are made as consistent as possible with the National Water Initiative. The trading of water entitlements should not be expressly excluded (NWC 2009). In its 2011 biennial assessment of progress under the initiative, the commission recommended that these arrangements also apply to water associated with mining and petroleum activities, including groundwater brought to the surface during coal-seam gas extraction (NWC 2011). Under the terms of the National Water Initiative, all users should pay a price for water that reflects the full costs of supply and management and have equitable access to trading opportunities in water markets.
A further general principle is that contractual arrangements for the supply of water to generators should reflect the same access provisions as those for other users, and not mandate take-or-pay contracts that exclude participation in water trading.
The government will work with agencies such as Geoscience Australia to promote better understanding of the interaction between water resources and the energy sector, including through linked mapping of energy and water resources.
12.2.2 Improving the effectiveness and efficiency of regulation and planning
Environmental regulation and planning are essential but can be streamlined and better coordinated to minimise business costs. Poor-quality, delayed or inconsistent decision-making hinders investment, imposes unnecessary costs or produces suboptimal environmental results. In Australia, our federal system presents particular challenges of administrative duplication and inefficiency.
The Environment Protection and Biodiversity Conservation Act
Nationally, demand for approvals under the EPBC Act has increased significantly over recent years, as has the complexity of the assessments. Much of this increase comes from the rapid expansion in Australia’s energy and resource development sectors. The EPBC Act has been in force for more than a decade, yet half of all the approvals given have been granted in the three years to 2011.
In 2011, the Australian Government announced significant reforms to the administration of the EPBC Act (DSEWPaC 2011b), including:
- a shift from individual project approvals to strategic assessments, including new regional environmental plans
- streamlined assessments and approvals
- better identification of national environmental assets
- cooperative national standards and guidelines to harmonise approaches between jurisdictions and foster cooperation among all stakeholders.
The reforms include a package of measures designed to conserve protected matters of national environmental significance in a streamlined way.
One focus of the reforms is on greater use of existing strategic approaches to environmental management. Under the EPBC Act, strategic assessments are landscape scale assessments and unlike project-by-project assessments, which look at individual actions, they can consider a much broader set of actions. They enable the Environment Minister to approve classes of actions that can proceed without further assessment, avoiding the need for individual referrals and assessments of projects. The reforms will also allow regional environment plans to be developed in partnership with states and territories outside of Commonwealth areas of responsibility, and in consultation with local government, natural resource management bodies, industry and the community. Similarly to strategic assessments, they will allow landscape-scale assessment and planning and provide for the approval of certain classes of actions, as long as those actions are carried out appropriately, removing the need for the referral of individual projects.
The reforms also include a commitment to developing a more clearly defined offsets policy framework to provide more certainty to business about how these conditions are applied.
These reforms will deliver better environmental protection and more timely environmental assessments, remove duplication between national and state and territory environmental regulation, cut red tape, and provide greater transparency and a nationally consistent approach.
Reducing regulatory burdens
On 13 April 2012, recognising the impact of duplication and double handling, COAG agreed to fast-track Australian Government accreditation of state and territory environmental assessment and approval processes for matters of national environmental significance, supported by specific national environmental standards.
In its decision, COAG reaffirmed the commitment of all governments to high environmental standards. COAG agreed:
- to fast-track the development of bilateral arrangements for accreditation by the Australian Government of state and territory assessment and approval processes (frameworks are to be agreed by December 2012 and agreements finalised by March 2013)
- to develop environmental risk and outcomes based standards (to support the bilateral agreements) with the states and territories by December 2012
- that the Australian Government will work with the states and territories, bilaterally or collectively, to improve the process for approvals in areas where the Commonwealth retains its existing final approval responsibilities, for consideration by COAG at its next meeting
- to examine and facilitate the removal of unnecessary duplication and reduce business costs for significant projects.
Work to implement these COAG reforms is well underway. The Commonwealth held initial discussions with the states and territories in May and June 2012, and stakeholder consultations with industry and non-government groups began in July 2012. Consistent with COAG’s decision to maintain high environmental standards, the bilateral agreements with the states and territories must be consistent with the EPBC Act.
As part of its response to the Hawke review of the EPBC Act, the government agreed to consider opportunities to streamline the legislative arrangements under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 and the EPBC Act as they relate to offshore petroleum activities. Discussions are ongoing between the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA—the independent national regulator responsible for health and safety, well integrity and environmental management of offshore petroleum activities since 1 January 2012), the Department of Resources, Energy and Tourism, and the Department of Sustainability, Environment, Water, Population and Communities to implement this reform. The Department of Resources, Energy and Tourism is also conducting a review of the Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2009 to ensure that the regulations are an up-to-date basis for regulation by NOPSEMA.
Integrating a changing climate into energy planning
The Australian Government has put in place a comprehensive range of measures to reduce carbon pollution through its Clean Energy Future Plan (discussed in detail in Chapter 6: Clean energy). It is also important to plan for unavoidable climate change impacts, as Australia’s energy sector is vulnerable to projected changes in the frequency and intensity of extreme weather and other events, such as intense precipitation, storms, bushfires, heatwaves and floods, as well as to incremental changes in climate, such as rising temperatures and sea levels. In particular, critical infrastructure must be resilient to manage the long-term impacts and risks.
Fundamentally, this is a risk management issue for industry itself to consider. However, to support better business planning the Australian Government is supporting research to improve our understanding of potential climate impacts, including at the regional and subregional levels. The government will work with industry to ensure that critical infrastructure is protected from climate impacts. Critical infrastructure protection issues are discussed in Chapter 4: Energy security.
Better project assessment in transport infrastructure planning
The government has also made assessments of transport infrastructure projects much more transparent and rigorous. For example, there is now a greater emphasis on the conduct and publication of cost-benefit analyses. Because those analyses account for savings in fuel and vehicle emissions, this approach identifies the most energy-efficient projects.
12.2.3 Effectively managing multiple resource use
Developing unfamiliar energy resources and technologies may generate concerns about potential environmental impacts, human health and safety, and visual or social amenity. Such concerns are usually heightened when proposed developments are perceived to be in conflict with other established land or resource uses. In recent times, coal-seam gas projects, new or expanded coal mines and large-scale wind farms have caused disquiet among some members of local communities.
Projects and technologies must earn a 'social licence' to operate, as failure to do so can generate community resistance, deterring investors and increasing project costs. The task of establishing social acceptance lies mainly with project proponents and technology developers and users, rather than government, and must occur at the local and broader societal levels.
Projects such as coal-seam gas or wind farm developments require a high degree of community engagement to ensure that environmental, economic and social changes associated with them are supported. By understanding the benefits of the project or the sector more generally and by having a better understanding of the science and risks associated with the project, local communities are better placed to see tangible benefits from the development (see Chapter 5: Energy resources). While a social licence does not guarantee dispute-free development, it assists by transparently addressing environmental and community impacts and concerns.
The vast majority of businesses in the Australian energy sector operate responsibly and with due care to create and maintain their social licence to operate. The Australian Government does not believe that such practices could or should be mandated or regulated in every instance, as they are most effective when they are embraced and embedded within corporate management strategies and behaviours, rather than when they are the subject of a compliance regime.
However, there is room for improvement. The government will continue to engage with business to improve operational frameworks, information flows and community engagement. It has made the development and implementation of community consultation plans a condition of grants under the Solar Flagships Program and the Carbon Capture and Storage Flagships Program.
There is also a role for government in promoting the benefits of developing new energy resources and clean energy technologies by providing efficient and effective regulatory frameworks which ensure that concerns are addressed through robust, transparent decision-making. The Australian Government will continue to work with state and territory governments to better manage co-development pressures and to promote the benefits of innovation and new energy resources and technologies.
Another role of government is to provide geoscientific and geographic data and knowledge to support the management of multiple resource use.