Australian Energy Industry - Case Study Example

The Effect of Business Name Name of Institution The Effect of Business Introduction This essay will focus on the Australian energy industry. The sector was selected since it plays a pivotal role in the economy by providing the much-needed energy that allows businesses to function. Thus, the energy sector determines whether individual businesses in Australia can be sustainable and not contribute to greenhouse gas emissions and climate change. The essay examines the current state of sustainability in the energy industry, and it shows that the sector is unsustainable owing to a reliance on fossil fuels. Climate change is expected to add further challenges to the sector through extreme weather that can damage energy infrastructure and unexpected variations in energy consumption. The paper will conclude with the selection of a strategic response that is most likely to work and a discussion on the implementation of this preferred approach. The Current State of Sustainability in the Australian Energy Industry It is an accepted fact that the development of human societies has coincided with the placement of enormous strain on the planet. Diesendorf (2012) notes that air, waterways, land, humans, and other species have all suffered as a result of this increasing strain on the earth. Research has shown that the energy sector bears the greatest responsibility for the destruction of the valuable system that supports various forms of life. Specifically, the burning of fossil fuels releases copious amounts of greenhouse gases that are responsible for the disparities in climatic conditions. Therefore, an examination of the degree to which the Australian energy industry is sustainable is critical in any attempt to stop climate change. Sustainability, in this case, defines sources of energy that can be exploited in the long-term without harming future generations. For instance, a country that relies on wind power has a sustainable energy industry while a country that fully relies on fossil fuels has an unsustainable energy sector. The Australian Government has realised the pivotal role played by energy. The government wants to ensure that individuals and businesses have access to energy that is affordable, reliable, and secure as energy is the basis of modern life. The government also realises the importance of ensuring that clean energy takes up a significant proportion of the energy mix. This can be established by looking at assessments of the energy industry that were conducted in 2010 and 2012. According to Geoscience Australia and ABARE (2010, p. 1), Australia has diverse and abundant energy resources that include fossil fuels, uranium, and renewable sources like wind, geothermal, hydro, and solar energy. However, the sustainable energy sources were not properly developed as of 2010 with renewable energy accounting for 2% of all energy production (Geoscience Australia & ABARE 2010, p. 3). This shows that the energy industry was unsustainable as it relied on fossil fuels like coal and oil that cannot be exploited in the long-term without harming future generations. Despite the unsustainability, there were signs that the Australian Energy Industry was moving towards sustainability in 2010. For instance, wind energy was the fastest growing source of energy with projections showing that its share would increase from 1.5% of total electricity generation in 2007 to 12% in 2029 (Geoscience Australia & ABARE 2010, p. 239). As stated, Australia is one of the driest places on earth meaning that there is a vast amount of solar energy. As in the case of wind energy, projections in 2010 showed that the usage of solar energy in Australia would rise by 5.9% each year (Geoscience Australia & ABARE 2010, p. 261). According to the Bureau of Resources and Energy Economics (BREE) (2012, p. 55), major growth in renewable electricity generation was expected with 10 out of 19 advanced electricity generation projects being renewable. The evidence shows that the Australian Energy Industry is not sustainable due to a lot of reliance on coal and gas plants. However, there is abundant evidence that shows that the industry is moving towards sources of energy that are clean and sustainable. Strategic Challenges to the Sustainability of the Industry In Light of Climate Change It is worth accepting that climate change is a real occurrence that is bound to have tremendous impacts on the government, businesses, and Australians (Stern 2007, p. i). An evaluation of literature shows that climate change defines variations in the long-term averages of climatic elements like precipitation, sunshine, temperatures, wind velocity, and humidity (Maunder 2012). As stated, the Australian energy sector is unsustainable but it is making slow progress towards being sustainable in the long run. However, climate change threatens to slow or eliminate the much-needed progress towards a status where the industry meets the energy needs of present generations without harming the prospects of future generations. One example of a short-term challenge is the manner in which climate change threatens energy infrastructure. It is an acceptable fact that climate change is associated with extreme weather conditions that can wipe out expensive energy infrastructure. According to Wade (2015), Australia’s immediate neighbourhood is very vulnerable to extreme weather conditions. The nation has suffered from cases of flooding and severe storms in the recent past, and the frequency of these events are expected to increase in the future. These events can lead to the destruction of energy infrastructure leading to temporary switches to more harmful sources of energy to meet shortfalls in production. This presents a short-term challenge to sustainability that needs to be addressed. Extreme weather from climate change also has a direct impact on the levels of energy consumption. Climate change will mean that Australia will have a warmer climate and citizens will need to use more energy for air conditioning. In 2013, the nation experienced its hottest year on record, and scientists suggest that the intensity and frequency of heat waves will increase (Frew 2014). The heat waves place enormous pressure on energy consumption and production. As stated, coal, oil, and gas are the main sources of energy in the nation, and an increase in energy consumption is directly associated with the release of more harmful greenhouse gases (BREE 2012, p. 3). The move towards a more sustainable energy sector is, thus, threatened by climate change as extreme weather forces energy providers to increase generation capacity. In many cases, the cleaner sources of energy are not fully developed, or they are associated with lower efficiencies (BREE 2012, p. 47). Energy companies, therefore, resort to the abundant coal, oil, or gas resources, thereby worsening the degree to which the energy sector is sustainable in the medium term. Recent government policies on climate change also present strategic challenges to the sustainability of the Australian energy industry. According to Taylor (2015), policy papers presented by recent governments have always recognised the need to institute changes in the energy industry as a way of mitigating climate change. For instance, John Howard’s 2004 white paper had a full chapter that addressed the manner in which climate change would alter energy policies (Taylor 2015). The 2012 white paper by the Labor government also addressed the issue of climate change, and it envisioned a shift from fossil fuels to sustainable renewables in the domestic market. Surprisingly, the present Abbot government has taken a different approach to climate change by adopting a policy of non-involvement in electricity generation and transportation (Taylor 2015). This means that the present government will not encourage the energy sector to cut emissions and move towards more sustainable sources of energy like wind and solar energy. Energy producers and distributors will, therefore, seek to maintain their current business model that is heavily reliant on the unsustainable coal, oil, and gas resources. The decision by the government presents a long-term challenge to the sustainability of the energy industry as it is likely to eliminate the gains realised in the past. Development of alternative sources of energy is unlikely to continue due to a lack of backing from the government. This will have horrible long-term implications for the natural, social, cultural, and economic environments of future generations. Major Stakeholders The various assessments of the energy industry show that the government is a key stakeholder in the industry. The government's mandate is to guarantee the social, cultural, and economic well-being of its citizens. Additionally, the government has to ensure that citizens have access to affordable, secure, and clean energy. Despite the stated failures of the present government, past governments have taken up the role of ensuring that the energy sector is moving towards a higher degree of sustainability. The other major stakeholders in the energy sector are investors and traditional energy companies that produce, transmit, distribute, and sell energy to various types of consumers. These firms invest much time, effort, and funds with the aim of providing energy while getting sufficient economic returns. As such, these firms might oppose wholesale changes in the energy mix as they will have to alter their business models. Alternative energy companies are other major stakeholders, and their goal is to implement clean energy projects to increase the sustainability of the critical energy sector. Finally, consumers and citizens as a whole are also stakeholders in the energy sector. Their usage of energy determines the direction of the sector, and they can also influence policies through the choice of leaders. Possible Strategic Responses Within the energy sector, fossil fuels take the largest share of the blame for the release of harmful greenhouse gases. The strategic responses to mitigate climate change, therefore, involve finding ways of reducing the dependence on these harmful fossil fuels. A move towards nuclear energy is a possible strategy to reduce and eliminate reliance on fossil fuels in the long term. According to Geoscience Australia & ABARE (2010, p. 171), Australia is the world’s leading nation in terms of identified resource of uranium and thorium. These are the energy sources that can power nuclear power plants that generate massive amounts of energy. Advances in technology can allow Australia to explore nuclear energy as a possible strategic response to climate change. The exploitation of renewable energy sources that are abundant in Australia is another possible strategic response to climate change. BREE (2012, p. 47) notes that hydro, wind energy, solar, biogas, and biomass are the clean energy sources currently being used in the nation. Geothermal, ocean energy technologies, large-scale solar plants, and carbon capture technologies are clean technologies that are yet to be deployed commercially (BREE 2012, p. 47). The introduction of these sources into the energy mix and an expansion of the clean energy sources that are already being exploited is a possible solution to climate change. As stated, consumers form a key component of the stakeholders in the energy industry. These are the people who are likely to suffer the most from climate change both in the present and the future. Therefore, they have a reason to influence the direction being taken by the energy industry. For instance, consumers can embrace energy saving measures in a bid to lessen the total national energy consumption. In turn, this will affect production and reduce the release of greenhouse gases. Similarly, the consumers can become energy self-reliant by embracing technologies such as solar. In such a case, utility companies will be relegated to acting as a backup for the days where homes and businesses are unable to exploit solar energy. Another possible response by consumers can involve electing a government that is a committed to mitigating climate change. Recent events in the Netherlands have also shown that the legal system can be used to force governments to take climate change seriously (Dinham 2015). Preferred Approach and its Implementation The preferred approach to reducing the energy industry’s contribution to climate change will be citizen action. It is worth mentioning that nuclear energy can be a tempting solution in light of the availability of uranium in Australia. However, nuclear power is associated with enormous risks. For instance, a natural disaster can lead to the release of radioactive material that can lead to contamination as happened in Fukushima in Japan. Having eliminated nuclear energy, the rationale for selecting citizen action as the preferred action comes from the failure of the government to create aggressive policies that will lead to an energy industry that is sustainable. Additionally, the energy industry cannot effectively adopt policies that will compromise its profitability in the short and medium term (Diesendorf 2013). According to Garnaut (2011, p. 102), reducing emissions will be effective only if individual Australians, businesses, and the government work together in making choices and deciding on investments. Citizen action can be used to ensure that the government and the energy sector realise the importance of protecting future generations. This should then lead to the adoption of renewable energy sources, which Diesendorf (2013) argues are capable of meeting the energy needs of an industrialised nation. When it comes to the timeline for implementing this approach, citizen action needs to begin now as any delay will increase the burden on future generations. Successful citizen action will lead to a situation where the next government takes up a major role in the creation of sustainable energy policies. Energy firms will then dedicate their enormous resources to clean energy, meaning that the entire energy sector will be sustainable in the long-term. How Climate Change Affects Businesses The evaluation of the effect of climate change on the Australian Energy Industry illustrates the way climate change can affect businesses in the country. This case study shows that businesses have to monitor the degree to which they are sustainable. Additionally, businesses have to determine whether they are contributing to climate change, a phenomenon that will make them unsustainable in the long-term. When it comes to the actual impacts of climate change on businesses, the first effect is the way climate change can lead to the creation of laws that increase the cost of doing business. Additionally, these laws introduce complications for businesses as they can change at a fast pace. Secondly, climate change can force businesses to pay carbon taxes that can be expensive and reduce profits considerably. It is obvious that climate change can also affect the reputation of businesses as more people become sensitive to the environmental impacts of businesses and their products. As stated, climate change is expected to lead to more extreme weather conditions. Therefore, businesses will be exposed to the risk of losing their investments to extreme weather conditions like severe storms and bushfires. In turn, insurance companies will increase premiums to provide coverage to businesses. Finally, unpredictable weather patterns will change demand for seasonal goods and services and alter the way businesses operate. It is evident that business have to embrace policies that will mitigate climate change in order to avoid the many negative effects of climate change on businesses. Conclusion This essay began with the definition of climate change and what constitutes sustainability in the energy industry. The paper then analysed the degree to which the Australian energy is sustainable. The finding was that the sector is unsustainable, but past governments have taken measures to make the industry more sustainable. The essay has identified that climate change presents some strategic challenges to the energy industry. Extreme weather can destroy energy infrastructure while a reduction in water supplies can harm energy production facilities that rely on water for cooling. Climate change also impacts energy consumption, and this creates a dangerous cycle where more harmful gases are released when producers try to meet increased demand. Another challenge comes from the government policies towards climate change. When it comes to stakeholders, all Australians together with businesses and the government have a stake in the energy sector. Possible responses to climate change will include nuclear energy, government policies that encourage a move towards renewable energy, and citizen action. The essay’s conclusion is that citizen action is the preferred option owing to the failures of the present government and businesses in the energy sector. The recommendation is for Australians to undertake immediate social action that will force the government and energy sector to embrace policies that will safeguard future generations. References Bureau of Resources and Energy Economics 2012, Energy in Australia 2012, BREE, Canberra. Available at [25 June 2015] Diesendorf, M 2014, Sustainable Energy solutions for climate change. NewSouth Publishing, Sydney, NSW. Dinham A 2015, Environmentalists consider legal challenge to climate 'inaction', SBS News [1 July 2015] Frew, W 2014, Australia sweats over extreme hot weather, BBC News. Viewed at [1 July 2015] Garnaut, R 2011, The Garnaut review 2011: Australia in the global response to climate change, Cambridge University Press. Geoscience Australia and ABARE 2010, Australian Energy Resource Assessment, Geoscience Australia. Available at [25 June 2015] Maunder, WJ (Ed.) 2012, Dictionary of global climate change, Springer Science & Business Media. Stern, N 2007, The economics of climate change: the Stern report, Cambridge, UK. Taylor, L 2015, Climate change ignored in energy white paper that lets market rule future policy, The Guardian. Viewed at [1 July 2015] Wade, M 2015, Extreme weather the new normal in Australia’s disaster-prone neighbourhood, Sidney Morning Herald. 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