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Sustainable Regulation: Moving Towards Environmentally Sound Energy Markets

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As the global focus on climate change and greenhouse gas emissions abatement has intensified in recent years, the extent to which environmental considerations may threaten future energy supply security has become an increasingly important consideration for governments, policy-makers, legislators and energy market participants. Energy markets are the source of more than half of global greenhouse gas (GHG) emissions. Consequently, securing environmentally sound domestic energy markets is becoming crucial to achieving global emissions reductions. Global energy demand is anticipated to grow rapidly in the coming decades. As such, there is a need to develop environmentally sound regulatory and legislative frameworks in energy markets. These frameworks will then be central to addressing the rising dilemma of energy-sourced GHG emissions. In part, this requires independent energy market regulators to be equipped with adequately underpinned and appropriate regulatory instruments to direct the market and its participants towards sustainable energy practices.

Accordingly, this chapter examines the value of incorporating sustainability obligations into energy market regulatory practices at the national level, with reference to national energy market regulators in the UK and Australia. By way of background, the harmful relationship between energy activities and the environment is discussed at the outset. An overview of the reforms in Australian and UK markets is then set out and considered within the broader context of privatisation, competition and regulation. The role of the regulators in each domestic market is then considered, both generally and in terms of environmental regulation. In particular, this chapter examines the extent to which these present-day energy market regulators are required to observe environmental obligations in their respective jurisdictions. Recommendations as to future environmental regulatory practices and concluding remarks complete the chapter.

Environmental damage of various kinds occurs at all points along the energy supply-demand transaction: production, transportation and consumption. More often than not, current global energy supply and demand are being satisfied by national energy market practices that pay little or no heed to the requirement to conserve and protect the local and global environment. At all points along the energy production-demand transaction, numerous outcomes illustrate that the relationship between energy and the environment is far from positive. Examples include: the GHG and air pollutants which result from flaring (at extraction) and fuel combustion (energy conversion and final end use); GHG and air pollutants from energy consumption in transportation of primary energy sources and transmission and distribution to end-users; methane emissions from coal, oil and gas extraction, pipeline leakage, natural gas transmission and distribution and fuel combustion; oil and other liquid fuel spills and discharges; solid wastes from mining and coal combustion; radon from uranium extraction and nuclear waste from power production; and finally, ground water contamination and surface degradation from coal, oil and gas extraction.

Document Type: Research Article

Publication date: January 1, 2011

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