Law economics and education

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It has been stated that the degree of penetration of alternative energy technologies will depend on three factors: regulation, stimulation and education, or a combination of any two or more of these measures. Regulation is the major role of law, and one which has many illustrations in the traditional energy context. Before private investment can occur, legal certainty as to the rights and duties of the Parties is required. It is difficult to conceive of large-scale private investment occurring in any part of the energy industry if investors are not certain as to their legal position. In high-risk investment areas, such as petroleum exploration and production, comprehensive legal regulation has always preceded private investment. Legal certainty is required even in respect of small-scale private investment. For example, why would a private individual or company wish to invest in a solar energy appliance without an assurance that they will have a guaranteed right of solar access? Without such a right the appliance will be essentially worthless. There is certainly scope to minimise bureaucratic controls over the operation of the energy sector and, for example, it maybe appropriate in certain circumstances, particularly with the implementation of environmental controls, for the government to negotiate codes of practice rather than rely on regulation.89 However, there is no alternative to legal regulation to determine the basic management regime for the exploitation of each of the energy resources and the basic rights and duties of private owners and operators.

88 AMiller, 'Legal Obstacles to Decentralised Solar Energy Technology: Part II' (1979) 1 Solar Energy Reporter 761, at 783.

89 See L Campbell, 'Codes of Practice as an Alternative to Legislation' [1985] Statute L Rev 127; A Samuels, 'Codes of Practice and Legislation' [1986] Statute L Rev 29.

Although stimulatory measures are largely the preserve of economists, most stimulatory measures require laws for their introduction. Thus, for example, every proposed tax concession given to investors in the energy sector requires a change to an existing statute or regulation to implement it. Perhaps more importantly, society is not presented with a choice simply between regulation and stimulation to achieve a desired result. There is the further option of introducing both regulatory and stimulatory measures. This is often the most effective of the alternatives. It is sometimes referred to as the 'carrot and stick' approach. The 'stick' (that is, the regulatory measure) ensures that the private operator reaches prescribed minimum standards of performance. The 'carrot' (that is, the stimulatory measure) ensures that the operator goes as far as possible beyond the minimum prescribed performance standard. Regulation without stimulation means that there is no incentive to go beyond minimum standards, while stimulation without regulation may not produce any action at all.

It may be thought that education has nothing to do with the law. However, this misconceives the proper role of law in society. There are many illustrations of laws being introduced with a primarily educative function. Outside the energy field, laws requiring the mandatory wearing of seatbelts in cars and crash helmets for motorcycles, and laws requiring a compulsory health warning to be displayed on tobacco products, are useful examples. Within the energy sector, many jurisdictions already have laws designed to educate the public. An example is State and Territory legislation requiring the manufacturers and retailers of specified electric appliances to display a label on each appliance showing its average energy consumption and level of efficiency according to a prescribed testing procedure.90

As can thus be seen, the law has a vital role to play in relation to each of the major means of introducing change towards the adoption of sustainable energy technologies.

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