Guideline for Australian Gas Networks Limited - Case Study Example

Australian Gas Networks Limited Name ID number Date Executive Summary Australia is a country that experiences huge ripples of climate change. This has been the situation since the 21st century. Generally, the conditions have seen a gradual move from a wet climate to the now present dry climate. This is due to increasing population especially in the urban region which creates much pressure on land. A report released by CSIRO (2013) shows that climate change will lead to extreme heat and longer fire seasons. Green house effect and other human activities are some of the major contributors to such climatic changes. Currently, the government is working in collaboration with the Climate change and water Ministry, towards an emission trading scheme which is expected to cause positive economic growth by countering the effects of climate change. The aim is to avoid inundation of property worth Australian $150 billion consisting of buildings and other property. The government has much investment in the Natural Resource Management Change Impacts and Adaptation Research Program. This makes the Australian Gas Networks limited a good partner for implementing government initiatives. It also improves decision making on matters of climate change control. Exports of the natural gas have led to economic growth, increased employment and the determination of Australia’s current deficit account. Most people have been employed to necessitate the production of natural gas for external markets whose demand has consistently exceeded the supply. Similarly, the economic conditions have improved due to low emissions as most countries embark on the use of Australia’s natural gas. Finally, exportation of natural gas has led to an improvement in the current account deficit of Australia (Economicshelp.org, 2013). The fifth Assessment Report (2013-2014) will ensure updated information on climate change and a high degree of responsiveness by businesses and individuals. This report is a guideline for Australian Gas Networks since it provides solutions to the risks associated with climate change. Contents Executive Summary 2 Company Overdraft 1 i.The rationale and the theoretical underpinnings of a carbon tax 3 ii.The Direct Action Plan 4 iii.Impacts of climate change on the Australia Gas Networks limited 5 iv.Risks suffered by Australia Gas Networks limited in a carbon dioxide constrained environment 5 v.Opportunities available to Australia Gas Networks in a carbon dioxide strained environment 6 vi.Appropriate adaptation strategies 6 Company Overdraft Australian Gas Networks (AGN) is a company that was formed in 1997 with the name Envestra Limited. The company has its headquarters in Australia-Adelaide, with about 16 employees (AGN Limited, 2015). The primary product that the company deals in is the distribution of natural gas. In the year of formation, the company was listed on the Australian Stock Exchange. The company produces natural gas both for local consumption and export purposes, thus making it a trade exposed company. This is possible owing to the fact that Australia has reserves of natural gas that significantly represent an estimated figure of 819 trillion cubic feet (TCF). The company made an acquisition of a distribution business in Victoria in 1999 which led to an immediate increase in its assets to $2.1 billion, and also raised the distribution networks to about 17,000 kilometers. The amount of natural gas supplied also increased in consistence with an increase in the number of customers served which amounted to 835,000 customers. Gas Networks and statistics (2014) shows that Australian Gas Networks covers a distance of 22,981 kilometers out of the available natural gas distribution networks and transmission pipelines that covers 1,124 kilometers which are distributed in the five different locations. The company also serves 1,184,779 consumers in the Northern Territory, Victoria, New South Wales, Queensland, and the South Australia. During the financial year that ended in 2014 June, the company recorded revenues worth Australian dollars (A$) 554.4 million. This is a figure above the 2013 revenues by 9.3 percent. The company also had an operating profit worth Australian dollars (A$) 339.8 million in the financial year 2014, which represents a 12.6 percent increase from the 2013 figure. Its net profit was Australian dollars 153 million in the financial year 2014, which is an increase of 41.9 percent above the 2013 figure (Anon, 2015). Australian Gas Networks has an environmental policy that makes it committed to management of its activities in order to minimize the negative implications and impacts on the environment. Such impacts as excessive gas emissions are put under control in order to lower cases of droughts, rising sea levels, acidification of oceans and other poor effects that excessive emissions may cause to the environment. On the other hand, the industry is faced with uncertainties due to rapid climate change. Changes in rainfall patterns may lead to low rainfalls and run off which results to limited water for power plants. Too much heat also makes it uncomfortable for people to work thus weakening the manpower for natural gas production. Dry spells also enable communicable diseases to spread much faster thus reducing the labor force through deaths and hospitalization of workers. The increases in temperatures have been associated with bush fires, floods and dry conditions which reduce the productivity of the company. The company has a corporate strategy that aims at expanding its gas distribution networks to incorporate all the areas where natural gas is currently not available. This is an effective strategy that also works to ensure an increase in the transported gas capacity using the pipeline as a channel of transport. This will lead to an increase in company’s market share of the natural gas industry and in the general Australian energy consumption and at the same time provide secure and reliable services to their customers in the natural gas industry. In addition, the company also has policies on risk management, work health and safety as well as compliance policy. Australian Gas Network is one of the high economic contributors in the country. This is because natural gas is growing faster as a source of energy. The increasing demand for natural gas puts the company at a better position to compete for more customers as compared to dealers in other sources of energy. The natural gas industry is the leading competitor in the energy sector since it is also a means of environmental conservation. The Australian Gas Networks strive to remain competitive by undertaking various projects of renovation and establishing new projects. For instance, the company carried on a replacement program that incorporated parts of high density polyethylene pipe which had been laid more than four decades ago. Such upgrade of the cast iron and steel mains are increasing and currently mains that cover 520 kilometers have been upgraded. This is an indication that Australian Gas Network limited is geared towards an improved economy of Australia and the energy sector with respect to environmental conservation as well as meeting consumer needs in a cost effective way (ESCSA, 2015). i. The rationale and the theoretical underpinnings of a carbon tax The carbon tax policy ensures that any amount of carbon emitted is taxed against the producer. This policy aims at reducing the amount of emissions since the tax is on a progressive basis. Introduction of the carbon tax led to household compensation together with cuts on other costs of living. This policy applies to entities that generate more than 25,000tonnes of carbon dioxide. The Australia Gas Networks limited is directly affected by the policy by the virtue of being a company in the energy sector. Scrapping of the carbon tax is said to be the cause of rising household gas prices. However, the Australian Gas Networks limited is eligible to take part in the Clean Energy Plan set by the government. The company also qualifies to be classified as emissions intensive since it focuses on producing clean gas (Lw.com, 2015). The repealing of the carbon tax has led to great economic impacts such as budget inflation. The government has to spend more on the carbon tax cut policies and thus the budget is expected to worsen off (Berg 2014). This is a forecast made on the basis that there will be a loss of the carbon tax and also the costs related to the implementation of the government proposed Direct Action plan together with the Emissions Reduction Fund, whose value is estimated at Australian $2.55 billion for the next four years. Repealing the carbon tax will consequently lead to reduced cost of living and low costs of retail electricity. This will also boost the economic growth of Australia, increase employment levels and raise national competitiveness of Australian businesses. In addition to the above, there will be a reduction in the cost of compliance to rules and regulations since most of the regulations will be removed from the system. ii. The Direct Action Plan The Direct Action plan is a government initiative to do away with the carbon tax policy. It is an alternative climate policy to the carbon tax policy. The plan revolves around the contribution of Emissions Reduction Fund (ERF) by tax payers. These funds are then used to heavy lift in order to reduce emissions in Australia. The heavy lifting is done by using this money to pay polluters so that they do not either pollute the environment or encourage carbon sinks development by farmers. The mechanism for implementing this is by paying a certain amount for a given percentage of emission reduction. In this case, polluters are encouraged to reduce pollution by a huge percentage in order to earn more money. This scheme has also led to debates as to whether or not it will succeed in eliminating the carbon tax policy since the modelers of its auction are in doubt that it will not work. This is because they see that the funds are not sufficient and fall short of the required amount. On the other hand, the funds were enough to purchase a good amount of the Australian abatement task. iii. Impacts of climate change on the Australia Gas Networks limited The reports found that, the major cause of climate change is human activities. This greatly affects the five major regions where the Australian Gas Network operates. Activities such as forest fires cause a great deal of global warming due to emission of carbon dioxide. In order to mitigate the emission of green house gases, Australia Gas Networks limited provides a cheaper but quality source of energy by supplying natural gas. Unlike electricity as a substitute for unclean gas, natural gas is affordable and offers a great comfort to users. iv. Risks suffered by Australia Gas Networks limited in a carbon dioxide constrained environment The Australian Gas Networks plays a major role in the governmental efforts to control climatic change since it tends to implement one of the government initiatives. Political risk arises when different political parties seek to offer what will benefit citizens. This will interfere with the stability of the industry as politicians seek to repeal or not to repeal the carbon tax. The company may also suffer safety risks due to potential loss of assets from fire breakout, and infrastructural damage. The company is also exposed to health risks as workers can inhale the carbon emissions and suffocate even to death. The company may also suffer environmental risks as carbon gas is released to the atmosphere. This increases chances of environmental pollution and global warming. There is also risk of poor quality energy production due to the pressure of wanting to meet the ambition of 2020 which advocates for reduction of emissions. Another risk is the depletion of natural sources as demand for cleaner gas increases (Rubin, 2015). v. Opportunities available to Australia Gas Networks in a carbon dioxide strained environment The rise in emissions results in environmental pollution. Similarly, such gases are health hazards that need to be eliminated. Due to the high economic and population growth in the region, Australia Gas Networks has an opportunity to widen its markets and sell its product to a wider range of customers. The company can also advance by educating the community about dangers of using hazardous sources of energy like coal and unclean gas. By so doing, the company can attain a competitive advantage over competitors like the APA Group, Liquefied Natural Gas Limited and Origin Energy Limited. Being a high energy company, Australia Gas Networks can use technologies and policies that will ensure the achievement of deeper cuts on emissions. Researchers Liz Minchin & Michael Hopkins (2014) found out that most Australian dwellers do not have an understanding of the carbon tax. This is an opportunity for Australia Gas Networks limited to influence the greater multitude by making them understand the need for them to purchase their natural gas. vi. Appropriate adaptation strategies Australia Gas limited has to adopt various strategies that will enable it to adapt to the carbon strained environments. These strategies must not be only geared towards keeping the business alive but also attracting more new customers and maintaining old customers. The company must first understand that customer expectations are rising on a daily basis; therefore they should work to keep up with the high demands. Adaptation of a digital strategy will enable them to have constant digital presence so that the distribution of information is made swift and practical. This provides a means for efficiency in communication with the locals. This strategy ensures that useful information such as the benefits of natural gas and the connection process is easily accessible. Another strategy involves creating an engagement strategy in the south Australian branch. This will ensure that all work groups are considered in the publication of the reports and efficiency of communication is maintained. References Anon, (2015). [online] Available at: http://www.australiangasnetworks.com.au/ (link is external) [Accessed 15 Oct. 2015]. 'Australian Gas Networks Limited', 2015, Envestra Limited Market Line Company Profile, pp. 1-18. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=101716593&site=ehost-live Berg, C 2014, 'The repeal of the carbon tax', Institute of Public Affairs Review, vol. 66, no. 2, pp. 12-13. Economicshelp.org, (2013). Importance of exports to the economy | Economics Help. [online] Available at: http://www.economicshelp.org/blog/7164/trade/importance-of-exports-to-the-economy/ Essential Services Commission of South Australia. 2015. Australian Gas Networks jurisdictional service standards for the 2016-2021 regulatory period: draft decision. Retrieved from http://www.worldcat.org/oclc/905839745 Lw.com, (2015). Australia’s Greenhouse Gas Pricing Law: A Post-Election Primer. [online] Available at: https://www.lw.com/thoughtLeadership/LW-australia-greenhouse-gas-pricing-mechanism Piercy, N 2009, Market-led Strategic Change : Transforming the Process of Going to Market, Routledge, Amsterdam. Rubin, e. (2015). IPCC special report. Carbon dioxide capture and storage. [online] Available at: https://www.ipcc.ch/pdf/special-reports/srccs/srccs_technicalsummary.pdf [Accessed 15 Oct. 2015]. Read More