This paper presents some of the key features of Australia's energy sector with respect to its contribution to the economy, greenhouse gas emissions and how the energy sector has challenged all past and present government to developing an effective mitigation policy. This is mainly because Australia produces world's cheapest electricity with very high emissions intensive carbon bearing fossil energy sources.The high emission intensive energy use is one of the major reasons for Australia to be highlighted as the highest percapita emitting nation in the world, although, Australia produces less than 1.5 percent of the world's greenhouse gas emissions. As a result energy sector has played a key role in deciding Australia's emission mitigation policy framework that has been successfully implemented in July 2012.