"These barriers are creating potential near-term supply shortages on the east coast, and also increasing prices," says the paper, which was released by Federal Industry Minister Ian Macfarlane on Tuesday.

The paper said there were no "quick fixes" on gas supply and increasing prices were inevitable but the focus needed to be on increasing supply.

Mr Macfarlane pointed in particular to the problems in NSW, which relies on other states for 95 per cent of its supplies and has been slow to develop its coal seam gas resources despite a tripling in east coast demand because of the start-up of the $70 billion LNG export industry in Queensland.

"The message for onshore gas is we need to find a supply solution for New South Wales which is unlikely to come from it developing it's own gas resources from particularly CSG," he said, pointing to the possibility of a gas pipeline link from the Northern Territory that could help meet demand in NSW.

The paper argues that placing limits on sales of gas overseas is not the best way to head off potential shortages of gas - a policy proposed by the Australian Workers' Union and some businesses.

The paper, which will pave the way for a White Paper blueprint on energy policy, likely to be published in 2015, says the domestic gas supply is one of two "watch-points" that signal risks around energy supply security, the other being the continuing decline in the country's refining capacity.

"Ad-hoc and interventionist approaches to shaping our future energy system will not give the best results," the green paper says.

"Forced outcomes and unnecessary regulatory barriers should not prevent access to the broadest p[ossible range of competitively priced energy options, now and in the future."

Australian Industry Group chief executive Innes Willox said the vital reforms needed in the gas market would only happen if the states were on board called for negotiations with the states to begin "immediately".

"Blanket bans and moratoriums that are stiflying unconventional gas production in NSW and Victoria should be replaced by credible science-based regulation" Mr Willox said.

But AI Group also appeared to urge the government to reconsider its opposition to subjecting LNG projects to a national interest test. The group "believes that it would be wise to consider the economic and suppl impacts of future LNG expansions before investments happenrather than after," Mr Willox said.

The green paper also canvasses the possibility of nuclear power for Australia, saying nuclear "remains a serious consideration for future low-emissions energy".

However Mr Macfarlane played down the chances of any near-term move to nuclear power.

"We have set about in this paper not to preclude any area of energy from discussion but can I emphasise that the Abbott government has no plans to develop a nuclear energy future in Australia," he said.

Coal will remain important for meeting energy demand but requires major capital investment "in a market that is currently oversupplied," the paper notes.

Western Australia already has a gas reservation system, which is supported by most industrial gas users, although broadly opposed by producers.

"Such actions will not address current challenges in the market, and may result in negative long-term outcomes by deferring future investment. Instead, more competitive markets need better market information, informed community participation, operational transparency, and accelerated project development," the paper says.

The release of the green paper, originally scheduled for May, has been delayed amid continuing uncertainty over the future of the 2020 Renewable Energy Target. The controversial recommendations from the RET review panel led by Dick Warburton look unlikely to be adopted by the government, which has yet to formally respond to the review's results and wants to secure a bipartisan agreement on the way forward with the Labor Opposition.

Mr Macfarlane said on Tuesday the government was "completely committed" to renewable energy.

"We are committed to ensuring that there is stability on terms of the renewable energy industry going forward but that will require the Labor party to decide whether or not they are prepared to approach this in a bipartisan way," he said.

"If they take a political approach they will simply leave the renewable energy industry in a region where investment will stall."

Renewable energy, meanwhile, will also be important, especially in remote areas off the main power grid.

Advances in large-scale energy storage could be "a game-changer" for renewable energy as it smooths intermittent supply typical of electricity produced from renewable sources.

The green paper also points to an increased push toward electricity tariff reform to better match prices with real costs of infrastructure designed to cope with peaks in demand, after a circa 50 per cent jump in household electricity prices over the past four years.

The paper also urges further privatisation of energy assets and said greater competition was needed to drive innovation and productivity and improve services for customers.