As the federal treasurer Joe Hockey targets welfare spending in what is shaping up to be a radical budget overhaul, new data has revealed that revenue losses from scrapping Australia’s carbon pricing scheme, combined with the redirection of taxpayer funds to the Emissions Reduction Fund (ERF), will have a $24-$40 billion fiscal impact on the federal budget out to 2020.
In a climate policy brief released on Wednesday, The Climate Institute outlines the cost to the budget from the ERF and removal of the carbon price under a number of different scenarios, and concludes that repealing the carbon laws and their revenue is not only a high risk climate gamble, but a high stakes fiscal gamble.
“To 2020, the Government’s carbon pollution policy hits the budget with a $24 billion impact, while all publicly available independent assessments estimate increasing carbon pollution over that time,” said John Connor, CEO of The Climate Institute – noting that this sum could cover funding for the Gonski school reforms to 2020, or for the National Disability Insurance Scheme over that period.
Meanwhile, achieving pollution as well as expenditure targets would cost around $40 billion, the report said – the equivalent of total annual spending on pensions.
“This budgetary impact not only affects broader choices but the loss of carbon revenue also threatens funds now supporting clean energy, low emission programs, technology research and development, as well as support for households and business.”
“Over the four years of the forward estimates, the Government has indicated it would spend $2.55 billion of taxpayer funds to subsidise emission reduction activities via the ERF, while at the same time losing $12.55 billion from companies paying the carbon price for next financial year and purchasing permits under the European linked carbon trading scheme from 1 July 2015,” said Connor. “That adds up to an over $15 billion slug.”
Reports in the media suggest the proposed debt levy would raise $8.8 billion over four years.
The “even bigger problem,” says Connor, is that in the absence of credible climate policy, Australia’s national emissions are projected to grow by 30 per cent by 2030.
“Even using the most generous assumptions to drive credible levels low pollution investments, the government would need to be spending $3-$5 billion every year by 2030,” he said.