Rudd slashes climate programs to pay for carbon politics

On Monday, Prime Minister Kevin Rudd made us wince as he confirmed plans to take the thought bubble away from Tony Abbott and transition to an emissions trading scheme a year early. Today, he made many cry as he identified the victims who would have to make way for his populist ploy.

The Rudd government has taken an axe to a series of climate change programs to make up the budget shortfall caused by the proposed accelerated transition to a traded emissions scheme to July 1, 2014. The axe has not touched the main renewable energy programs, but also will leave in place compensation for trade exposed and energy intensive industries.

The popular, and much praised, Clean Technology Investment Program is one of the major victims – with impacts on solar and energy efficient lighting – along with carbon capture and storage programs, and the biodervisity fund and the farming support fund.

The Energy Security Fund, which shielded mostly brown coal generators from the carbon price, will end one year early as the price falls from more than $25/tonne to a current estimate of around $6/tonne.

Funding to the Clean Energy Finance Corporation and the Australian Renewable Energy Agency remained untouched. Rudd and his key minister, Treasurer Chris Bowen and Climate Change Minister Mark Butler, sang the praises of the renewable energy target, talking of 24,000 jobs created and “tens of thousands in the future”.

However, the government did not engage in any discussion about lifting the ambition of emission reduction target, saying it would await the findings of a report by the Climate Change Authority.

Other cuts were delivered to fringe benefits for cars ($1.8 billion) as part of the effort to claw back $3.8 billion lost from ending the fixed price on carbon a year early.

Rudd attempted to pitch the deal to consumers, saying that the package would deliver savings to households of $380 a year, as a result of reduced electricity prices and because they would retain their support packages. He said the Coalition’s Direct Action package would result in an increased cost of $1200 to households.

But some of the programs cut or shortened will be lamented – particularly the CTIP, the farming support scheme and the biodiversity fund. Environmental groups wondered why diesel rebates for miners were not targeted (Rudd could probably explain that, harking back to his proposed mining tax)

The $800 million CTIP was only recently accelerated by the Gillard government because of its success in reducing emissions and delivering energy savings to manufacturers.

It encouraged a range of initiatives, from solar PV installations, more efficient lighting, upgraded and more efficient equipment, and even wind and biogas installations. Some 25 per cent of projects had achieved reductions in emissions intensity of more than 50 per cent. Some in the solar industry described it as the most effective means of breaking down barriers for commercial scale solar.

The loss of $213 million from the biodiversity fund was lamented by environmental groups. “Our natural environment, including the Great Barrier Reef, our forests and tropical savannahs, are being impacted by climate change now – it’s important we invest more in protecting, managing and restoring these landscapes so they can naturally store carbon more effectively,” ACF’s Don Henry said.

A further $143 million has been cut from the $429 million Farming Futures Fund, which was focusing on technologies and techniques for emissions reductions, including carbon farming initiatives – ironically the main set piece of the Opposition’s Direct Action plan.

The decision to defer $200 million of funding from the CCS program, and return $24 million to budget, reflects the growing reality that the technology – if it ever is competitive – will not be in a position to deliver any time soon.

Rudd said that it was clear that nominated CCS projects would not be ready “on time” to meet the funding profiles. He insisted that the coal industry has a “real future”, although it was entirely clear if he was talking about thermal coal for power stations or metallurgical coal used for steel. He was in Queensland, near the heart of the Bowen coal basin, at the time. “We have to be sensible about how long they (CCS projects) will come on stream,” he said.