The clean energy idiot’s guide to the Federal Budget

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Canberra holds firm on carbon price forecasts; miners win again on diesel fuel rebate; dumping of green building tax break another blow to efficiency; connecting renewables and other Labor fairy tales; and where did all that solar funding go?

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Government holds firm on carbon price assumptions

There is a wee difference between analysts’ forecasts for the carbon price in 2015/16 and the government’s. It was not surprising that Canberra would hold to its predictions of $29 a tonne for that year, because its revenue forecast of $6.7 billion would be trashed without it. If the carbon price fell to its planned floor of $15, that would cost around $3.2 billion in revenue, although Treasury insisted that the budget would still be in surplus. The price of $29 happens to coincide with the fixed price at the end of fiscal 2015 (it starts at $23 and then rises each year).

The government could argue that the EU is bound to take some sort of action to arrest the decline of its carbon price, and the start of emission trading schemes in California (the world’s 8th biggest economy), South Korea (15th), and the prospect of schemes in China, Mexico and elsewhere could create demand and add some bite to the carbon price. Until that happens, however, analysts are pessimistic, suggesting it the international price – the credits that Australian companies will be allowed to source to offset their carbon liabilities – could fall as low as $4/t. Others note that rapid changes could still occur – after all, the price was around $40 just a few years ago.

Green building tax break scrapped

Ditching some complementary schemes was anticipated, but the dumping of the $1 billion tax break for green buildings was a surprise, even if it had been flagged before the budget. The energy efficiency industry has long felt hard done by, which they find perplexing, given it is widely thought that energy efficiency offers one of the cheapest paths to abatement.

The government is now arguing that the projects that could be undertaken for buildings could be funded through Low Carbon Australia or the Clean Energy Finance Corporation. (The CEFC sees a double-up there and suggested either merging the two or outsourcing its energy efficiency mandate to LCA). It seems that trying to make this scheme work was complicated by the fact that many buildings were owned by trusts, and it was simply dumped in the too-hard basket. However, what the industry really needs is for the government to finally act on the report delivered late in 2010 by the energy efficiency task force. Some suggest a sector-specific cap-and-trade scheme as the most efficient measure.

Miners win again

The mining industry continues to reign supreme over policy making in this country. The mooted reduction, or even cancellation, of the diesel fuel rebate failed to emerge, saving the impoverished mining industry more than $9 billion. Industry leaders such as BHP Billiton and Rio Tinto said such a move might threaten some projects. Perhaps the government was afraid of offending the farming community as well.

The fuel tax rebate might have helped accelerate the deployment of renewables such as solar into mining areas, but there is still a heap of work to be done to make diesel and solar compatible. And in any case, the price of diesel is not going down, but the costs of solar will. Mining groups such as BHP are considering alternatives such as marrying gas (where available) with solar and other renewables. Just don’t mention climate change when you’re talking to miners.

Don Henry, the head of the Australian Conservation Foundation, said the diesel fuel rebate to mining companies amounted to $182 per taxpayer, per year. And he noted that the ACF was disappointed that funding for roads outstripped that of rail by a factor of 14 to one. “Australia should not be axing tax breaks for green buildings and slashing the aid budget, while leaving untouched billions of dollars of tax breaks for mining and resource industries to pollute our environment,” he said.

Connecting Renewables and other Labor fairy tales

Yet another of the government’s billion-dollar renewables funding announcements that will never happen. Labor announced the $1 billion connecting renewables program with great fanfare in mid 2010, in the midst of the last election campaign, saying it would be a key ingredient in ensuring that energy from the sun (enough of which falls in a day across Australia to power the country for 25 years – you can read Penny Wong’s gushing announcement here), along with wind and geothermal would be connected to the rest of the grid.

Wong said the initiative would help “transform” the nation’s electricity networks, but it only planned to spend $100 million in the first four years, during which time network operators would spend $45 billion replicating and expanding the existing structure, just as most other countries talk of a “new way of thinking” about energy. The government hasn’t cancelled the project, but its funding has been deferred, making it all a little academic. Another failed grants program that will need to be taken up the CEFC.

Wong, at the time, cited the opening up of north-west Queensland as the sort of opportunity that could be entertained by the program. Of course, the CopperString project that would have linked Townsville to Mt Isa, unlocking a series of wind, solar, biomass and geothermal projects in-between, was scuppered when the former Queensland government meekly surrendered to Xstrata’s choice of an AGL Energy gas-fired generation plant instead. Another election promise was the emissions standards for coal-fired generators. That has already been punted, on the basis that we will now have a carbon price.

Where did that solar funding go?

The creation of the Australian Renewable Energy Agency and its absorption of a range of various schemes makes tracking the progress of the Solar Flagships program, and the like, virtually impossible. The budget papers reveal that the flagships program did not spend nearly $100 million allocated last year, but that was hardly surprising given the delays in the two selected projects. ARENA is expected to spend $292 million in 2012/13, $345 million in 2013/14, $437 million in 2014/15 and $322 million in 2015/16.

But given that many of these grants programs have allocated much and spent little in recent years (the REDP grants announced in 2009 to geothermal companies and a wave energy project will unlikely be spent before 2014, and see Connecting Renewables above), this is all very much academic. But just to show that both sides of politics are equally incompetent (and to remind us what a load of codswallop the Coalition’s Direct Action plan is), the government appears to have given up entirely on the Howard government’s Low Emissions Technology Demonstration Fund.

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2 Comments
  1. Peter Hansford 7 years ago

    The purpose of a budget is to provide a plan of government expenses over the coming years. The objective of government expenditure is to attempt to redistribute income in a manner which will enable greater equity and underscore the continued economic well being for the population.

    In an increasingly globalised economy there are many and varied extraneous factors which impact on the economic wellbeing of Australia.

    Globally “the Green Race Is On” between countries to transform to low carbon economies and to become leading suppliers of resource efficient technologies & solutions.

    The demand for fossil fuels continues to grow and so supply from Australia is assured for some time. However to ensure prosperity into the future we must simultaneously transform our home market and build domestic demand for a low carbon solutions before exporting these to the world.

    The investment in renewable energy generation now outstrips investment in convenional fossil fuel energy generation.

    The sooner we transition the better in terms of jobs, exports and investment in Australia. Regretably the 2012 budget does not support this reality and so fails to meet its objective.

  2. Matt Ruffin 7 years ago

    Thanks Giles, excellent summary. I am repeatedly astounded by the atrociously underwhelming renewable energy policy of this country’s major parties. Stunningly poor.

    I simply cannot fathom why Australia isn’t embarking upon a massive nation building program centred around renewable energy, sustainable transport and water infrastructure, and energy efficient buildings. We have the money, the educated populace, and most importantly the natural resources (esp sun, wind, geothermal) to be totally renewable in 20 years, and yet we languish behind most of the rest of the developed world. Unforgivable. We could be a significant clean energy exporter to Asia if we did it right, and instead we send them coal and gas…

    The only explanation I can see is that the Carbon Mafia still controls Cabinet decisions as it did under Howard.

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