Budget Review 2013–14 Index

Anita Talberg

‘Offsetting’ a lower projected carbon price

Treasury has revised its projection of a 2015–16 carbon price from $29 to $12.10.[1] As a result, the expected revenue from the sale of carbon permits, after deducting industry and household assistance, is reduced by $1.9 billion until 2015–16.[2] However, the Government has stated that the Clean Energy Future package will remain broadly Budget neutral through ‘offsetting savings’.[3] Table 1 lists these, as highlighted in Budget Paper no. 2. The savings total $1.3 billion until 2015–16. In addition to those savings listed in Table 1, a further $300 million in cuts (Table 2) have been made over that time to climate change expenditure in general. The result is that net government expenditure on climate action until 2015–16 is just over $320 million more than at last year’s Budget. It would seem that reducing the Budget deficit has not been done at the detriment of climate action funding overall.

Additional savings

A second commitment period under the Kyoto Protocol: Australia has signed up for a second commitment period under the Kyoto Protocol. [4] As a requirement of this, Australia must adopt revised figures for the global warming potential (GWP) of certain greenhouse gases, such as methane. The net result of these new GWPs is an inflation of Australia’s emissions accounts, for example in the landfill sector. The government expects a $240 million increase in revenue from the sale of carbon permits.[5] Also, as part of re-joining the Kyoto Protocol, Australia has opted to account for emissions from certain land-based activities that had previously been exempt from our international obligations. Consequently, all carbon credits generated from land-based emissions abatement activities under the Carbon Farming Initiative (CFI) will be Kyoto-compliant, and will be accepted to meet liabilities under the Carbon Price Mechanism (CPM). The Non-Kyoto Carbon Fund, which had been established to purchase credits deemed not Kyoto-compliant, becomes redundant. Although this increases some costs to the government, it also saves almost $390 million over four years from the cancellation of the Non-Kyoto Carbon Fund.[6]

Abandoning the Global Carbon Capture and Storage Institute: the Institute has flagged that its ‘primary source of funding will be Membership fees’.[7] Termination of the government’s funding agreement saves $45 million over four years.[8]

The destruction of refrigerants: with the introduction of the CPM, the government began applying an equivalent carbon price to synthetic greenhouse gases, such as refrigerants. To help industry manage this new levy, the government had outlined an incentive program, ‘Destruction of Waste Ozone Depleting Substances and Synthetic Greenhouse Gases.’ In 2011–12 this program was costed at $97.9 million over five years.[9] However, the design of the scheme is now being altered to work in tandem with industry programs, such as that run by Refrigerant Reclaim Australia, a not-for-profit product stewardship organisation.[10] The government is also relaxing the levy requirements for certain applications, such as medical and veterinary devices.[11] Overall, these changes generate net savings of $81.5 million over four years.[12]

Early conclusion of the Solar Credits scheme: phase-out was completed in 2012, resulting in $1.8 million in savings.[13]

Additional expenses

As well as the savings noted above, the Government is increasing expenditure in some areas:

• an additional $6.1 million in 2013–14 is being provided for the running of the Australian Renewable Energy Agency (ARENA)[14]
• $17.4 million over the forward estimates is being provided for Antarctica, most of which is for climate change research[15] and
• $23.3 million over four years is being provided so that the Australian Energy Regulator may fund various changes, of which one is the establishment of a Consumer Challenge Panel to improve consumer decision-making on electricity usage and costs.[16] Alongside this, $6.8 million over four years is earmarked (from existing resources) for the development of a consumer energy data system.[17]

Table 1: Explicit ‘offsetting savings’ highlighted as such in Budget Paper no. 2

	Expense ($m)
Program (Department/Agency[18])	2012–13	2013–14	2014–15	2015–16	2016–17
Clean Technology Program — reprofile funding (DIICCSRTE)	-58	-	160.00	-60	-100
Education Investment Fund — return of unallocated funds (DIICCSRTE)	-46.1	-46.8	-66.20	-	-
Regional Structural Adjustment Assistance package — cessation (Regional)	-	-43.6	-5.40	-57.4	-28.6
Coal Mining Abatement Technology Support Package — reduction in funding (RET)	-	-	-	-14.5	-14.5
Carbon Capture and Storage Flagships — reduction in funding (RET)	-	-	-100.00	-200	-200
Coal Sector Jobs Package — reduction in funding (RET)	-	-	-	-160.7	-113.4
Low Carbon Communities — concluding rounds (RET)	-5.7	-17.6	-49	-25.9	-
National Low Emissions Coal Initiative — reduction in funding (RET)	-	-32.8	-55.4	-	-
Biodiversity Fund — rephasing of funding (SEWPaC)	-	-50.9	-70.6	-53.7	-50.2
Australian Renewable Energy Agency — deferral of funding (ARENA)	-	-	-70	-150	-150
Total	-109.8	-191.7	-256.6	-722.2	-656.7
Total savings over four and five years				1,280.3	1,937

Source: Budget measures 2013–2014: budget paper no. 2

Table 2: Additional expenses and savings related to climate action

	Expense ($m)
Program (Department)	2012–13	2013–14	2014–15	2015–16		2016–17
Kyoto Protocol — adoption of second commitment period and new greenhouse gas GWPs (CER)	-	-	-	-100		-140
Issuing additional permits under the CPM (CER)	-	3.2	12.3	-		-
Termination of the Non-Kyoto Carbon Fund (DIICCSRTE)	-	-49.6	-46.7	-60.7		-77.7
Global Carbon Capture and Storage Institute — cessation of funding agreement (RET)	-	-20	-20	-2.5		-2.5
Synthetic greenhouse gases and ozone depleting substances — altered arrangements (SEWPaC)	-	-15.6	-19.4	-24.0		-24.2
Solar credits scheme — early conclusion (CER)	-1.4	-0.4	-	-		-
ARENA— additional departmental funding (RET)	-	6.1	-	-		-
Antarctica — additional support (SEWPaC)	2.6	13.5	-	1.3		-
Empowering consumers on electricity choices (ACCC and RET)		8.3	8.6	7.2		5.8
Total	1.2	-54.5	-65.2	-178.7		-238.6
Total savings over four and five years					297.2	535.8

Source: Budget measures 2013–2014: budget paper no. 2

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