Carbon scheme adjustments

Budget Review 2013–14 Index

Kai Swoboda and Anita Talberg

The original carbon price projections factored into the Budget estimates rose from $23 in 2012–13 to over $31 in 2020–21.[1] This price path assumed that prices would continue to rise smoothly in the transition from the fixed price period (2012–13 to 2014–15) to the commencement to the emissions trading scheme (from 1 July 2015). At these prices and with the range of expenditures linked to the establishment of a carbon price, the net cost of the Clean Energy Future (CEF) package to the budget was expected to be $4.4 billion over the four years to 2014–15.[2]

As part of the 2013–14 Budget, the Government revised the price path for Australian carbon prices from 1 July 2015. Instead of carbon prices of around $29 in 2015–16 and $31 in 2016–17, the revised prices for these years are $12.10 and $18.60 respectively.[3] These revisions, in turn, result in changes to a number of revenue and expenditure estimates.

Revenue

Government revenue under the CEF package comes from the sale of permits and the application of an ‘equivalent carbon price’ to some liquid and gaseous fuels and synthetic greenhouse gases. Changes to the assumed carbon price have a direct effect on revenue estimates. The revised price assumptions reduce revenue for 2015–16 by an estimated $6 billion (Table 1). There has also been a revision to revenue for the sale of permits of $500 million for 2012–13 to 2014–15.

Related expenses

Related expenses include:

  • funding for specific industry programs
  • compensation payments (including through the tax system) to individuals and some social service providers and
  • those that are directly related to changes in the carbon price, such as the value of ‘free’ permits to eligible businesses.

Specific industry program measures to reduce carbon price-related expenditures are summarised in a related budget review paper.[4] In addition to these measures, the Government announced that it would defer to 2018–19 lifting the tax-free threshold from $18,200 to $19,400.[5] The impact of changes to these expenditures and to the value of ‘free’ permits is summarised in Table 2.

In total, the Parliamentary Library estimates that measures announced in the 2013–14 Budget have reduced associated expenditure by $2.1 billion over the period 2012–13 to 2015–16. If the value of ‘free’ permits is also included, the reduction in expenditure associated with the carbon price is around $5.9 billion over the period 2012–13 to 2015–16.

Net impact

The net change in the Budget, taking into account the lower revenue estimates and reduced expenditures, is for the cost to the Budget to be higher, by around $625 million over the four years from 2012–13 to 2015–16 (Table 3).

Table 1: Carbon price revenue under different price assumptions, 2012–13 to 2016–17

 

2012–13

2013–14

2014–15

2015–16

2016–17

Original carbon price (a) ($)

$23.00

$24.15

$25.40

$29.23

$31.18

Revenue from sale of permits ($ million)

7,690

8,685

9,275

9,400

NA

Revenue from application of equivalent carbon price (b) ($ million)

966

589

1,029

1,184

1,263

Total revenue ($ million)

8,656

9,274

10,304

10,584

NA

2013–14 Budget carbon price

$23.00

$24.15

$25.40

$12.10

$18.60

Revenue from sale of permits ($ million)

7,540

8,340

9,270

4,090

6,110

Revenue from application of equivalent carbon price (b) ($ million)

966

589

1029

490

754

Revised carbon price total revenue ($ million)

8,506

8,929

10,299

4,580

6,866

Note: (a) Prices for 2015–16 and 2016–17 estimates by the Parliamentary Library from Treasury figures adjusted for CPI (b) No published equivalent carbon price estimates are available for 2015–16 and 2016–17. These estimated revenues are based on the revenue for 2014–15 adjusted for respective prices for 2015–16 and 2016–17. Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2012–13, p. 5–39, accessed 15 May 2013; Australian Government, Budget strategy and outlook: budget paper no. 1: 2013–14, p. 5–26, accessed 15 May 2013; Australian Government, Mid-year economic and fiscal outlook: 2012–13, pp. 155, 160 and 289, accessed 16 May 2013; Australian Government, Portfolio budget statements 2013–14: budget related paper no. 1.12: Industry, Innovation, Climate Changes, Science, Research and Tertiary Education Portfolio, p. 319, accessed 16 May 2013; Australian Government, Portfolio budget statements 2012–13: budget related paper no. 1.4: Climate Change and Energy Efficiency Portfolio, p. 71, accessed 16 May 2013.

Table 2: Carbon price program expenditure changes from 2013–14 Budget decisions and change to price assumption, 2012–13 to 2016–17 ($ million)

 

2012–13

2013–14

2014–15

2015–16

2016–17

2013–14 Budget program expenditure changes ($ million) (a)

-109.8

-191.7

-256.6

-722.2

-656.7

2013–14 Budget deferral of increase to tax-free threshold ($ million)

 

 

 

-820

-670

Change to expense for free permits
($ million)

-335

-264

-245

-2934

Not available

Total change in associated expenditure ($ million)

-445

-456

-502

-4476

Not available

Total saving over four years

-5879

Note: (a) These measures are identified separately in the 2013–14 Budget and are summarised in a separate Parliamentary 2013–14 Budget Review paper. Source: Australian Government, Budget measures: budget paper no. 2: 2013–14, May 2013, p. 24, accessed 15 May 2013; Australian Government, Portfolio budget statements 2013–14: budget related paper no. 1.12: Industry, Innovation, Climate Changes, Science, Research and Tertiary Education Portfolio, p. 319, accessed 16 May 2013; Australian Government, Portfolio budget statements 2012–13: budget related paper no. 1.4: Climate Change and Energy Efficiency Portfolio, p. 71, accessed 16 May 2013; Australia, Parliamentary Library, ‘Climate Action’, Budget Review 2013–2014, Research paper, 3, 2013–2014, Parliamentary Library, Canberra, 2013.

Table 3: Net change to budget from revised carbon price assumptions and impact of program expenditure changes in the 2013–14 Budget, 2012–13 to 2016–17 ($ million)

 

2012–13

2013–14

2014–15

2015–16

2016–17

Change in revenue ($ million)

-150

-345

-5

-6,004

Not available

Change in linked expenditure measures
($ million)

-443

-456

-502

-4,476

Not available

Net reduction in cost ($ million)

295

111

497

-1,528

Not available

Net change to budget over four years

-625

 

Source: Parliamentary Library estimates from Tables 1 and 2.



[1].       Treasury, ‘Chart 5.1, Australian carbon price’ and ‘Chart 5.39: CPI impact from carbon pricing compared with history’, Strong Growth, low pollution: modelling a carbon price, accessed 17 May 2013.

[2].       Australian Government, Securing a clean energy future: The Australian Government’s climate change plan, July 2011, p. 135, accessed 16 May 2013.

[3].       Australian Government, Budget strategy and outlook: budget paper no. 1: 2013–14, p. 2–48, accessed 15 May 2013.

[4].       Australia, Parliamentary Library, ‘Climate Action’, Budget Review 2013–2014, Research paper, 3, 2013–2014, Parliamentary Library, Canberra, 2013.

[5].       Australian Government, Budget measures: budget paper no. 2: 2013–14, Commonwealth of Australia, Canberra, p. 24, accessed 15 May 2013.

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