Budget Review 2016–17 Index

Kai Swoboda and Sophie Power

On 23 March 2016, the Government announced that it would establish a $1 billion Clean Energy Innovation Fund (CEIF) to ‘support emerging technologies make the leap from demonstration to commercial deployment’.[1] Importantly, the Government noted how this policy was related to broader efforts to reduce greenhouse gas emissions:

[T]he changes announced work hand in hand with the Emissions Reduction Fund, the Renewable Energy Target, the National Energy Productivity Plan and our broader support for clean energy to reduce emissions and drive productivity across the energy sector.[2]

Clean Energy Innovation Fund

The CEIF will be administered by the existing Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Authority (ARENA). This is interesting because the government scheduled those two agencies for abolition in the 2013–14 Mid-Year Economic and Fiscal Outlook and in the 2014–15 Budget respectively. However, without sufficient parliamentary support, the government has now reversed the intended abolition.[3] Now the agencies will play a significant new role through their involvement with the new CEIF.

Key features related to the establishment of the CEIF include:

• ARENA will continue to manage its existing portfolio of grants and deliver the announced $100 million large-scale solar round, and will be given an expanded focus beyond renewable energy to enable energy efficiency and low emissions technology. However, once the $100 million large-scale solar round is complete, ARENA will move from a grant-based role to predominantly a debt and equity basis under the Clean Energy Innovation Fund.
• The CEIF will be established from within the CEFC ’s $10 billion allocation, which will make available $100 million each year for ten years.
• The CEIF is expected to be formally established on 1 July 2016 by amending the CEFC ’s investment mandate.[4]
• ARENA and the CEFC will jointly manage the CEIF, allocating up to $100 million each year to commercialise innovative renewable energy projects using equity and debt instruments. [5]

Although the details are yet to be fully worked out, it appears that under the joint administration arrangements for the CEIF, ARENA will assess project proposals and make recommendations for funding to the CEFC, which will make the final approval decision.[6]

Funding for the emissions reduction fund

The 2014–15 Budget provided $2.55 billion to establish the Emissions Reduction Fund (ERF) from 1 July 2015.[7] Administered by the Clean Energy Regulator (CER), the ERF is used to purchase certain greenhouse gas emission abatement activities by auction. The Government describes the ERF as the ‘centrepiece’ of its policy suite to reduce greenhouse gas emissions.[8]

Since the establishment of the ERF, the CER has conducted three auctions to purchase emissions:

• 15/16 April 2015 —107 contracts to deliver a total of 47,333,140 tonnes of abatement with a total value of contracts awarded of $660,471,500. The average price per tonne of abatement was $13.95 with contract lengths ranging between three and 10 years.[9]
• 4/5  November 2015—129 contracts to deliver 45,451,010 tonnes of abatement with a total value of contracts awarded of $556,875,549. The average price per tonne of abatement was $12.25.[10]
• 27/28 April 2016 —73 contracts to deliver 50,471,310 tonnes of abatement with a total value of contracts awarded of $516,177,598. The average price per tonne of abatement was $10.23.[11]

The decline in the average price paid per tonne for the last auction was largely attributed to the success of lower cost ‘mega projects’ accounting for a large share of emissions purchased at the auction.[12]

Based on the auction results to date, ERF expenditure commitments have totalled around $1,733 million, leaving $816 million in funds not yet allocated.[13]

The Government made no announcements in the 2016–17 Budget in relation to additional funding for the ERF. Further funding for the ERF will apparently ‘be considered in future budgets’.[14]

Funding for programs that support reducing emissions in the energy sector

The 2016–17 Budget also includes measures that reduce funding to programs that support activities to reduce emissions in the energy sector. The Government will save $27.4 million over two years from 2015–16 from the Carbon Capture and Storage Flagships Programme and the National Low Emissions Coal Initiative, which are already closed to new projects.[15]

The Carbon Capture and Storage (CCS) Flagships Programme was established in May 2009 to support the construction and demonstration of CCS projects in Australia. The program aimed to promote the wider dissemination of CCS technologies by supporting a small number of demonstration projects designed to prevent emissions to the atmosphere by capturing and storing carbon dioxide that would otherwise be emitted from industrial processes. Five projects have been funded under the program.[16]

The National Low Emissions Coal Initiative was established in 2008 to help to accelerate the development and deployment of technologies to achieve reductions in greenhouse gas emissions from coal usage. The remaining projects funded under this initiative are scheduled to conclude by July 2016.[17]

 

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All online articles accessed May 2016. 

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