Chapter 5
The rise and cost of the green bureaucracy
Introduction
5.1
This chapter of the report outlines the rise of a new green bureaucracy
to oversee the administration of the carbon tax and other aspects of the
government's Clean Energy Future legislative program.
5.2
This chapter:
- shines a light on the costs to the Commonwealth Budget of the
green regulators and agencies;
-
highlights the truncated process of consultation regarding the
regulators and agencies; and
-
puts into sharp focus the growth in the green bureaucracy.
5.3
In the event that the relevant legislation to give effect to the
regulators is passed by the parliament, the committee recommends careful
scrutiny of the regulators and the potential impact that a specific regulator,
the Clean Energy Finance Corporation (CEFC), could have on the Commonwealth
Budget.
The regulatory structure
5.4
The governance structure for the scheme is set out in the graphic below.
The Australian Government and the Minister for Climate Change and Energy
Efficiency are responsible for setting the overall policy direction for climate
change.
5.5
The Climate Change Authority (CCA) will recommend pollution caps and
oversee the operation of the flexible carbon permit trading market. It will be
staffed by around 45 employees, including commissioners.[1]
The Clean Energy Regulator (CER) will administer the scheme that enables the
trading of permits. It will be resourced by 330 staff.[2]
These agencies are in the process of being established with staff and other
resources being marshalled to establish these entities.
5.6
The Productivity Commission will conduct ad hoc reviews into climate
change matters at the direction of the government and will review the
compensation provided under the scheme but not the direct spending on, for
example, the CEFC. As a result, significant Commonwealth expenditure will not be
subject to periodic, independent scrutiny. The Productivity Commission is
already established and the CEFC is yet to be established - there is, as yet,
no bill to create that agency.
Graphic 5.1: Governance arrangements for the carbon tax[3]
Issues
5.7
The Energy Supply Association of Australia raised concerns about the
scope of the Clean Energy Regulator’s information-gathering and monitoring
powers, including that they should be contained to circumstances where the CER has
a reasonable belief that breach or non-compliance has occurred.[4]
These concerns express similar views to those raised in the press at the time
the bills were exposed in draft by the Shadow Environment Minister, the Hon.
Greg Hunt MP.[5]
5.8
The Explanatory Memorandum for the Clean Energy Bill 2011 states:
The Regulator has broad powers to gather information to let
it monitor compliance with the mechanism, investigate possible contraventions
and, where necessary, take enforcement action. These powers reflect the nature
of the mechanism, under which liable entities must actively comply with its
requirements, as well as avoid contravening the law.[6]
5.9
While the Joint Committee '...is satisfied that the scope of the Clean
Energy Regulator’s powers is appropriate given its role in promoting compliance
with the mechanism and in ensuring its ongoing integrity and security',[7]
this committee wants such regulatory powers subject to scrutiny in the future
to ensure their proper administration.
Other agencies
5.10
In addition to the establishment of the regulators referred to above,
other agencies will also be getting involved in the implementation of the
government's Clean Energy Plan - the CEFC and the Australian Renewable Energy
Agency (ARENA).
Clean Energy Finance Corporation
5.11
The role of the CEFC will be to invest in the commercialisation and
deployment of renewable energy, energy efficiency and low-emissions technology.
It has allocated funding under the Clean Energy Plan of $10 billion over five
years from 2013-14.[8]
This is amongst the largest single cost item of the Clean Energy Future Plan.
5.12
The CEFC was subject to inquiry during the course of the committee's
public hearings. The corporation is a part of the regulatory architecture for
the overall carbon tax scheme but despite this its exact status remains unclear
with it possibly being part of the Treasury Portfolio or the Finance and
Deregulation Portfolio.[9]
It is not yet established.[10]
5.13
The reason for the inability of the government to determine which
Minister will have responsibility for the CEFC opens the way for speculation
about whether disagreements between Ministers or departmental secretaries are driving
the delay.
5.14
The rationale given by the Gillard Government for a public sector
organisation competing with private businesses in the provisions of loans is that:
- Recipients of commercial loans provided by the CEFC are expected
to be charged an interest rate comparable to that offered by lenders in the
private sector.
- The objective of the CEFC is to remove market barriers that would
otherwise hinder the financing of large-scale clean energy and renewable
projects. That is, the CEFC will operate in the ‘market gap’, encouraging
projects that wouldn’t otherwise proceed by providing an alternative source of
debt or equity to underpin a project’s financial viability.[11]
5.15
While the CEFC will be providing a variety of loans, some of which are
to be non-commercial, this inevitably gives rise to concerns about the fiscal
impact of such organisations on the Commonwealth Budget:
- The fiscal impact of $944 million across the forward estimates
reflects the net impact of revenue and expenses excluding public debt interest
costs. Departmental expense is equal to $60 million over the forward estimates.
- Over half is explained by the expense associated with
concessional loans and the remainder is largely explained by the allowance that
is made for defaults.
- The funding provided to the CEFC will impact on gross debt. To
the extent that the CEFC acquires offsetting debt-like assets, such as loans,
there will be a lesser impact on net debt.
- Treasury expects that taxpayers will, over time, receive interest
and dividends. That is, taxpayers will get a positive return on the investment.[12]
5.16
Many of the government's claims about the rationale for the CEFC and
about its fiscal impact seem to be mutually contradictory.
5.17
The inevitable concern with a government-owned financing corporation
providing funds to industry is the age-old issue of picking winners. During
the 1980s various state governments were engaged in this practice, with the
electorates across Western Australia, South Australia and Victoria left to pick
up the pieces.
5.18
To the extent that picking winners is unsuccessful, there will be an
impact on the Commonwealth Budget. The extent of that impact is a 'thorny
issue'. At present:
There are some issues that we [the Department of Finance and
Deregulation] are working through which go to transparency and accountability
which are really around how to classify the entity and how to classify the
transactions – essentially how to account for what is does. We are working
through that with the ABS [Australian Bureau of Statistics], with ANAO
[Australian National Audit Office], with Treasury and within Finance to
understand the entity and understand the kinds of activities it will undertake.[13]
5.19
The Department of Finance and Deregulation explained the matter further:
Whilst the Clean Energy Finance Corporation is in the general
government sector, the key issue is the activities that it undertakes are the
essential thing in determining whether those activities hit the budget bottom
line or not. If you look at the Clean Energy Future program, you will note that
we allocated the costs from the Clean Energy Finance Corporation to the budget
bottom line. The corporation is being set up to provide loans to commercial
operations. In the vast majority of cases we anticipate that will be so, so the
impact on the budget bottom line does not occur. We have, however, said that in
some proportion of those activities of the corporation there may be an impact
on the bottom line of the budget, and we have taken that into account in the
numbers that were incorporated in the release that was put out on the Clean
Energy Future package.[14]
5.20
The test for the impact on the Commonwealth Budget is as follows:
If an entity in the general government sector is undertaking
investments to achieve a return, then they do not impact on the budget bottom
line, according to the accounting standards.
To the extent to which the Clean Energy Finance Corporation
is undertaking investments, and that is the government's policy, then the
majority of its activities will not impact on the budget bottom line. However,
as announced in the policy, there are effectively two streams of its
investments: one is for renewable energy and the other is for clean energy. On
the renewable energy side, which is an emerging set of technologies, we have
made an allowance of 15 per cent of those investments being deemed ultimately
as grants, which would impact on the budget bottom line.
Effectively, 50 per cent of the activities of the entity will
be in renewable energy investments, of which 15 per cent are assumed as grants
because it is an emerging technology, and there may be some investments that do
not achieve a particular return.[15]
5.21
In these circumstances the total cost of the CEFC program is $10 billion
over five years, with $2 billion being spent annually. Of that, $1 billion per
year is for activities related to renewable energy and it is this part of the
expenditure that is likely to be non-commercial and hit the Commonwealth
Budget. The value of that impact is, according to the Department of Finance
and Deregulation, 15 per cent of that $1 billion. That is a $150 million per
year hit to the Budget under the CEFC.
Australian Renewable Energy Agency
5.22
ARENA will be a statutory authority, set up to provide funds for
research, development and commercialisation of renewable energy technologies.
It will incorporate a number of existing programs, such as the Australian
Centre for Renewable Energy, the Australian Solar Institute and the Australian
Biofuels Research Institute. It is projected to be revenue neutral, as it will
utilise $3.2 billion of funding already allocated to those programs over nine
years. Future funding for ARENA will also come from dividends paid by the CEFC.[16]
5.23
ARENA is located within the portfolio of the Department of Resources,
Energy and Tourism.
5.24
In the context of ARENA, on 13 October 2011, the Senate referred the provisions
of the Australian Renewable Energy Agency (Consequential Amendments and
Transitional Provisions) Bill 2011 and the Australian Renewable Energy Agency
Bill 2011 to the Senate Environment and Communications Committee for inquiry
and report. Submissions were to be received by 20 October 2011. The reporting
date is 7 November 2011.
5.25
Given the important role of ARENA, that is, its oversight of $3.2
billion, it is surprising that such a tight reporting timeline was applied to
the process of scrutinising the Bills.
5.26
The ARENA Bills were not part of the government's Clean Energy Future
Legislative Program that was introduced into the Parliament on 13 September
2011.[17]
Other regulators
5.27
In addition to the climate change regulators and other agencies outlined
above, several other regulators will also be involved in the new regime and
these are outlined below.
Australian Competition and Consumer
Commission
5.28
The government announced on 13 July 2011 that the Australian Competition
and Consumer Commission (ACCC) would be policing claims by businesses that
could mislead consumers into believing that price rises had occurred due to the
carbon tax when this was not the case.
5.29
The funding for the ACCC to undertake this activity is:
...$12.8 million over four years to the ACCC and those funds
will go towards the establishment of a dedicated team which will involve more
than 20 staff and their activities will be directed towards enforcement and
towards education of businesses and consumers.[18]
5.30
This measure was not included as a cost in the government's Clean Energy
Plan announced on 10 July 2011.
Finance sector and criminal justice
regulators
5.31
Under the government's Clean Energy Future Legislative Package, the
Australian Securities and Investments Commission (ASIC) will also have a role
in the emissions trading scheme. As emissions units will be permits and will
be defined as financial products, ASIC will have responsibility for the regulation
of related carbon permit trading markets.[19]
At this time, there are no publicly available costings for ASIC which will
undertake this important role.
5.32
The Clean Energy Regulator will also have powers to work with the
Australian Transaction Reports and Analysis Centre, the Australian Federal
Police and the Commonwealth Director of Public Prosecutions regarding fraud and
criminal activity that could be involved with the permits. As highlighted in
chapter 3, there is considerable risk around of fraud around permits and this
highlights the need for well resourced regulators to act to ensure the
integrity of the permits.
5.33
The Clean Energy Regulator will also have powers to work with the
Australian Transaction Reports and Analysis Centre, the Australian Federal
Police and the Commonwealth Director of Public Prosecutions regarding fraud and
criminal activity that could be involved with the permits[20].
The cost of the regulators
5.34
The table below provides an overview of the costs of the green
regulators and agencies:
Table 5.1: The cost of green regulators and agencies
|
Clean Energy Regulator ($m) [21]
|
Climate Change Authority
($m)
[22]
|
Productivity
Commission
Reviews
($m)
[23]
|
Clean Energy Finance Corporation
($m)[24]
|
Australian Renewable Energy Agency
($m)
|
Australian Competition and Consumer Commission
($m)[25]
|
Australian Securities and Investment Commission
($m)
|
2011-12
|
-68
|
0
|
-4
|
-60
|
Yet to be disclosed.
|
-12.8
|
Yet to be disclosed.
|
2012-13
|
-68
|
-6
|
-4
|
Yet to be disclosed.
|
Yet to be disclosed.
|
2013-14
|
-61
|
-9
|
-5
|
Yet to be disclosed.
|
Yet to be disclosed.
|
2014-15
|
-59
|
-9
|
-5
|
Yet to be disclosed.
|
Yet to be disclosed.
|
Totals
|
-256
|
-25
|
-18
|
-60
|
Yet to be disclosed.
|
-12.8
|
Yet to be disclosed.
|
A deficient consultation process
5.35
The Clean Energy Plan legislative package comprises 19 bills
constituting more than 1 100 pages of new legislation. Yet even these 19 bills
are already known not to constitute the entire legislative package proposed by
the government. The ARENA Bills were introduced into the parliament separately
and the CEFC Bill has not yet been introduced.
5.36
Many stakeholders have expressed concern and dismay at the timelines
provided to participate in the Joint Committee on Australia's Clean Energy
Future and make a meaningful contribution:
AMEC also expresses its complete dissatisfaction in the
manner in which this step-change legislation has been introduced. The timelines
throughout the legislative consultation process have been extremely short,
which has not allowed AMEC and its members any reasonable time to properly
consider the finer detail of the legislation.[26]
BFVG is also disappointed in the amount of time granted (six
days including a weekend) by Government to provide submissions in regards to
the proposed suite of legislation (approximately 1100 pages) under the banner
of Carbon Tax. BFVG would have thought that such an important suite of
legislation deserved a longer time to enable both industries affected and the
general community to provide in-depth submissions and encourage worthwhile
debate.[27]
5.37
As mentioned earlier, the Clean Energy Future legislative plan is not the
entire suite of legislation that will give effect to the government's plan. ARENA
and the CEFC were not part of the suite of 19 Bills introduced into the
Parliament on
13 September 2011. The concern about the process also extended to groups
supportive of the government's reform program. Below is an excerpt from a media
release from the group Climate Action Newtown – 100% Renewable Campaign:
The 100% Renewable Energy campaign has today welcomed the
introduction of the carbon price bills in parliament, but questioned the
reasons for the delay on the Clean Energy Finance Corporation and Australian
Renewable Energy Agency bills.
“The bills that deliver more renewable energy for Australia
are the real clean energy bills. If the government is hoping to win community
support for the carbon tax these are the bills that need to be front and centre
in parliament,” said Lindsay Soutar, 100% Renewable Campaign Co-ordinator.
The parliamentary timetable announced by the government
yesterday did not include the renewable energy bills to institute the Clean
Energy Finance Corporation and Australian Renewable Energy Agency. It is
unclear when these bills will be introduced into the parliament.
“While we welcome the introduction of the carbon price bills,
we think the government’s decision to delay the bills for the two new renewable
energy agencies is the wrong one.
...
"Renewable energy is something we know the Australian
people support – it’s the most popular part of the package - so why delay it?”[28]
Rise of the green machine
5.38
Since coming to office in 2007, the Rudd and Gillard Government's have
overseen a rapid and sharp rise in the number of officials engaged in policy
advising and regulating matters pertaining to the environment.
5.39
The table below provides a national snapshot of the rise of the 'green
machine'. As the table below highlights, the number of green bureaucrats has
risen from 19 621 in 2007 to 23 466 in 2011. That is around 1 000 new staff per
year since 2007.
Graphic 5.2: Number of public servants assigned to green
schemes, across Australia[29]
5.40
The federal green workforce has risen by more than 75 per cent since
2007.[30]
It has risen from 2 254 in 2007 to 3 930 in 2011. This growth in the green
workforce equates to a workforce of around 4 000 permanent staff. To this 4 000
staff, there is a need to add another 345 for the CER and the CCA. Further
growth can be expected once ARENA and the CEFC are more developed.
5.41
According to the Chief Executive of the Australian Industry Group,
Ms Heather Ridout, '[t]he growing green bureaucracy is a concern for our
members'.[31]
Committee comment
5.42
The committee notes the ever-expanding green bureaucracy and the
potential fiscal risk posed by an agency such as the CEFC. In addition, the
regulators will acquire powers to undertake their tasks and while they will
most likely attempt to act judicially, the committee recommends that the Senate
review the conduct of the green regulators – the Climate Change Authority and
the Clean Energy Regulator.
Recommendation 6
If the Clean Energy Future legislative package is passed by
the Parliament, the committee recommends that the Senate review the conduct of the
relevant regulators.
Recommendation 7
If the Clean Energy Future legislative package is passed by
the Parliament, the committee recommends that the Senate review the cost to the
Budget of the Clean Energy Finance Corporation and the Australian Renewable
Energy Agency given that between them they will be responsible for $13 billion
of expenditure.
Navigation: Previous Page | Contents | Next Page