Changes to energy and climate programs

Budget Review 2014–15 Index

Alex St John

The 2014–15 Budget contains a number of changes to climate and energy programs, with many programs being abolished or reduced to find budget savings. The broad policy background to these measures is the replacement of the previous Government’s ‘Clean Energy Future’ climate change policy, based on the carbon pricing mechanism, with the current Government’s ‘Direct Action Plan to Tackle Climate Change’, based on the proposed Emissions Reduction Fund (see separate brief). These are new savings, in addition to those previously announced in the 2013–14 Mid-year Economic and Fiscal Outlook (MYEFO). Some measures associated with the proposed repeal of the carbon pricing mechanism were included in MYEFO, so do not feature in the 2014–15 budget papers.

Renewable energy

Government support for renewable energy development has been dramatically reduced.

Subject to passage of legislation, the Australian Renewable Energy Agency (ARENA) will be abolished, saving an additional $1.3 billion by 2021–22.[1] ARENA was set up in 2012 to provide financial support for research, development and commercialisation of renewable energy technologies, and was to have spent $2.5 billion over ten years, in addition to other funds from existing programs.[2] Although funding for ARENA’s activities had been deferred in the 2013–14 Budget ($370 million) and reduced by $434.9 million in the 2013–14 MYEFO[3], its complete abolition had not been previously flagged. Existing projects that have a funding agreement with ARENA in place will not be affected, but no new grants will be issued.[4] The abolition of ARENA, and the Clean Energy Finance Corporation, will leave the Renewable Energy Target as the sole substantial Commonwealth renewable energy program.

The Budget does provide $2.1 million over three years for a ‘Solar Towns’ initiative, which will provide grants to community groups to install solar hot water heaters or photovoltaic panels.[5] However, grants will only be available to groups in the electorates of McEwen, Corangamite, Bendigo, Moreton, Bonner, Lyons; the City of Monash in Victoria, and the Port Adelaide/Wakefield/Makin area in South Australia. A spokesman for the Minister for the Environment, the Hon. Greg Hunt, stated that this fulfilled specific commitments made during the election campaign.[6] This program is substantially smaller than the $50 million for solar towns that the Minister announced in December, 2013.[7] The $500 million ‘One Million Solar Roofs’ and the $50 million ‘Solar Schools’ programs, also announced at that time, have not yet been proceeded with.

The Government has also provided $10.6 million over the forward estimates to service existing renewable energy power stations in remote Indigenous communities.[8]

Climate change programs

The Budget has made changes to several climate-related programs. Funding has been reduced for the Carbon Capture and Storage Flagships program and the National Low-Emissions Coal Initiative (NLECI). These programs, commenced in 2009–10 and 2008–09 respectively, were intended to provide a total of $2.5 billion for research, development and deployment of technologies to reduce greenhouse gas emissions from the combustion of coal and other fuel sources.[9] Both these programs have had significant amounts of funding redirected, deferred or reduced since their inception by both the current Coalition and former Labor Governments. The Government has indicated that existing Carbon Capture and Storage Flagships projects will continue to be funded; there will also be $52.6 million allocated to the NLECI between 2014–15 and 2016–17.[10] However, it is not clear if this funding simply covers existing projects or enables new projects as well.

Additional funding of $9 million has been provided to the National Climate Change Adaptation and Research Facility to continue operations, with emphasis on understanding risks from climate change in the coastal zone. NCCARF had been without funding since its previous contract with the Government expired in 2013.[11] The Government has also merged several research programs, including the Australian Climate Change Science Program, into a new ’National Environmental Science Program’; overall funding for the new body will be $21.7 million less over the forward estimates, compared with the predecessor programs.

A part of the Government’s Direct Action Plan is the 20 Million Trees program, under which new trees will be planted by 2020 ‘to re-establish green corridors and urban forests on both public and private land.’[12] The program will be established in 2014–15, but its $50 million cost will be funded from within the National Landcare Program (see separate article on Environment).[13] Despite this measure being included as part of the Government’s plan to tackle climate change, planting new trees provides very little immediate greenhouse gas abatement. Trees absorb relatively little carbon dioxide in the early years of their life; it is therefore unlikely that this measure could contribute greatly to the target of reducing Australia’s emissions by 5 per cent by 2020.[14]

Reduced support for biofuels

Along with changes to general fuel taxation (see separate brief on fuel excise taxation), the Government has moved to reduce support for biofuels. This is manifested by a reduction in the generosity of excise concessions for domestically produced ethanol and biodiesel (see separate brief on these topics). Given that ethanol represents a small and declining percentage of fuel sales, it is unlikely that there will be significant increases in greenhouse gas emissions associated with this measure, compared to emissions from transport more generally.[15]

The Government has chosen not to proceed with a $5 million program to encourage research, development and deployment of advanced biofuels derived from algae. This initiative had been flagged in the Coalition’s Direct Action Plan policy document.[16] Algae have been touted as a potential feedstock to produce large amounts of renewable fuel, without diverting land from agricultural uses, as they can be grown intensively in tanks on otherwise unproductive land. It is also thought that algae could produce biofuel with less environmental impact than growing other biofuel crops, such as palm oil.[17]

[1].           Australian Government, Budget paper No.2: 2014–15: Budget measures, 2014, p. 163, accessed 14 May 2014.

[2].           Australian Renewable Energy Agency Act 2011 section 64, accessed 14 May 2014.

[3].           Australian Government, Budget paper No.2: 2013–14: Budget measures, 2013, accessed 15 May 2014; Australian Government, Mid-year economic and fiscal outlook 2013–14, accessed 15 May 2014.

[4].           Budget paper No.2: 2014–15, op. cit.

[5].           Ibid., p. 110.

[6].           J Newton, email, 22 May 2014.

[7].           G Hunt (Minister for the Environment), The Coalition Government’s plan to repeal the carbon tax and tackle climate change, speech, 3 December 2013, accessed 15 May 2014.

[8].           Budget paper No.2: 2014–15, op. cit., p. 186

[9].           Australian Government: Budget paper No.2: 2009–10: Budget measures, 2009, accessed 15 May 2014, and Australian Government, Budget paper No.2: 2008–09: Budget measures, 2008, accessed 15 May 2014 (The NLECI was originally the National Clean Coal Fund).

[10].         Australian Government, Portfolio budget statements 2014–15: budget related paper no.1.12: Industry portfolio, 2014, p. 56, accessed 15 May 2014.

[11].        Budget paper No. 2, op. cit., p. 106; National Climate Change Adaptation and Research Facility (NCCARF), A short history of NCCARF, NCCARF website, accessed 15 May 2014.

[12].         G Hunt, The Coalition Government’s plan, op. cit.

[13].         Budget paper No. 2, op. cit., p. 99.

[14].         KF Kovacs et al., ‘The marginal cost of carbon abatement from planting street trees in New York City’ Ecological Economics, vol. 95, 2013, pp. 10.

[15].         According to the Bureau of Resources and Energy Economics’ Australian Petroleum Statistics March 2014 issue, 2,569 million litres of ethanol-blended petrol were sold in 2012–13. As almost all ethanol-blended petrol sold is 10% ethanol and 90% normal petrol, this represents ethanol sales of around 260 million litres of ethanol, which is 1.4% of all unleaded petrol sold in Australia for that year.

[16].         Liberal Party of Australia, The Coalition’s Direct Action Plan, Coalition policy document, Election 2013, accessed 15 May 2014, p. 27

[17].         Commonwealth Scientific and Industrial Research Organisation (CSIRO), Algal biofuel, CSIRO website, accessed 15 May 2014.


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