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’. 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.
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.
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
- 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.
- 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. 
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.
Funding for the emissions reduction
The 2014–15 Budget provided $2.55 billion to establish
the Emissions Reduction Fund (ERF) from 1 July 2015.
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
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.
- 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.
- 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.
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.
Based on the auction results to date, ERF expenditure commitments
have totalled around $1,733 million, leaving $816 million in funds
not yet allocated.
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’.
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.
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.
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.
The investment mandate is a non-disallowable legislative instrument
made under section 64 of the Clean Energy Finance Corporation Act 2012. The
Explanatory Memorandum to the Clean Energy Finance Corporation Bill 2012 states
that this ‘is consistent with Ministerial directions issued to statutory bodies
like the Future Fund' (Explanatory
Memorandum, Clean Energy Finance Corporation Bill 2012, p. 10).
M Turnbull (Prime Minister of Australia) and G Hunt (Minister for the
Environment), op. cit.; Australian Renewable Energy Agency (ARENA), ‘About ARENA’, ARENA website.
Australian Renewable Energy Agency (ARENA), ‘About ARENA’, ARENA website.
All online articles accessed May 2016.
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