Budget raises doubts over Direct Action

The hard budget numbers reveal a funding appropriation for the Emissions Reduction Fund that is $1.4bn lower, or less than half, what the Coalition suggested before the election. Press releases suggest the government funding is in line with promises, but it all seems rather odd.

The Federal Budget has detailed annual funding allocations from 2014-15 to 2017-18 for the government’s centrepiece climate change program which are $1.4 billion lower, or less than half, what the Coalition had promised before the 2013 Federal Election.  

The budget text states that the government will provide an “initial” $2.55 billion to establish the Emissions Reduction Fund, which is consistent with what the Coalition had promised prior to the election over the first four years of the scheme.  

Yet the table which accompanies this text listing the hard dollars provides a contradictory and highly confusing story. It outlines a total funding allocation over the next four years of just under $1.15 billion.

The table below details the annual funding for the Emissions Reduction Fund as listed in the government’s budget papers versus what was outlined by the Coalition prior to the election.

Annual funding allocation to the ERF – 2014-15 Budget vs Pre-election ($millions)

2014-152015-162016-172017-18TOTAL
Budget allocation$76$300$355$417$1,147
Pre-election promise$300$500$750$1,000$2,550
Funding shortfall-$225-$200-$396-$583-$1,403

A spokesperson for Environment Minister Greg Hunt has told Climate Spectator that the Clean Energy Regulator is free to at least commit to abatement purchasing contracts up to $2.55 billion over the next four years. However, they expect that because the regulator will only pay for abatement once it is delivered, the expenditure of the $2.55 billion will be spaced out over a period beyond the forward estimates period to 2017-18.

The spokesperson added that the $2.55 billion did not represent the absolute limit of what would be made available to purchase abatement over the life of the scheme. Instead they said further funding allocations would be made on top of the $2.55 billion in subsequent budgets for the years beyond 2017-18. This is supported by an April press release from Minister Hunt which states:

“In line with the government's long standing policy, the forward estimates commitment to the ERF will be $2.55 billion, with further funding to be considered in future budgets.”

This somewhat explains the anomaly. However, it still raises two major question marks over the scheme.

Firstly, it suggests that the government has come to realise that rolling out this program and mobilising abatement projects will be much harder than the Coalition had thought prior to the election. Minister Hunt said months before the election that the program would only pay for abatement on delivery, this is not a new thing. Yet he has maintained over the same period that the scheme would spend $2.55 billion in its first four years, and therefore he must have thought the scheme would be delivering substantial abatement in those first four years.  The halving of the funding allocation seems to suggest that now they’ve had a chance to consider this program in a lot more detail they now realise this is unrealistic. Yet they’ve only got a further two years left beyond the forward estimates to make the 2020 emission reduction target. The government is rapidly running out of time to bridge its 400 megatonne emissions gap.

Secondly, the halving in the locked-in dollar appropriation will further add to concerns about the security of the scheme, given this government’s abandonment of its Million Solar Roofs program and the axing of ARENA (in spite of assurances it fully supported the organisation). With the Million Solar Roofs program, the government assured stakeholders that the lack of a funding appropriation in the mid-year budget update (MYEFO) meant nothing untoward. Today these stakeholders find the program has been abandoned for lack of money. 

History demonstrates that funding for carbon abatement programs is liable to disappear at short notice when the dollars are listed in black and white in a budget funding appropriation. So who’s going to be brave enough (or should that be stupid enough) to spend the hundreds of thousands often required on abatement project development to get a project proved-up, in the hope that funding materialises which doesn't even have an appropriation?