Direct Action funding gone missing

The government has rather oddly chosen to not reveal the funding it will allocate to the Direct Action Emission Reduction Fund, nor the Million Solar Roofs program in the Mid Year Economic and Fiscal Outlook.

In a move that will raise eyebrows and some degree of suspicion, the budget papers outline that funding for the Emission Reduction Fund has been assigned to the budget’s contingency reserve.

The contingency reserve has traditionally been used to assign funds related to measures that, if disclosed, might compromise commercial negotiations or national security, or for funding possible surprise events such as an agency experiencing a funding shortfall.

Yet, in the lead-up to the federal election, Greg Hunt repeatedly stated that the funding for the ERF would be $300 million in 2014-15, $500 million in 2015-16 and $750 million in 2016-17. A spokesperson for his office confirmed today that the funding commitment had not changed.

Given this concrete funding commitment it seems rather strange that the government now feels the funding for this measure couldn’t be disclosed in the budget papers.

This lack of funding detail on ERF and the Million Solar Roofs is especially unusual when it is considered that the government could provide clear guidance on funding for its other major election commitment – the Green Army. This will receive $50.7 million next financial year – followed by $98.5 million the subsequent year and $147.3 million the year after that – to support conservation management objectives through the delivery of local projects like weed removal and revegetation. Not only was the program's funding over the forward estimates confirmed, but the government also provided estimates of funding for the program beyond the forward estimates – of $222.1 million in 2017‑18 and $289.2 million in 2018‑19. 

The Green Army now has greater certainty over its funding than the government’s signature climate change initiative. This is especially concerning when the ERF is relying on businesses to deliver abatement via large capital investments lasting decades or more.

One carbon market analyst speculated that it might be that the government expects to encounter difficulty repealing the carbon price post-July 2014. They, therefore, don’t want to commit any budget to the ERF until the carbon price has gone.

However, it seems unreasonable that the government expects non-Coalition senators to agree to abolition of the carbon price when it is choosing to withhold making clear budget commitments to its own alternative.

Other key items to come out of MYEFO are:

– Abolition of the carbon price will mean a hit to the budget of $9.4 billion in underlying cash terms over the forward estimates. This comes in circumstances where the government finds itself with a serious structural deficit, and expects budget deficits totalling $123 billion over the forward estimates (2013-14 to 2016-17).

– Confirmation of earlier announced cuts to the budget of the Australian Renewable Energy Agency. Cuts total $475 million including a saving of $40 million this financial year (2013-14).

– A surprise announcement that they will be terminating funding for the Energy Efficiency Opportunities program from July 1, 2014.

– That the Coalition expects to reduce their cash outflow associated with Clean Energy Finance Loans by $1.144 billion but, at the same time, this means they’ll sacrifice repayments on these loans of $439 million over the forward estimates and, no doubt, far more beyond the forward estimates (which haven’t been revealed).

– It will be abolishing the Low Carbon Communities program which supported energy efficiency initiatives for low income households and community facilities. In further news, we now know the government will also not be proceeding with provision of funding to applicants who had been successful in a prior tender round.

--The government will not be providing additional support to the existing industry operated destruction incentives program for synthetic greenhouse gases and ozone depleting substances from July 1, 2014 even though at the same time they will be abolishing the carbon price applying to these gases which provided a strong incentive to reduce the usage of these powerful global warming gases.