FEDERAL BUDGET 2012: A one-off carbon bonanza

Labor's been telling us for months that it would 'save' its way out of deficit, and largely it didn't – it managed to find only $4.7 billion in savings in this budget while chalking up an extra $39.6 billion in tax revenues. And yes, a good chunk of the new revenue comes from the carbon tax.

Carbon permit money will gush into Treasury to the tune of $4.02 billion in the coming financial year, followed by an estimated $6.61 billion in 2013-14.

After that who knows – the most likely outcome is that carbon revenue will vanish after a double dissolution election called in late 2014 or 2015 by soon-to-be-PM Tony Abbott.

If pigs fly, however, and Labor clings to power, Treasury projections are worth looking at closely – yes, the 2014-5 figure might be solid at $7.3 billion. But in the year after that (2015-16), the first year of the floating price of the ETS, the projection is still $6.7 billion.

That figure is optimistic, heroic and dodgy with capital 'O', 'H' and 'D's respectively.

For the first year of a floating price to return almost as much revenue as the year before, the global economy would have returned to trend growth – particularly in Europe, where the carbon price is currently plumbing new depths due to broad-based economic contraction. (That, incidentally, is one of the strengths of an ETS – it shrinks in hard times, and ramps up in good.)

The European ETS will be a key determinant of our floating price, and with the 'anti-austerity' left on the rise in both the French and Greek elections, prospects for a return to trend growth are looking dicey.

All pretty academic, of course, if Abbott has lived up to his word by then and wiped the carbon tax off the map.

Despite all this new revenue, there has been some shuffling around of substantial sums linked to carbon emissions reduction.

The biggie is the scrapping of the Tax Breaks for Green Buildings program. This scheme, worth $405 million over four years, is deemed to be too expensive for the abatement it would achieve – and the Department of Climate Change's suggestion to firms who wished to use the scheme is to seek low-cost financing of energy savings measures from the Clean Energy Finance Corporation instead.

The significance of this suggestion should not be missed – the CEFC has $10 billion to lend or directly invest in renewable energy or energy efficiency projects over the next four years.

What the Greens, progenitors of the scheme, seem to miss is that spending any of that on renewables is a waste of time. As things stand, we have a legislated requirement for 20 per cent of our energy needs to be sourced from renewable energy by 2020 anyway – giving cheap loans to firms to build renewable capacity that would already have to be built does not add to the nation's renewable capacity.

So firms booted out of the Green Buildings program should be knocking very hard on the CEFC's door for money. And that money would actually achieve abatement over and above the RET scheme. That's what the CEFC should be doing with all its lending or investing.

There are other carbon-related moves in the budget, though they are hard to find. The Connecting Renewables to the Grid program has not been axed, but its $48 million of expenditure has instead been pushed out to 2018-19 and 2019-20 (though you'll only find that in a footnote). The Greens will be on the warpath over that one.

The Carbon Capture and Storage Flagships program continues to attract increasing funds over forward estimates, rising from $35 million to $65 million this year to next.

The Australian Centre for Renewable Energy, Australian Solar Institute and Solar Flagships programs vanish from the forward estimates figures, not because they have been scrapped, but because in years ahead they are accounted for under the new Australian Renewable Energy Agency (ARENA). Confused? One suspects that was the plan – from within the budget lock-up, it's impossible to know what has happened to their absolute funding levels, though, again, expect the Greens to dig that data out in coming days.

The Solar Hot Water Initiative is scrapped (as announced pre-budget), with just $500,000 left to spend in the next financial year. Likewise the excoriated Home Insulation Scheme, which is binned from July onwards.

The Low Carbon Communities program, which Climate Spectator editor Tristan Edis last week called "an appalling concept that could be better dealt with through a market-based mechanism to drive energy savings", survives with its $53.5 million budget intact.

On the expenditure side there are one or two small-budget items around energy efficiency and 'adaptation' to a low-carbon environment, but the only big-ticket item is a new $37 million to set up a "nationally-consistent legislative framework to regulate the energy efficiency of equipment and appliances". Whether you buy your next bit of plant machinery in Perth or Brisbane, its efficiency should be easily compared – if the government's $37 million can convince the states to re-jig existing legislation.

In sum, a torrent of carbon revenue, mostly flowing to the places we expected. Until, that is, Tony Abbott blows the whole thing up.