Has the Vic Government committed an own goal?

The Napthine government has cut an energy efficiency loans program that would have saved it more money on its energy bill than the carbon tax impost.

It seems like something straight out of a political comedy.

The Victorian Government decides it needs to undertake an inquiry into how the carbon tax is hurting the budgets of healthcare even though it already has the numbers – they say the cost is an extra $13.5 million per annum out of a total health budget of around $15 billion.  

Meanwhile, it cuts an energy efficiency loans program that would have saved it more money on its energy bill than the carbon tax cost it – around $21 million. And a program that in 2011 was given the Premier’s Award for Sustainability.

The Greener Governments Buildings program seeks to get around the rather bizarre practice inherent in government departments. This is where government agencies have little incentive to allocate their budgets to energy efficiency capital works which might save them money in the future, because all it means is Treasury just claw operational savings back in future budgets. Instead, a hospital is better off allocating this money to things that immediately influence the metrics they are assessed on, like patient waiting times, so the money is spent on hospital beds or more nurses. You get rewards and recognition for reducing waiting times but you just get a budget cut from saving on your energy bill.

So the Greener Government Buildings program involved Department of Treasury and Finance setting aside loans that the agencies like hospitals could draw upon to undertake energy efficiency upgrades. Also, it created a centralisation of expertise and focus on improving energy efficiency within government buildings. Hospital managers aren’t experts on boilers and lighting, they’re experts on heart disease, broken bones and cancer.

Under such a program the hospital doesn’t take any kind of hit to its budget to fund the equipment upgrades. Instead it allocates a proportion of the energy savings from the upgrade to repay the loan. Treasury and Finance get their money back plus some interest. Meanwhile, the hospital gets to spend less of its budget on energy, and more of it on patient care.

In an ideal world where everyone behaved in a way that optimised the entire system rationally you wouldn’t need such a program. But because we divide up the span of management control and accountability, small things like the energy budget tend to be sub-optimised by hospital management concerned more about the big ticket items like hospital beds, and the numbers of doctors and nurses.

According to the Energy Efficiency Council’s Robert Murray-Leach: "Upgrades to schools and hospitals around Victoria, including in Frankston, Monash, Footscray and Geelong have now been put on indefinite hold.”

Maybe, if the government was a little less focused on ridiculous political games like holding inquiries into the carbon pricing scheme, they might actually find they’d have an energy bill going down rather than up.