State rollback on climate programs rolls on

Last week’s Western Australia government backflip over retrospective changes to solar feed-in tariffs has been generally well received. Some see it as a sign the tide may be turning on the onslaught by the states on energy efficiency and climate change measures. This may be missing the bigger picture.

In April, the COAG Business Advisory Forum Taskforce conducted a review of 74 state programs to see whether they were cost effective and did not duplicate Commonwealth programs. Climate Spectator covered the report and its finding that two-thirds of the programs met these criteria here.

A recent update from COAG suggests a far gloomier picture as state governments are rolling back climate action programs at an alarming rate. This COAG list shows the states have been actively closing programs even when shown to be cost effective in the April review.

They are also closing programs well beyond the original 74 programs identified for review. This suggests a bloody minded pursuit of anything smelling of “green energy” by Coalition governments.

• NSW has scrapped a further 8 programs bringing its total to 11 killed off;
• Victoria has now scrapped 6 programs – twice the number found to be not cost effective;
• WA had not taken any decisions on the 9 measures included in the original COAG review but has now dumped 16 programs. Solar feed-in tariffs would have raised WA Energy Minister Mike Nahan’s tally to 17, but he was forced to backflip. His former colleagues at the Institute of Public Affairs free enterprise thinktank would be proud of his tally;
• Qld had acted early, scrapping 10 programs before the COAG review;
• The NT government scrapped 3 programs whilst the Labor jurisdictions of SA, Tas and ACT accounted for 4 more.

The Commonwealth has rationalised 15 programs since the introduction of the carbon price in June 2012, mainly through amalgamation of programs or transfer to ARENA.

The total number of state government carbon reduction and energy efficiency programs scrapped has now trebled from 15 in April to now 50. Another seven have been “rationalised” leaving just 36 programs of the original programs being reviewed still operating – and a third of these are in Tasmania.

This should be a particular concern for Greg Hunt who is really depending on continuation of existing trends to have any chance of achieving the targeted 5 per cent reduction in Australian emissions within the Direct Action budget.

It is also a significant shift given the recent discussion about the underlying trends in Australian emissions and how the “business as usual” projection should be measured.

As highlighted in Tristan Edis’s article last week, both SKM and Energetics have produced work that suggests the forward projection of the size of cuts required to meet Australia’s 5 per cent reduction target has been halved due to a reassessment of the underlying growth trends.

This is similar to the findings by ClimateWorks that if current trends are continued, Australia is on its way to achieving 40 per cent of the cuts required to meet its 2020 target.

However, all these assessments may prove to be optimistic if the impact of the wave of program closures by the states means that current trends will not continue.

The encouraging signs of reduced emissions over the last few years were driven by energy efficiency programs and, more recently, by the carbon price. This trend is now likely to stall and the growth in emissions will resume an upward path.

The impact of Direct Action is likely to further exacerbate the problem. The new Climate Institute report is now projecting a 9 per cent growth in emissions under Direct Action rather than the promised 5 per cent reduction.

Much of the state rollback of programs has been justified on the basis that they are no longer necessary because of the existence of a national carbon price. This is a contradiction, as the Coalition federal policy is to abolish the carbon price.

The state complementary measures are important given the low world traded price coming into play in Australia next July. They will be needed even more if the carbon price is actually abolished.

Moreover, the detailed COAG list of scrapped programs bells the cat on the argument of duplication. Most of the programs were related to matters of sole state government jurisdiction and sectors of the economy not subject to carbon price impacts.

The paradox is that by scrapping programs to promote government energy efficiency for buildings and vehicles, state governments are shooting themselves in the foot in terms of their own budgets. Most of these programs had positive rates of return with relatively short payback periods. They were not among the programs recommended for closure by COAG.

Clearly there is some very confused thinking going on, driven by politics rather than economics. State governments are acting against their own interest and the interest of their Coalition partners in Canberra by continuing a jihad against climate programs.

Andrew Herington is a former Labor ministerial adviser and now a Melbourne-based freelance writer.