The Coalition stumbles towards emissions failure

Promised Direct Action funding of $2.55 billion by 2018 was found to deliver a 9% increase in emissions by the due date. So what's the outlook with just $1.15 billion?

The carnage and uncertainty being wrought on climate and clean energy policies across the nation leaves the government’s carbon pollution policy resting on three increasingly wobbly legs.

These are its Emissions Reduction Fund; the Renewable Energy Target now under review; and the still to be determined “safeguard mechanisms”, which will set pollution limits on 130 of Australia’s most-emitting companies.

Amid the federal budget’s host of surprises was one regarding its ERF.

Prior to the election the government clearly committed to spending $2.55 billion through the fund over the next four years, to purchase emission reductions. This commitment was repeated only two weeks before the budget in the fund’s own White Paper.

But the budget’s forward estimates show only $1.15 billion of expenditure through the fund over the next four years.

This is Treasury’s best estimate of what the actual expenditure will be for proven emission reductions in those four years – less than half of what was promised. As such, it is a vote of no confidence in the ability of this fund to achieve emission reductions on the scale required. 

Bizarrely, it appears that the Clean Energy Regulator, which is to administer the fund, does have the capacity to spend $2.55 billion over the four years. However, such approval remains dependent on ongoing Cabinet-level support, which could be removed at any time in future budget processes. This emphasises how unsatisfactory it is to rely on the annual arm-wrestle which is the budget process as a foundation for sustained, long-term carbon pollution reduction.

Prior to the last election, The Climate Institute commissioned Sinclair Knight Mertz and Monash University to analyse the Coalition’s policy and to estimate the overall pollution reductions that could be achieved. Even with a range of generous assumptions, that assessment – as per all other independent public assessments – showed the government’s policy would lead to a 9 per cent increase in Australian emissions (above 2000 levels) by 2020. This is much higher than the government’s minimum commitment of a five per cent reduction by 2020, and a yawning chasm away from its maximum target of 25 per cent.

That assessment was based on the government’s promised ERF funding of $2.55 billion by 2018 and annual spending of $1.2 billion thereafter. But if you plug in the new spending forecasts the picture darkens even further. An ERF paying $1.15 billion by 2018 will reduce emissions by only 63 million tonnes – less than 15 per cent of the government’s declared “task” of reducing emissions by 421 million tonnes.

And the government’s task is based on expectations that the Renewable Energy Target remains unchanged and that existing energy efficiency measures continue. Any cuts to renewable energy and energy efficiency will increase pollution and thereby increase the size of the government’s task.

Yet the RET – a vital pillar of pollution reduction which could provide another 70 million tonnes of emission reductions from now until 2020 – might be slashed. And the final leg of policy, the “safeguard mechanisms” for industry, will be defined through a process of negotiation between business and a government shown to have little appetite for robust regulation.

This shows what a tragedy it will be shift the burden of reducing emissions from polluters under the current framework to taxpayers under the government’s proposed framework. 

And by the way, this current framework would not only achieve at least the minimum emissions reduction target but provide over $12.5 billion in revenue. In contrast, the government’s carbon pollution policy creates a $13-15 billion black hole in the budget – without even coming close to meeting its goal.

These points should be borne in mind as we enter Senate estimates and the lead-up to the new Senate’s consideration of the repeal of current carbon laws.

All politicians should reconsider doing away with the current framework, which rests on far more solid foundations, cuts millions of tonnes of pollution, creates thousands of jobs in clean energy industries and which will generate billions in revenue.

Amid all this post-budget uncertainty this is no time to repealing laws that have clear limits and have clear revenue benefits for Australian taxpayers.

John Connor is chief executive of The Climate Institute.