Introduction

The Government has continued its commitment to reduce Australia's carbon pollution through a carbon price. The 2013 Budget continues the roll out of the Clean Energy Future Package and the transition to an internationally-linked emissions trading scheme from 2015, but with some changes.

The changes have largely been dictated by the impact of a reduced forecast of the carbon price coupled with a reduction in the overall projected total Commonwealth Government revenue. The collapse of the European carbon price in mid-April has caused the Government to revise the carbon price projection in 2015-16 from $29.00 a tonne in 2015 to $12.10 a tonne. The revised permit price is estimated to reduce the carbon price revenue by around $6 billion over the four years from 2012-13 to 2015-16.1

Accordingly, the original forecast spending for the Clean Energy Future Package has been reviewed. There has been a reordering of priorities and a change in the timing of some of the programs - some being brought forward but a number significantly delayed. Committed funding remains on track, as does the move to a full emissions trading scheme in 2015 and continued high industry assistance.

ARENA

The total funding for ARENA of over $3 billion remains. However $370 million has been deferred to beyond the forward estimates, extending the program to 2021-22.2

ARENA administers a number of pre-existing Commonwealth Government funding programs in support of R&D, and demonstration and commercialisation of renewable energy technologies (such as the Solar Flagships Program). Its model involves the commitment of significant tranches of money for new, though unproven technology which is expected to deliver energy efficient power. The Coalitions’ policy on ARENA is not yet clear although this funding model has not previously been supported by the Coalition.

Clean Carbon Capture and Storage and coal sector assistance

In the 2012 Budget, the Government had allocated funding of $1.68 billion to the Carbon Capture and Storage (CCS) Flagships program. The 2013-14 Budget will see $500 million of that funding withdrawn from the CCS Flagships Program over three years and returned to the Budget.3 Additionally, $29 million in funding will be withdrawn from the Coal Mining Abatement Technology Support package, $88.2 million from the National Low Emissions Coal Initiative and $274.2 million from the coal sector jobs package. Uncommitted funding of $45 million for the Global CCS Institute will also be withdrawn.

While these reductions represent a significant reduction in the scale of the funding available to the coal sector, the emphasis on uncommitted funding here is important. Any reduction or unwinding of the Clean Energy Future Package may face difficulties where it proposes to tackle existing, binding funding agreements with the private sector. The claw back of only uncommitted funding will put this issue off the agenda for the current Government. The money remaining in the CCS Flagships program means that at least one of the projects should be able to proceed beyond the feasibility stage with Government assistance.4

Clean energy funding for industry

The $1.2 billion Clean Technology Program will continue with this Budget, bringing forward $160 million to 2014-15 from 2015 through to 2017. The same total will now be provided over seven years. This will facilitate a potential earlier take up by industry under the Clean Technology Investment Program and Food and Foundries Program. Earlier take up will mean a greater chance of industry stimulus, both generally and specifically for clean energy (the Government’s publicly stated aim), and a greater absorption of the Clean Energy Future scheme within affected industries.

Likewise, the Government remains committed to the roll out of the Clean Energy Finance Corporation investments from 1 July 2013, despite recent political noise surrounding this issue.5 No adjustment has been made to its $10 billion funding profile, with $2 billion appropriated for 2013-2014.

The key components of the Government’s Clean Energy Future Package survive this Budget – the carbon price and emissions trading scheme, industry assistance and industry loans – however a number of the “bells and whistles” have been curtailed. These changes are an inevitable result of the collapse of the European carbon price and the overall reduction in Government revenue. The impact of the success of the scheme – judged by reference to emission reduction targets, impact on households, changed behaviour and investment in clean technology – will remain to be seen and will no doubt be put to the political test in the lead up to the September election.