An article from me in today’s Oz on taxes, regulations and government spending on carbon suppression
In addressing climate change spending and regulatory costs, the government has made some impressive first steps. Few of these are in the wrong direction.
Labor went to the 2013 election with over $5 billion a year in budget outlays for its climate change programs. This included over $2 billion a year to be spent by the “Clean Energy Corporation”.
In addition Labor’s carbon tax would be raising $13 billion by next year, (though Rudd had foreshadowed reducing this) and its Renewable Energy Target would be raising electricity bills – by $5 billion a year by 2020.
In all, Labor’s planned spending on reducing greenhouse gas emissions was ramping up to $23 billion a year, similar to the entire Defence budget or twice the annual spending planned by the present government on transport and communications which house its signature infrastructure areas.
In its first move to cut back the climate change impositions, the Coalition put beyond doubt any question of keeping the carbon tax. The budget reinforces this by curtailing many other programs, though painfully slowly in some cases.
There have been backward steps. Among these is the creation of the Green Army, a sort of “young pioneer” corps of the unemployed doing landcare repair to prepare themselves for future taxpayer funded environmental jobs. The programme’s objectives avoid mentioning climate change but, starting at $48 million this year, spending is ostensibly hurtling towards $230 million a year. This is an expensive attempt to deflect green dudgeon,
We have also seen the first spending step of the Direct Action programme. Limited to $75 million in the current year this is planned to increase but remain a far cry from the billion dollars a year spending the Coalition once proposed. “One million roofs”, once flaunted as a $100 million dollar program has been dropped.
Outweighing these new spending measures are many program cuts within the Environment and Industry Departments. These include savage cuts to the adaptation and international negotiation spend – no more of those 114 delegation team visits like the one accompanying Mr Rudd to Copenhagen in 2009.
The budget abolishes Australian Renewable Energy Agency (ARENA) saving $1.3 billion. However, ARENA’s Chairman, the World Wildlife Fund’s Greg Bourne, like his counterpart at the Clean Energy Finance Corporation said he’ll to continue “delivering funding to worthy projects” until the agency’s bank account is closed.
Also to be terminated, with a saving of $460 million, is the scandalously wasteful carbon capture and storage program, though its commitments might mean it soldiers on to 2017. Similarly, the government has closed the $17 million “clean coal” initiative and axed the $20 million a year “Clean Technology Innovation” program. Also gone is the Green Car Innovation Fund which became redundant as a result of labour laws and regulatory induced increases in energy prices made motor vehicle manufacturing unprofitable in Australia.
Ever so gingerly, the Treasurer has begun paring back the profligate scam that is ethanol subsidies, grabbing back $120 million a year.
The government’s own published estimate of aggregate climate change expenditure is that it falls from $5.75 billion this year to $500 million two years hence. This includes spending by the Clean Energy Finance Corporation. But it excludes some spending, like that of CSIRO which, when it saw its interest was in being active on climate matters, claimed around 50 per cent of its budget was being spent in these directions. CSIRO can count itself lucky to have escaped with a mere $33 million haircut, less than 5 per cent of its direct budget.
Outside the budget, is the Renewable Energy Target, presently under review by a panel headed by Dick Warburton.
Renewable energy from wind and solar, the two major subsidised supply types, remains non-commercial. It is threefold the cost of electricity sourced from coal.
Renewable energy lobbyists have done wonders in getting governments to force consumers and other producers to pay some $18.5 billion on worthless assets.
Even with the carbon tax is repealed, according to the electricity market regulator, next year will see renewable subsidies and associated schemes bringing about a 75 per cent increase in the wholesale electricity price.
Those arguing for the retention of the subsidies to renewables nonsensically claim that the subsidies reduce overall electricity prices. In fact the privileged position of renewables, if left untouched, would entail bankrupting the commercial providers, leaving a legacy of much higher prices and less reliable supply.
It is also claimed that early termination of the renewables program would introduce an element of sovereign risk into Australia’s investment environment. This is untrue. The withdrawal of a privilege does not constitute a government seizure of property which would undermine investor confidence. Nobody suggested compensating the motor vehicle assemblers for the billion or so dollars they have written down as a result of losing government supports. Nor has Spain suffered from reputational loss since it wound down its own previously agreed wind and solar subsidies
Wind and other renewables should be left to stand on their own feet commercially. Their on-going subsidisation severely weakens the national economy and should be terminated immediately.
The cuts to Australia’s energy subsidies will force the entrepreneurs who have been so successful in grabbing government favours to make their fortunes elsewhere. This is a gain to Australia and ways should be explored to allow earlier terminations of wasteful schemes that have been put in place.