Subsidy scam, energy and industry competitiveness

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.

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28 Responses to Subsidy scam, energy and industry competitiveness

  1. Mark

    …and still no mention of what happens when the tax changes to a trading scheme. Once property rights have been afforded to traded units the compensation will be prohibitive!

  2. Don’t like atmospheric carbon for some reason?

    Modernise coal power generation and minimise hot burns in the bush. Done.

    Our Green Betters won’t like that sort of quick, clear result. But it never really was about the carbon, was it?

  3. Nice to have your summary Alan – I wonder what is happening $wise in the States – just in NSW this www site talks of hundreds of millions of expenditure on CCS projects alone. Yet the Fed Emissions Reduction Fund White Paper said CCS was not economic. They seem to be putting most of their eggs in the carbon farming basket.

  4. Grey ghost who walks

    It is when I read a summary such as this; bringing the disgusting waste and stupid schemes to the surface, that the time has come to be even harder on cutting the waste. How does someone running a charity for world animals, land a job handing out millions on snake oil schemes? Then he has the temerity to say that he will continue with this until the bank account dries up.
    The whole thing should be stopped now and stripped out for good; not sometime never.

  5. James of the Glen

    An excellent summation from Alan.

    The immediate termination of subsidies (Renewable Energy Certificates) is a most important point. This open conduit to the coffers of Australia via REC’s is an outrage that amounts to plundering the country’s wealth and future prosperity ; in a just society it would have the perpetrators put away for life.

  6. incoherent rambler

    James of the Glen

    How do you politically wind this back when half the nations super is heavily leveraged on the scamsters?
    You lose votes when peoples super goes south.

  7. James of the Glen

    @ incoherent rambler

    My degrees are not in economics, ir, but to use the dishonest term of the wind farm scamsters, even the dullards with their superannuation in such rackets can be educated to see that this system is not “sustainable”. When business and domestic consumers are cleaned out, and manufacturing has done what it did in Spain or Calif., who pays the REC’s? One way or a much harder another, the looting will stop.
    (It’s particularly galling when companies acting on behalf of overseas “investors” are prominent among the looters.)

    It may take what Spain has is suffering, 27% unemployment, for the same class to wake up and vote out the socialists and other eco-ignoramuses. Let the turbines turn uselessly in the wind, as thousands now do in California, to bring home the message of reality.

  8. cohenite

    Don’t like atmospheric carbon for some reason?

    Modernise coal power generation and minimise hot burns in the bush. Done.

    Correct.

  9. Notafan

    The Carbon Scam makes my blood boil, let the super funds take a hit, if investors chose ‘green’ investments then let the capitalists take a hit like the rest of us shareholders do, when we make bad choices.
    I’m sick of taxpayers propping up the green religion and destroying our economy at the same time.
    They can all hook their bicycles up and pedal themselves some electricity.
    Rude word.

  10. incoherent rambler

    The Carbon Scam makes my blood boil, …

    I can hear Shorten now, “Tony Abbott might have save the economy, but he destroyed your super!”

  11. Mr Rusty

    Good summary but can we PLEASE use the correct terms;
    Carbon DIOXIDE suppression, carbon DIOXIDE tax…etc.
    Every time you say ‘carbon’ instead of ‘carbon dioxide’ you fall for the leftist trick of redefining the debate using misleading or just downright incorrect terminology and words.

  12. 70s Playboy

    Shame that most people won’t even notice or see this as A Good Thing. To most people in the circles I frequent it is heresy to question any of these schemes. Hard to get new friends at my age though…

  13. handjive

    Green heads explode:

    “The budgetary facts are inescapably grim for researchers and scientists based in renewable energies and research. The funding for all government programs related to climate change is set to shrink at an alarming rate, going from $5.75 billion this year to a scant $500 million in the next four years. Additionally, the Emissions Reduction Fund which is meant to help lower greenhouse gas emissions in Australia is going to be reduced to only $1.14 billion.”

    But, if there is a budgetary emergency, why waste anymore taxpayer money?
    No predicted warming for 17+ years.
    Why must it wind down over 4 years?
    So the fraud can continue for another 4 years?

    Where and when is due diligence applied & accounted for, or lack thereof, for wasting taxpayer funds?

    Should we just turn our heads away and not question Labor spending $23 billion when the UN-FAO says The world only needs $30 billion dollars a year to eradicate the scourge of hunger?

    Abbott to ask pensioners to spend $7 at the doctor, $7 for a blood test etc, so he can waste $500M a year an a climate boondoggle of UN wealth re-distribution, marxist approved?

    It doesn’t make sense.

  14. JohnA

    Mark #1310643, posted on May 19, 2014 at 8:22 am

    …and still no mention of what happens when the tax changes to a trading scheme. Once property rights have been afforded to traded units the compensation will be prohibitive!

    Mark, IIRC, the incoming government announced its “carbon tax” policy during the election campaign to include a specific repudiation of any property rights involved in the shift to a trading scheme (nearly typed “scam”).

    So any investor in subsidised green power or other vehicles for collecting tradeable “carbon” credits was on notice that such credits would be worthless whether the tax was repealed or not.

  15. JohnA

    incoherent rambler #1310797, posted on May 19, 2014 at 11:22 am

    The Carbon Scam makes my blood boil, …

    I can hear Shorten now, “Tony Abbott might have save the economy, but he destroyed your super!”

    To which the only rejoinder can be: “If the economy is stuffed, then so is your super!”

  16. manalive

    Mr Rusty 12:02 pm. ✔

  17. nerblnob

    The idea of ” carbon trading ” could only ever have been a scam.

    I’m no economist, but a mandated “market” in a nonexistent “commodity” that there has never been any demand for and whose price is entirely arbitrary?

    A charter for corruption is all it ever could have been. Jonathan Swift would have rejected it as too fantastic even for satire..

  18. alan moran

    Incoherent rambler
    I don’t think the superannuation funds are at risk. As I understand it they have contracts with retailers. Thus a recent analyst report of AGL said
    “AGK had undertaken to acquire all the black and green electricity generated at an
    all-in price ca. $110/MWh.”

    Hence the pressure is more from shareholders of firms rather than the super funds

  19. Notafan

    In 2010 Flannery came out against Carbon Capture, did he backflip or
    http://iceagenow.info/2013/12/professor-trapped-ice-hidedisguise-involvement-carbonscape/
    Shareholdings of Carbonscape end 2013

  20. nerblnob

    Notafan, hardcore greenies always hated “carbon capture” . Not enough destruction of industry, sacrifice of comfort, and renewable subsidies involved.

  21. Mark

    JohnA,one hopes you are correct. Google doesn’t help me on this regard.

  22. Notafan

    Notafan, hardcore greenies always hated “carbon capture” . Not enough destruction of industry, sacrifice of comfort, and renewable subsidies involved.

    Yes but after speaking out against it, it appears that Flannery continued to hold a significant amount of shares in a carbon capture company.
    Money was too good?

  23. sabrina

    $460 million, is the scandalously wasteful carbon capture and storage program

    Alan – I hope you know that CCS was pushed heavily by coal industry here and overseas. Look at the websites of World Coal Institute, GCCSI, IEA, now disbanded Australian Coal Association (where are the high-flying officials now?) and many others – they are the ones who pushed for and coaxed the governments to spend taxpayer money for CCS. Keep some criticism for them, not just the politicians at the time.

  24. nerblnob

    I hope you know that CCS was pushed heavily by coal industry here and oversea

    Because they believed this would save them from closure by the government and there was free money on offer. But , whatever the merits of CCS, the greenies were never going to publicly support a plan that allowed the coal industry to continue operating. They hate coal more than oil, except Big Oil makes a more recognisable target. They even target as “Big Oil” companies that have fewer employees than Greenpeace Australia has members, and less wealth. It’s insane but it works. David vs Goliath, and we’re supposed to ignore that Greenpeace and associated groups are really the Goliath in this conflict.

  25. Andrew

    Good summary but can we PLEASE use the correct terms;
    Carbon DIOXIDE suppression, carbon DIOXIDE tax…etc.

    I call it “airborne plant food” – does that work?

  26. Andrew

    I’m no economist, but a mandated “market” in a nonexistent “commodity” that there has never been any demand for and whose price is entirely arbitrary?

    I am an economist, and the CEF modelling was self evident fraud. Consider the premises:
    1) our target abatement is -80%
    2) there’s a global, open market
    3) our domestic abatement is -7%
    4) our purchase of “carbon credits” is -73% costing $57bn pa by 2050.

    Question: who the flying fuck has excess abatement to sell us???? How? Why aren’t we able to use the technology magic bullet and have to buy credits? Why are there excess credits in a -80E world when by definition even if someone can go carbon neutral they would be overwhelmed by those who can’t?

    CEF assumes that the entire world can produce -81% abatement using technology uniquely unavailable to us (eg the whole world goes nucular and we refuse). Then it assumes we’re happy to pay $57bn in fines pa. And finally, it calculates that this has no economic consequences due to “green jobs.” Even though we aren’t abating at all.

    Yeah, sounds plausible. Ken Henry couldn’t find a contradiction.

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