Government's pollution policy teeters on budget insights: new analysis Media Release

May 26, 2014 - 11:04am

The Government’s carbon pollution policy, and its ability to achieve even the “inadequate” minimum 5 per cent 2020 reduction target, is looking even more unstable as new analysis shows forecast expenditure would require massive additional spending in 2019 and 2020 or significant regulatory intervention, said The Climate Institute today.

“While the Government maintains it can spend the $2.55 billion it promised over four years through its Emissions Reduction Fund (ERF), our analysis finds that the Budget’s forward estimates of just $1.15 billion would produce just a small fraction of the emission reduction needed,” said John Connor, CEO, The Climate Institute.

“We find that the ERF’s budget over the forward estimates will only reduce emissions by much less than a quarter of the minimum 5 per cent target by 2018, with more than three quarters to be achieved in two years. This is extraordinarily risky, if not downright implausible.”

“If followed, this path means massive reliance on the two remaining limbs of the Government’s carbon pollution policy: the Renewable Energy Target under review and the still to be determined ‘safeguard mechanisms’ which are to set limits on pollution from some of Australia’s biggest companies.”

“The policy also assumes existing energy efficiency measures will reduce emissions – but Victoria’s just announced it will abolish its energy saving target and the federal Energy Efficiency Opportunities program is also facing the chop. Cuts to the Renewable Energy Target, energy saving programs and inadequate safeguard mechanisms will see emissions blow out far beyond what the ERF has been budgeted for.”

“The Senate should consider this analysis very closely before repealing carbon pollution and clean energy laws, which are reducing millions of tonnes of pollution and growing thousands of jobs in Australia’s clean energy industry.”   

The Climate Institute’s analysis draws on pre-election independent modelling and reveals the following key points: 

  1. The Government defines its 5 per cent task as requiring the reduction of 421 million tonnes (Mt) of carbon pollution. This relies on an unchanged RET and 40 million tonnes saved through two years of carbon pricing.
  2. Under the spending outlined in the Budget, by 2018 the ERF will have purchased only about 60 Mt of verified pollution reduction. Another 360 Mt (or 180 Mt a year) is needed in 2019 and 2020 just to get to the 5 per cent target. This achieves under 15 per cent of the task in the first four years, with the rest in the last two years.
  3. The annual rate of emission reduction reaches about 20 million tonnes per year by 2018, but needs to go up to about 180 tonnes a year the very next year – a nine-fold increase.
  4. Any cut to the RET will require more funds or regulation as the RET is estimated to reduce emissions by about 70 million tonnes by 2020.
  5. Victoria’s abolition of its energy efficiency scheme will also increase emissions by another 10-25 Mt with the proposed abolition of the national Energy Efficiency Opportunity program also making things harder.

“Treasury’s estimate of $1.15 billion on verified pollution reduction is a vote of no confidence in the ability of the tax payer funded ERF to build up the scale or reductions. Meanwhile, the Government is turning its back on over $12.5 billion in revenue from current laws which would also deliver 15 per cent reductions,” said Connor. 

“Our analysis underlines the folly of shifting the burden of emissions reduction from the polluters to the taxpayers. It shows why we shouldn’t rest our hopes on the annual arm wrestle of the budget process and why we should stay with current laws which set clear limits and provide billions from business taking some responsibility for their emissions.” 

For more information
Kristina Stefanova | Communications Director, The Climate Institute | 02 8239 6299

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