Budget shenanigans highlight risks of Emissions Reduction Fund Opinion Article

May 14, 2014 - 5:00pm

This article first appeared in Renew Economy on 14 May 2014. 

John Connor
CEO, The Climate Institute

Amid the drama of last night’s Budget announcements it was the fine print that put the heat on the Government. Statements about the Emission Reduction Fund appear to contradict the Government’s promise to spend $2.55 billion over four years on emission reductions.

And the resulting explanations merely served to underscore the growing uncertainty about the Government’s long term commitment to its Emission Reduction Fund, and highlight the enormity of putting Australia’s carbon pollution reduction at the whim of a highly uncertain annual budget arm-wrestle.

Just last week the Government assured the public the Emission Reduction Fund would spend $2.55 billion in the first four years. But the Budget Overview states that the ERF will spread this sum over a decade (p.27), while in Budget Paper 2, the appropriation table shows just $1.147 billion spent over the four-year forward estimates.

The Climate Institute has been advised that this is a ‘misunderstanding’ and that $2.55 billion is available over the four year forward estimates. The Government notes the “Clean Energy Regulator will be able to commit under contract [$2.55 billion] funding from the commencement of the Fund” (Budget Paper No. 2) and says there will be consideration of future expenditure.


Parliament must reject the repeal of carbon laws—which have clear limits on pollution and bring in revenue from polluter payments—to avoid Australia’s climate progress relying on the uncertain annual budget arm-wrestle for taxpayer priorities.

However, the $1.147 billion reflects expected expenditure forecast by Treasury and the Finance Department. This disparity appears as a $1.4 billion shortfall. There are serious questions about the ability of the Regulator to expend more than appropriated under the Financial Management and Accountability Act.

A number of consequences flow from all of this confusion.

Firstly, it is a massive vote of no confidence from Treasury and Finance that sufficient emission reductions can be purchased under the ERF.

Secondly, $1.1 billion will buy about half the emission reduction expected from the Fund’s first four years. This puts Australia under massive pressure to achieve even our minimum target of a 5 per cent cut in emissions in the two and a half years remaining to 2020.

Thirdly, this also puts massive pressure on future budgets. Not only will they bear the brunt of the deferred $1.4 billion but the Coalition had also originally projected ERF spending of $1.2 billion yearly after the four years.

It’s worth bearing in mind that every public independent assessment warns that even with that level of expenditure we fall short of the minimum 5 per cent target, let alone the 25 per cent target still part of Australia’s international commitment.

This pile of risk upon risk undermines confidence that the promised extra funds will indeed eventuate, and increases uncertainty about the government’s future climate ambition. A clear explanation is urgently needed, but more importantly, the government needs to demonstrate that it is serious about its international and domestic climate promises.

Unfortunately, last night’s Backward Budget demonstrated the opposite. The return of entitlements to big polluters to pollute for free, the transfer of the burden of reducing emissions to taxpayers, and the slashing of key climate and clean energy programs and independent agencies are an attempt to undo the good progress Australia has made recently in cutting carbon pollution, growing renewable energy jobs and taking advantage of our abundant solar, wind and other renewable resources.

The biggest backward step is the intended repeal of the carbon laws. This would give polluters a free pass on their pollution, and cost the Government over $12.5 billion of carbon revenue over the forward estimates.

Confusion over the replacement ERF, which was already facing criticism for failing to clarify how or whether the government would impose meaningful limits on Australia’s biggest polluting companies, might at least demonstrate one thing clearly: the Senate has a very clear choice.

Parliament must reject the repeal of carbon laws—which have clear limits on pollution and bring in revenue from polluter payments—to avoid Australia’s climate progress relying on the uncertain annual budget arm-wrestle for taxpayer priorities.

John Connor

John Connor was CEO of The Climate Institute from 2007 to March 2017. Whilst qualified as a lawyer, John has spent over twenty years working in a variety of policy and advocacy roles with organisations including World Vision, Make Poverty History, the Australian Conservation Foundation and the NSW Nature Conservation Council. Since joining The Climate Institute in 2007 John has been a leading analyst and commentator on the rollercoaster that has been Australia’s domestic and international carbon policy and overseen the Institute’s additional focus on institutional investors and climate risk. John has also worked on numerous government and business advisory panels.

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