2012/13 Budget: implications for carbon and energy management

11 May 2012Archived News Climate Change Matters

With the focus of the 2012/13 Budget to achieve a  surplus, renewable energy initiatives have been cut and there have been losses, although also some gains, to energy efficiency programs. In this article Energetics considers those aspects of the Budget that relate to energy and carbon management and the possible implications for business.

Cancellation of $1 billion green buildings tax breaks program.  What are the options now for funding support for energy efficiency measures?

This announcement came as a surprise to Australia’s energy efficiency sector. The Tax Breaks for Green Buildings program was intended to commence in July 2012 and featured a tax incentive for building owners awarded upon the attainment of a NABERS rating of 4 stars and higher. 

The Minister of Climate Change and Energy Efficiency, Greg Combet, said that energy efficiency programs will be funded by the Clean Energy Finance Corporation (CEFC) and Low Carbon Australia (LCA). In response the CEFC has highlighted that there is possible doubling up with commercial building retrofit programs under the LCA.

If, as a building owner, you were considering applying under the Tax Breaks for Green Buildings program, you should investigate the financing criteria under the LCA and CEFC to support energy efficiency projects.  Click here for more information about the CEFC and LCA’s Energy Efficiency Program.

Other energy efficiency programs

The good news is that smaller funding programs were announced and other programs were retained. New funding programs announced in the Budget are:

Greenhouse and Energy Minimum Performance Standards

A program of $37.1 million in funding over four years will introduce a nationally-consistent legislative framework to regulate the energy efficiency of equipment and appliances.  With the establishment of this framework the Government seeks to address the varying approaches across states and territories, against the overarching objective of making gains in energy efficiency and reducing Australia’s emissions.  

Building energy efficiency programs

Within the Budget $2.8 million will be available for building energy efficiency activities that will  include enhancements to current building rating tools, programs providing information and regulatory schemes.

The programs that will receive funding support include the Nationwide House Energy Rating Scheme (NatHERS), compliance aspects of the Building Energy Efficiency Disclosure (BEED) Act and assistance to measures outlined in the National Strategy on Energy Efficiency.

Low Emissions Technology Demonstration Fund (LETDF)

$101 million planned over this year and next will now be deferred, with the department instead planning to spend $160 million over 2013-14 to 2015-16.

Carbon Capture and Storage (CCS) Flagships

Expenditure for CCS Flagships has been pushed out once more. In 2011-12 and 2012-13 expenditure was reduced by combined total of $75 million, however expenditure in 2014-15 is planned to be $278.8 million and $450.4 million in 2015-16.

Other CCS programs were relatively untouched with the CCS Institute maintaining its funding.

Renewables

Solar Flagships Program

The program is aimed at demonstrating the feasibility of large scale solar parks, $650 million was cut from the $1.5 billion program over the forward estimates. Although the government says that these funds will be restored in later years, this remains uncertain.

The Renewable Energy Venture Capital Fund, which aims to provide venture capital to encourage the uptake and commercialisation of renewable energy technologies, had its funding shifted to 2023-24.

Connecting Renewables

The Connecting Renewables program has been subject to deferment. No money will be spent in 2012-13 and half the planned expenditure for 2013-14 has been cut, making a total of $72 million shifted to later years.  It is our expectation that the program will be cut altogether in next year's Budget on the basis that the CEFC can fund transmission infrastructure.

Australian Renewable Energy Agency (ARENA)

ARENA is expected to commence operations in July 2012 and will take over various Solar Flagship programs that did not spend its allocated $100 million in the previous financial year. With this Budget ARENA will need to allocate $292 million to project(s) in 2012-13. The only way this seems possible is if the retendering around the solar PV portion of Solar Flagships can be brought to a swift conclusion and the selected project is ready to go.

The following year’s expenditure increases to $344.9 million, then $436.6 million in 2014-15 and $321.8 million in 2015-16. These amounts are not large relative to the type of capital expenditure involved in renewable energy projects. However to achieve this rate of spending, major improvements in how renewable energy grant programs are administered will need to be seen.

No change to $1.2 billion Clean Technology program

As part of the Clean Energy Future package $1.2 billion in funding was committed to a Clean Technology Program to help improve energy efficiency in manufacturing industries and support research and development in low-pollution technologies. The funding for this program is unchanged from the previous Budget and is managed by the Department of Industry, Innovation, Science, Research and Tertiary Education.

Carbon price

Over next four years, the Government expects to raise almost $25 billion in revenue from the price on carbon in the fixed price period plus the first year of the flexible price period. The Government’s prediction of $29 per tCO2e in 2015 ($23 rising each year) remains unchanged.

If this prediction is wrong, and the carbon price falls to $15, revenues will cut by over $3 billion. The starting floor price for carbon of $15 in 2015 is significantly higher than the current international prices on European Union Allowances (EUAs) and Certified Emission Reductions (CERs).

The expected revenue from carbon tax in the flexible price period is potentially overestimated. This has a significant impact on the Government’s budget forecasts because carbon price related household assistance rates are fixed and not aligned with the revenue that the Government predicts to receive.

Energetics recommends that direct emitters and liable entities observe global carbon market movements in the lead up to the flexible price period in order to prepare for its potential impact on the economy.

Protection of consumers - ACCC

$12.8 million has been allocated to the Australian Competition and Consumer Commission (ACCC) over four years from 2011-12 to protect Australian consumers and investigate businesses that make false or misleading claims about the impact of a carbon price.

No change to diesel tax rebate

Though there was pre-budget speculation about the scrapping of the diesel tax rebates for off road diesel consumption, this was not addressed in the Budget. The removal of the tax rebate would have had a significant impact on the mining and farming communities.

Overall to achieve the $1.5B Budget surplus, we have seen significant cuts to departmental budgets.  $15 million will be cut from the Department of Climate Change and Energy Efficiency over 5 years. We have also seen cost reduction targets and cuts across virtually all agencies. As a result the number of staff is expected to be reduced and much tighter discretionary spending, impacting the number and quality of programs that can be delivered.

 

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