Budget priorities: the ERF, funding for innovation, diesel fuel credits and transitional arrangements

The “Budget Measures - Budget Paper No. [1]“ contains the key components of forward estimates spending that directly or indirectly, impact energy efficiency and clean energy measures over the short to medium term:

  • the Emissions Reduction Fund (ERF), which will provide incentives to support abatement activities across the economy

  • Innovative funding for entrepreneurs, manufacturing and infrastructure projects

  • cost of fuel increases through Fuel Tax Credits Scheme.

Emissions Reduction Fund (ERF)
Following the release of the exposure draft of the Emissions Reduction Fund legislation on Friday 9 May, the ERF funding program has been formalised within the 2014-15 Budget Papers.

The ERF White Paper allocated $300 million for the 2014-15 financial year; $500 million in 2015-16; $750 million in 2016-17 and $1 billion in 2017-18.  However, while contracts may be written totalling these amounts, the Budget provides for expected expenditure at the time emissions reductions are achieved, with an allowance of $75.5 million in 2014-15, increasing in subsequent years as outlined below.

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Energetics’ advice to business: Access ERF funds early. Businesses that are ready to participate in the early rounds of the reverse auction are most likely to be successful. Business should review their list of opportunities identified under EEO,  assess the need for funding and develop their ERF methodologies to bid into the reverse auction process. 

Consider project aggregation. This will reduce the administrative burden associated with ERF participation, and satisfy the Government's ideology for projects that deliver more significant emissions reductions.

Finally, the ERF draft legislation is currently available online. Submissions on the draft legislation are required by 23 May 2014.  Your business should consider building a strong position on the form of the legislation as it is currently proposed, and make a submission.

For further information on the likely design elements of the ERF please refer to our article "The ERF White Paper: what more have we learned?"

Innovative projects
Budget measures include a strong focus on innovation, and funding entrepreneurial solutions to problems within a number of sectors including manufacturing and infrastructure. The suite of newly introduced programs that may be accessed for funding to support innovative energy efficiency and clean energy projects include:

• The Government is providing a further $3.7 billion over five years from 2013-14 to the Infrastructure Investment Program for new investments to support economic growth and employment.
• The $484.2 million Entrepreneurs’ Infrastructure Program which will focus on supporting the commercialisation of good ideas, job creation and lifting the capability of small business.
• The Government will provide $50 million over three years to establish the Manufacturing Transition Grants Program to assist Australian manufacturers to transition to higher value manufacturing activities or niche activities which result in new products and improve a firm's competitiveness.

Energetics’ advice.  Watch for further announcements about the details of these programs.  Energetics will keep you up to date and provide advice accordingly.


Fuel Tax Credits Scheme
The Fuel Tax Credits Scheme is expected to increase by 5.4% in real terms from 2013-14 to 2014-15 and by 12.8 per cent in real terms from 2014-15 to 2017-18.

Energetics’ advice: Our experience reveals that cost savings are typically greater when the whole-of-business activities including fuel use reduction, reduced shrinkage, maintenance practices, tax credits and business reporting are all taken into consideration. We are happy to discuss the implications for your business.

Transition arrangements for phased-out programs
The Budget commits the Government to honour legacy ARENA and CTIP projects, so existing projects that have been contracted, but with payments not fully recognised, are entitled to receive funding.

The budget has provided transitionary arrangements for:
• funding for the Department of Industry to support ARENA legacy functions
• the free permit buyback facility provided as part of the Jobs and Competitiveness Program (JCP) and the Energy Security Fund, noting these programs will be abolished from 2014-15 should the repeal of the Clean Energy Regulations be successful
• previously committed expenditure from the Biodiversity Fund and the Clean Technology Programs, noting these programs will no longer be eligible for new applications beyond 2013-14.

The Budget reiterates the Government’s commitment to repeal the carbon tax, which they expect will deliver future decreases in the Consumer Price Index (CPI).  No details have been included within the Budget as to the net taxpayer costs associated with repealing the carbon tax.

Energetics’ advice: During this transition phase, Energetics recommends a thorough audit of your emissions liability and compensation through JCP and PECs. This is the last true-up period with no further opportunities for reconciliation. Energetics can help ensure that you are reporting accurately and will receive the compensation you’re eligible to receive.

 

 

 

[1] https://www.cleanenergyfinancecorp.com.au/our-investments.aspx
 

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