Joe Hockey on budget night

The federal budget 2015 has pretty much given nothing to the sustainability sector, except for the centrepiece small business measures, which might be beneficial for small and medium enterprises in the sector. But the Australian Renewable Energy Agency and Clean Energy Finance Corporation are still on the chopping block and a commitment not to fund urban rail projects seems to remain.

The Winners

Small business – Australian small businesses that “provide jobs for 4.5 million people and produce over $330 billion of Australia’s economic output” will be able to claim accelerated depreciation for each asset of up to $20,000, if their turnover is less than $2 million a year.

The potential for this to produce a surge in solar panels, energy efficiency measures and battery storage may turn out to be booby trap the government was not intending. According to the budget papers 96 per cent of Australian businesses will also be eligible for a tax cut.

“Small corporations will benefit from having their company tax rate cut to 28.5 per cent. Unincorporated small businesses will benefit from a 5 per cent tax discount, up to $1000 a year.”

Northern Australia – a $5 billion loan facility for infrastructure in Queensland and the Northern Territory including new roads, water, electricity, airports and rail projects. Also $101.3 million over four years from 2015-16 to improve cattle supply chains in the north, with a particular focus on road infrastructure; and $3.7 million over four years from 2015–16 to develop a new infrastructure projects pipeline that will be informed by the priorities identified in Infrastructure Australia’s Northern Australia Infrastructure Audit.

New South Wales – scores Norfolk Island as a new council area, with $136.6 million over five years allocated to Norfolk Island from 2014–15 [including spending of $35.8 million in capital and receiving $19.9 million in revenue] to reform the governance arrangements and extend Commonwealth and State government programs.

Global Infrastructure Hub – to be granted status as income-tax exempt entity.

Road builders – $50 billion for transport infrastructure to 2019–20, including a $3 billion commitment to East West Link recorded as a contingent liability. The government said this money will be given to any Victorian Government that reverses the decision to scrap the project. It also said the current Victorian Government will need to give it back the $1.5 billion of federal funds not spent on the project, unless it can come up with an idea for spending it that the government approves of.

Climate Change Authority – a temporary reprieve has been granted under the Emissions Reduction Fund agreement, with $6.1 million over two years from 2015–16 from within the existing resources of the Department of the Environment to extend the Climate Change Authority until 31 December 2016.

The Great Barrier Reef Trust – an additional $100 million over four years from 2015-16 to the Reef Trust to “support the delivery of priority projects in the Great Barrier Reef”, bringing the total contribution to the Reef Trust to $140 million.

The losers

National Low Emissions Coal Initiative – savings of $3.4 million in 2014-15 from the National Low Emissions Coal Initiative by reducing funding for the Australian National Low Emissions Coal Research and Development Project. Funding of $17.5 million over two years from 2015-16 will remain available for NLECI to support the development and deployment of technologies that aim to reduce emissions from coal use.

CSIRO – The government will further reduce the number of government bodies by abolishing the CSIRO Environment Strategic Advisory Committee, as the function has been reallocated by CSIRO to the relevant flagship advisory committee, IIF Investments Pty Ltd, and its assets have been transferred to the Department of Industry and Science.

The CSIRO Marine National Facility Steering Committee will become a subcommittee under the CSIRO Board, “to strengthen the board’s oversight of the facility”.

Additionally, the following bodies have ceased operations: the Bureau of Resources and Energy Economics (with its functions performed by the Department of Industry and Science and its work published under the auspices of the Office of the Chief Economist]; and the Consumer Advocacy Panel, with its functions transferred from the Commonwealth to Energy Consumers Australia established by the South Australian Government on behalf of the Council of Australian Governments’ Energy Council.

Fuel subsidies up and ARENA and Low Carbon Communities to go

Table 12.1: Trends in the major components of fuel and energy sub-function expenses
Component(a)Estimates Projections
Fuel Tax Credits Scheme6,1426,2306,4616,6797,044
Australian Renewable Energy Agency Projects267197747426
Resources and Energy279172653352
Total 6,9866,7066,7056,8957,237

Source: Federal Budget Papers 2015

The major program within this function is the Fuel Tax Credits Scheme, which is expected to decrease by 1 per cent in real terms from 2014-15 to 2015-16 and increase by 5.1 per cent in real terms from 2015-16 to 2018-19. The decrease in 2015-16 reflects an expected fall in eligible diesel consumption, particularly in the mining industry, with the subsequent increase reflecting the indexation of fuel excise.

The decrease in expenses under the resources and energy component from 2014-15 to 2018-19 reflects the government’s 2014-15 Budget decisions to reduce funding for the Carbon Capture and Storage Flagships program and to abolish the Ethanol Production Grants program on 30 June 2015, as well as the closure of the Low Emissions Technology Demonstration Fund and the Low Carbon Communities program in 2015-16.

The decrease in expenses under the Australian Renewable Energy Agency Projects component from 2014-15 to 2015-16 is due to the government’s 2014-15 budget decision to abolish ARENA. The management of existing ARENA projects will be transferred to the Department of Industry and Science. The decrease in expenses under this component from 2015-16 to 2018-19 is driven by the timing of project milestones for the existing ARENA projects.

Climate spending

The Government’s climate spending is shown on an aggregated basis in Table 11.

Table 11: Climate spending from 2014–15 to 2018–19
Climate spending(a)1.350.700.600.500.55

Spending in this table is on a headline cash balance basis; that is, payments and net cash flows from investments in financial assets for policy purposes, as well as estimated interest receipts associated with Clean Energy Finance Corporation investments.

Over the forward estimates, the key components of climate spending are:

  • The Emissions Reduction Fund, which is providing incentives to support abatement activities across the economy
  • Funding for the Department of Industry and Science to support Australian Renewable Energy Agency legacy functions

Estimates of climate spending have been updated to reflect the delay in the passage of legislation to abolish the Clean Energy Finance Corporation and to reflect revised timelines for the delivery of projects administered by the Australian Renewable Energy Agency.

Impact of climate spending on debt

Climate spending may be financed through either receipts or debt. This statement takes the approach of assuming that the proportion of climate spending being financed through new debt (as opposed to receipts) is equivalent to climate spending as a proportion of total spending. This is shown in Table 12.

Table 12: Impact on debt — climate spending as a proportion of total spending
Climate spending ($b)(a)1.350.700.600.500.55
Total spending ($b)(b)418.3440.9466.0478.0504.7
Climate spending (per cent of total spending)
Change in face value of CGS from previous year ($b)(c)
Contribution to change in face value of CGS from climate spending ($b)

(a) The calculation of climate spending in this table is on a headline cash balance basis; that is, payments and net cash flows from investments in financial assets for policy purposes, as well as estimated interest receipts associated with the Clean Energy Finance Corporation investments.

(b) The calculation of total spending in this table is on a headline cash balance basis; that is, total payments and net cash flows from investments in financial assets for policy purposes.

(c) Calculations of the change in the face value of CGS are calculated using total CGS on issue.

Clean Energy Finance Corporation

The Clean Energy Finance Corporation was established as a Commonwealth Authority in August 2012 through the Clean Energy Finance Corporation Act 2012 (CEFC Act).

The CEFC Act provides the CEFC with $10 billion over five years to invest in renewable energy, low- emissions technology and energy efficiency projects. The government has announced that it will abolish the CEFC.

Legislation to abolish the CEFC and transfer the CEFC’s existing assets and liabilities to the Commonwealth is currently before Parliament.

Big loser The climate change discussion

Australian Consensus Centre $4.0 million over four years from 2014-15 to help establish the Australian Consensus Centre

Big loser research funding

University research block grants

The Sustainable Research Excellence component of the university block grant will be cut by $260 million over the forward estimates, and by $150.0 million in 2016-17 alone

Cooperative Research Centres

There was no announcement on the future of the program which is currently under review. A further $26.8 million has been cut from the program over the four years from 2015-16

Entrepreneurs Infrastructure Programme

Cuts of $27.3 million over five years from 2014-15 from the program.

Industry grant programs

Cuts worth $31.7 million to commercialisation, enterprise connection and the industry innovation precincts. These programs were already closed to new applicants.