Australia: Commitment to the Carbon Tax and Clean Energy Future

Last Updated: 11 May 2012
Article by Noni Shannon

As expected, and despite mounting criticism, the government has confirmed its commitment to the introduction of the carbon price mechanism (CPM).

None of the key measures announced in the budget are new but, rather, are a restatement of the commitments made in the announcement of the Clean Energy Future (CEF) package in July 2011 (see our earlier alerts at " Carbon pricing mechanism snap shot: key features, certainty and flexibility" and " The carbon pricing mechanism: an industry focus" for a review of the CEF package).

The key measures which the government has chosen to highlight in the budget are:

  • $10 billion for the Clean Energy Finance Corporation (CEFC)

The establishment of the CEFC is a key element of the government's CEFC package. The intended focus of the CEFC will be to overcome barriers to private sector support for renewable and clean energy projects and technologies, with $2 billion funding per year for five years starting on 1 July 2013.

The current plan for the CEFC includes a divestment of capital into two streams: 50 per cent or more will be invested in the renewable energy stream and up to 50 per cent will be allocated to the low-emissions and energy efficiency stream.

This funding announcement was preceded by the government release of the report of the CEFC Expert Review Panel on 17 April 2012. This report included 26 recommendations, all of which were accepted by the government. They included:

  • investing in clean energy
  • the commercial approach of the CEFC
  • the structure of funding appropriation
  • the operation of the CEFC as an independent statutory authority.
  • $3.2 billion for the new Australian Renewable Energy Agency

ARENA will be a new independent statutory body, commencing on 1 July 2012, but it will be administering existing funding that was previously administered through separate programs by the Australian Centre for Renewable Energy, the Australian Solar Institute and the Department of Resources, Energy and Tourism. Approximately half of its funding ($1.7 billion) is currently unallocated, giving it some freedom in making new funding decisions to promote increases in the supply of renewable energy.

  • $200 million for the Clean Energy Technology Innovation Program.

The $200 million will be provided over five years from 1 July 2012 to support business investment in research and development, proof of concept and early stage commercialisation of clean technologies. The government's aim is for this Program to kick start the innovative solutions considered necessary by government for a transition to a low carbon economy.

This program is part of the $1.2 billion Clean Technology Program and will offer competitive grants of between $50,000 and $5 million on a 50 per cent co-contributor basis with the successful grantee.

  • $14.3 billion for the Household Assistance Package.

The $14.3 billion in financial assistance to households will be paid over four years, through tax cuts and increased government payments, and targeted to low and middle income families. The government's stated commitment is for more than 50 per cent of the carbon price revenue to be used to assist households. The Household Assistance Package starts from this month and the tax cuts from July.

  • $12.8 million for the ACCC.

Additional funding is to be provided to the ACCC over four years from 1 July 2012 for the investigation of false or misleading claims regarding the impact of the CPM (please see our earlier alert at " The 'carbon cops' are coming" detailing the implementation of this policy). The only new measures announced in the budget in relation to the implementation of the CEF package were:

  • $37.1 million for a nationally-consistent legislative framework for Greenhouse and Energy Minimum Standards to regulate equipment efficiency and replace the existing mix of state and territory schemes, described by the Government as "an inefficient patchwork".
  • $2.8 million additional funding for a range of building energy efficiency activities, for example, the maintenance and improvement of building regulatory and information disclosure schemes
  • $3 million additional funding to support the climate change adaptation policy and risk analysis.

While these new measures will provide practical solutions to some existing concerns of business, none is significant in the context of the larger CEF package.

In addition, the government has confirmed that it will not be proceeding with the Tax Breaks for Green Building Program. This will provide a saving of $405.2 million. The scrapping of this program has been justified by the government on the basis that recent changes to the policy environment, primarily through the introduction of the CEF package, will provide for alternative means of assistance for the retrofit of commercial buildings, for example, through Low Carbon Australia and the CEFC.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Noni Shannon
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