Australia cuts renewables agency, carbon tax repeal vote on horizon

15 May 2014

The Australian government has announced plans to cut the country’s renewable energy agency, subsuming its activities into the Department of Industry. The body is currently responsible for issuing grants to emerging technologies.

The planned move, confirmed on Tuesday, will reportedly entail savings of A$1.3 billion in consolidated revenue, should the repeal of the agency be approved by the Senate.

The Australian Renewable Energy Agency (ARENA), as it is formally known, could also face a rocky financial future, with the current A$436.64 million available for funding dropping to around AUS$331 million for the 2014-15 period.

If the repeal passes, whopping cuts would then follow for the next two financial years, as available resources drop to A$15 million per annum. 

ARENA released a statement indicating that the cuts would not affect the 181 projects currently underway. Concerns have been raised, however, by commentators that certain contract clauses in the projects could see spending slashed as a result of changes in government policy.

Ian Macfarlane, the government’s industry minister, said that aggregate levels of support for renewables would remain high as a percentage of state spending. “There is over A$1 billion in funding for existing renewable energy projects to be completed over the coming years,” he said.

ARENA chair Greg Bourne expressed his anger at the decision to reporters, suggesting that the country’s current Liberal government was “clearing the decks” of its support for renewables, swimming against the stream in efforts to mitigate climate change.

“We may well find we are locking ourselves in to a carbon-intensive future in which we have no way of getting out,” Bourne said, warning of renewables investment flight overseas.

Mark Butler, Australia’s Labor Party climate change spokesman, also questioned the wisdom of the new arrangement. “This budget takes the Abbott government’s assault on the environment and climate to a new level, and shows a disdain for science and research that threatens decades of investment and innovation,” he said in a statement.

John Grimes, head of the Australian Solar Council, an industry body, also criticised the government for threatening to renege on a number of promises and commitments previously made.

“We’re calling the government on this, we are drawing a line in the sand, the problem is this government wants to take solar backwards,” he said.

According to Grimes, these include scrapping a solar roofs programme and cutting the country’s renewable energy target in half, on top of the cuts already announced.

Carbon tax repeal controversy

Alongside plans to terminate ARENA in its current form, Tony Abbott, Australia’s Prime Minister since last September, has pledged to repeal the country’s carbon and mining taxes. (See Bridges Weekly, 12 September 2013).

Introduced under a previous prime minister, Julia Gillard from the Labor Party, the carbon tax has proven highly controversial. Australia has climbed to the top of the list of the world’s per capita emitters in recent years, with much of the country’s domestic energy sourced from coal, which also provides significant export revenue.

The coalition’s attempts to repeal the carbon tax were scuppered in March, when Senate members from the Green and Labor parties worked together to defeat the legislation.  A fresh attempt will be made in July, when a new Senate takes office, although the move is expected to face stiff resistance once again. (See BioRes, 12 February 2014).

Abbott’s government has indicated that it will replace the tax with a new strategy to tackle climate change, dubbed “Direct Action.” The legislation for the centrepiece of this plan – an incentives-based Emissions Reduction Fund (ERF) – was published last Friday.

A market-based mechanism, the ERF will see the government purchase emissions reductions from pre-approved projects on the basis of price per tonne of carbon dioxide, following an auction process.

Gregory Hunt, Australia’s environment minister, has said that the system offers “an effective, practical, and simple approach to reduce emissions.”

The ERF and Direct Action are, however, also proving to be an uphill battle for Abbott’s government, rejected by Greens and Labor as insufficient to mitigate climate change.

ICTSD reporting; “Angry head of renewable energy agency says axing will leave energy sector obsolete,” THE SYDNEY MORNING HERALD, 14 May 2014; “Solar industry slams Coalition’s renewable policy,” ABC ENVIRONMENT; “Clive Palmer threatens to block carbon and mining tax repeals,” The GUARDIAN, 22 April 2014.

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