Last night’s budget was like reading the first page of a new non-fiction bestseller called Australia makes the shift to a low-carbon economy. The climate change programs for renewable energy and energy efficiency are a big step forward from last year’s budget, but much bigger and more systemic changes are needed before we get anywhere near the end of the book.
The “green loans” scheme will help 200,000 households be more energy efficient and lower their energy bills. But this is over five years and will only reach 2.6% of Australian homes. Clearly there is more to do just to reach low income households, let alone the broad church that is “working families”. Similarly, the $240 million “clean business fund” is not going to stretch very far within the business community.
In the context of budget cuts and controlling inflation, it may be heresy to suggest these programs should be massively expanded. That is until you take a look at crude oil excise on condensate. Before this budget, oil produced as a by-product of natural gas extraction and processing was exempt from the crude excise. That fossil fuel subsidy was closed last night and is forecast to earn the government $2.5 billion over the next four years.
Put another way, the entire climate spend over seven years has been offset by sensibly removing four years of crude excise.
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This is just a small sample of what could have been done. The Institute for Sustainable Futures estimates more than $6 billion per annum is lost in incentives to pollute. These subsidies and tax breaks serve no other public purpose. In ACF’s budget submission, we modestly nominated the fringe benefits tax on company cars and the fuel tax exemptions for mining and transport as two reforms that would save the government billions each and every financial year.
Last night’s budget missed these opportunities, but they could yet be grasped by the Australian Future Tax System review, the terms of reference of which were announced last night.
In the story of Australia’s shift to a low carbon economy, cutting back on subsidies that encourage us to pollute and using the money to encourage emission reductions is essential. And the good news is it can be done with no impact on the surplus whatsoever.