The Department of Resources, Energy and Tourism is the Government’s delivery mechanism for its support for the coal industry, channelling hundreds of millions of dollars into the coal industry’s urgent attempts to develop carbon capture and storage technology, while Government investment in renewable energy lags far behind.

The Department’s spending programs show that the Government’s priority remains in funding CCS and ethanol despite claiming it is making a significant commitment to renewable energy.

Last month Crikey revealed the Resources Department had been undertaking a consultation process for a new Energy White Paper with no input from the renewable energy industry or mainstream environment groups (although, presumably coincidentally, some groups were invited to comment on a draft immediately after that item appeared).

The Government has been eager to spruik its commitment to renewable energy via both the renewable energy target and its renewable energy fund. But the Resources Department’s funding shows the Government’s emphasis is on CCS technology. In 2009-10, the Government’s Clean Coal Fund will ramp up to $105m, before increasing to $120m the following year and $95m in 2011-12. The Government is also still spending money from the previous Government’s $500m Low Emissions Technology Development Fund which has provided substantial funding to many of the most significant carbon capture projects.

And last September the Government announced another $100m pa for its international initiative, the Global Carbon Capture and Storage Institute, which the Prime Minister opened last week.

Resources also continues to fund the Commonwealth’s substantial commitment to subsidising ethanol, which cost $63m this year and is set to cost taxpayers more in 2009-10 unless the seemingly interminable review of the current excise exemption prompts the Government to cut it before 2011. However, taxpayers don’t just subsidise ethanol directly, they also fund the construction of ethanol plants, with grants of up to $10m available to companies like CSR that are building new ethanol production facilities, and grants to petrol stations to install equipment to handle E10.

How does renewable funding stack up? Last year, under pressure over its solar energy rebate arrangements, the Government brought forward all of the funding in its $500m Renewable Energy Fund into this year and 2009-10. There’s also an Energy Innovation Fund worth $150m over four years, and some small programs for electricity storage and wind power. But the investment in renewable in the Resources portfolio is less than half that devoted to CCS and ethanol, and the commitment from the Commonwealth is more open-ended than the temporary renewable programs.

There is a clear sense of urgency on the part of the Government about CCS technology. The climate change debate is starting to turn against coal, and therefore against Australia. There is a small but growing risk that other countries will start to turn away from coal unless associated emissions can be demonstrably captured and stored. Some advocates have been calling for the banning of coal altogether. The Government, with strong links to the coal industry through the CFMEU (which gave $700,000 to the ALP in 2007) is throwing money at CCS research in the hope of rapidly accelerating the development of the technology, than face the more politically difficult issue of managing coal’s transition to a low-carbon economy.

If CCS technology becomes viable quickly, all well and good. We’ll have made a critical step toward resolving a key climate change problem, one that will enable not just Australia but major emerging economies to continue to rely on coal as a baseload power source. And the coal industry itself is investing heavily in the development of the technology via the Coal21 fund, funded from a voluntary coal production levy that raises about $100m pa, and $75m research and development fund.

The problem is, there are renewable technologies — particularly solar — that are much closer to viability than CCS. And it’s also not clear that CCS can be rolled out more quickly or with less public investment than nuclear power, which at least is technologically proven. But the Government’s funding priorities are driven by the political imperative of shielding the coal industry from the consequences of its high carbon emissions.

The larger context for this issue is the likely defeat of the Government’s ETS in the Senate, and its likely ineffectiveness if it does get passed. This will further delay the pricing changes that would drive a shift to renewables. In the absence of the sort of price signals that would come from an effective ETS, the public sector will have to significantly increase its investment in renewables if they are going to make a significant difference to Australia’s emissions.

Currently we’re more focussed on finding a solution to the coal industry’s problems. With an Energy White Paper process dominated by the carbon-based fuels industries, it seems like things will stay that way.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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