Back when the government introduced its carbon tax, sweeteners were added to soothe a hostile public and industry rent-seekers. The tax has survived, but the sweeteners have been brutally pared back in the budget.

The budget cuts $2.4 billion in funding for climate change programs over the next four years. Renewable energy projects and biodiversity funding have been targeted, while former prime minister Kevin Rudd’s vanity project to clean up coal has been gutted.

The budgetary cuts on climate change have come about because the government is to link its carbon tax (which morphs into an emissions trading scheme in 2015) closely with Europe’s carbon scheme. European pollution permits are cheap, so Australia will get much less money from its carbon scheme from 2015 (the budget writes down the projected 2015 carbon price from $29 to $12.10 — and even that’s a bold prediction. The European price is trading today is 3.23 euros, or A$4.22).

This budget raises questions about linking Australia’s ETS so closely with Europe’s foundering scheme and suggests the possibility that Australia’s ETS may simply funnel money to Europe to pay for emissions reductions that are happening anyway due to Europe’s lingering depression.

Labor’s climate cutbacks in the budget include shelving $370 million for renewable energy projects via the Australian Renewable Energy Agency. This funding has been pushed back, not axed — but Australian Conservation Foundation climate spokesman Tony Mohr told Crikey the funding was now in “la la land”.

The Biodiversity Fund — a Greens sweetener to the carbon price — has had $225 million of its funding pushed back, and some of it has been redirected to compensate for Tasmania’s new logging deal (which will annoy conservationists).

The large, national Caring for Country environmental program has lost $141 million over five years, redirected to drought reform, etc. And $98 million has been saved by dumping future rounds of Low Carbon Communities, which promotes community-level energy efficiency schemes.

“While the budget pares back climate and environmental schemes, forcing a rethink from conservationists and the public servants administering the schemes, it’s not a green wipeout.”

The coal industry has fared poorly from the budget. Rudd’s grand designs to lead the world on clean coal technology (burying emissions from fossil fuel plants underground, called Carbon Capture and Storage) have been neutered, with $500 million cut from the main scheme. Additionally, the curious and secretive Global Carbon Capture and Storage Institute (a Rudd baby) appears to have severed its ties with the government. Treasurer Wayne Swan saves $45 million that would have gone to the institute, “following a request from the Institute” that he stop giving it money. This is a budget oddity that raises some very interesting questions.

The government also cut $271 million from a carbon tax compensation package for the coal sector, and $29 million from a similar technology fund for coal.

The government saves big bucks by gaming international rules on carbon schemes (Australia has a proud record in this department — remember the Australia clause, by which we got to count reductions in logging rates in our national emissions total?). New research which tweaks estimations of environmental damage from certain greenhouse gases has been enthusiastically embraced by Swan — saving the budget $240 million. And Australia has changed what emissions it counts in the land sector, saving the budget a further $389 million. International accounting rules on emissions are complex and controversial, and the government is riding them to make our emissions reductions look as large as possible. This is allowed under international rules — but the more that countries do this, the less global emissions are reduced by.

As already announced, the budget defers an income tax cut that was supposed to come in 2015 to compensate for a rising carbon price (which will now actually fall in that year).

While the budget pares back climate and environmental schemes, forcing a rethink from conservationists and the public servants administering the schemes, it’s not a green wipeout. Some environmental schemes are untouched (such as the cashed-up $10 billion Clean Energy Finance Corporation), and most of those that have been cut back do still contain significant dollars. These cuts may be dwarfed by much bigger cuts should the Coalition win the federal election.

Mohr told Crikey the budget was “not good but not as terrible as it could be”. He says the government could have made up for decreasing carbon price revenue by cutting subsidies to fossil fuels (such as the fuel tax credit scheme) rather than by cutting environmental programs.

Mohr also says if the government is to rejig how it works with international carbon accounting rules, it should use this to increase ambition to cut greenhouse gas emissions — which it is not doing.

Peter Fray

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