Australian Government, 2009‑10 Budget
Budget

Chapter 4: Climate Change Priorities and New Initiatives

Australia's climate change strategy

The world is currently suffering from a global recession, but this does not mean we can ignore the threat that climate change poses to our environment, our society and our economy. On the contrary, it is more important than ever to secure Australia's long‑term prosperity by building a low pollution economy that protects our environment. Addressing the challenge of climate change is one of the Rudd Government's highest priorities. To help Australia combat climate change and prepare for its effects, the Government has implemented a three pillar policy approach: reducing Australia's carbon pollution; adapting to unavoidable climate change; and helping to shape a global solution.

4.1: Climate Change Science: the foundation of our policy response

Quality scientific research is essential to underpin all pillars of the Australian Government's comprehensive policy response to climate change. We must continue to invest in the fundamental science we need to better understand the impacts of climate change, develop effective adaptation strategies and reduce our carbon emissions.

Australian scientists are making an important, and unique, contribution to building global understanding of climate change. However, our climate change science community is facing new challenges. Calls for more detailed information on climate change impacts are increasing, and there are key needs to enhance human scientific capabilities and physical scientific infrastructure.

The Australian Government is continuing to build our scientific understanding of climate change through an additional $31.2 million in funding over four years for its Australian Climate Change Science Program.

The Government has also adopted a new Australian Climate Change Science Framework which sets national climate change science priorities for the next decade; identifies the science capabilities, human capital and infrastructure investment needed to deliver on these priorities; and sets out ways to harness our full science capacity to address those priorities.

A high‑level coordination group, chaired by Australia's Chief Scientist, will develop an implementation plan to ensure that all organisations with a significant climate change research capacity are contributing to this nationally coordinated effort to meet Australia's priority climate change science information needs.

The Marine and Climate Super Science Initiative ($387.7 million over 4 years) will provide funds to address critical infrastructure needs and deliver facilities that will enhance Australia's existing research strengths in marine and climate science. These investments will underpin Australia's response to climate change and will provide an integrated national platform for marine and climate research, which is critical for sustainable development and management of Australia's terrestrial and ocean resources and the viability of our major commercial enterprises such as mineral and energy industries, aquaculture and fisheries, agriculture and tourism. Key investments include:

  • a new blue‑water research vessel capable of exploring Australia's vast ocean territory;
  • tropical marine research facilities at the Australian Institute of Marine Science in Townsville and Darwin that will transform Australia's approach to understanding climate adaptation in marine ecosystems;
  • an upgrade to Australia's peak supercomputing facility, which is essential to climate change modelling;
  • a comprehensive scientific observing system for Australia's marine province, with enhanced Southern Ocean monitoring critical to climate research and extended coverage of northern Australian waters; and
  • distributed infrastructure for research related to terrestrial ecosystems, groundwater depletion, sustainable energy, and water and energy use in built environments.

Reducing Australia's greenhouse gas emissions

The Government has developed an integrated policy program to reduce Australia's greenhouse gas emissions and achieve our ambitious 2020 target of a five to twenty five per cent reduction in emissions on 2000 levels, putting Australia on track for further reductions towards our 2050 target.

To guarantee that our emissions target is achieved, the Government will implement the Carbon Pollution Reduction Scheme (CPRS), and contribute to the transformation of energy supply through the Renewable Energy Target. The Government is also making significant investments in the development of new clean energy technologies for the future; and to encourage the deployment of existing climate change solutions such as energy efficiency and solar technology.

The Government has committed that every cent raised from the Carbon Pollution Reduction Scheme will be used to transition Australian households and business to a low pollution future. The Government will provide direct cash assistance and tax offsets to households to coincide with any increase to the cost‑of‑living flowing from the CPRS, with the most assistance flowing to low and‑middle‑income households.

Emissions-intensive, trade-exposed industries are important contributors to Australia's economy, and will receive assistance to support them through the transition to a low‑carbon economy and to protect jobs. The Government will implement a range of measures to assist households, business, workers, regions and communities to prepare for the CPRS and the associated impacts of a carbon price.

4.2: Deferral of the Carbon Pollution Reduction Scheme

In response to the global recession, the Government has announced that mandatory obligations under the CPRS will be deferred by one year, until 1 July 2011. Liable entities will be required to meet their emissions liabilities from 2011‑12, with emissions permits being surrendered for the first time in December 2012.

Assistance to emissions-intensive, trade-exposed (EITE) industries and through the Electricity Sector Adjustment Scheme (ESAS) will commence in July 2011, in line with the date for liability.

Under the EITE assessment processes already underway, the Government will now apply a Global Recession Buffer to the EITE allocation baselines to reflect the difficult circumstances currently facing many EITE industries in Australia. The buffer will be in place for the first five years of the CPRS at a cost of $1.1 billion.

In 2011‑12, as a transitional measure, an unlimited number of permits will be available at a fixed price of $10 per tonne. These permits will not be able to be banked for future use. The market will set the price of permits dated 2012‑13 onwards.

The CPRS will result in changes to a wide range of prices, but the overall increase in the cost of living will be modest. The Government will provide a package of assistance to support households as they adjust to a low pollution future.

In 2011‑12, household assistance will be proportionately adjusted to align the level of assistance with the lower estimated cost of living impacts resulting from an initial $10 fixed carbon price. In 2012‑13, household assistance will be provided on the basis of the estimated cost of living impacts of a flexible carbon price. Each year, the adequacy of this assistance will be reviewed in the context of the Budget.

Motorists will also benefit from cent-for-cent reductions in fuel tax for the first three years of the scheme.

The overall budgetary impact of changes to EITEs assistance, ESAS, fuel tax and the Household Assistance Package from the deferral of the CPRS will be broadly budget neutral.

Central to the implementation of the CPRS and the RET will be a dedicated agency, the Australian Climate Change Regulatory Authority (ACCRA), to oversee the operation of the CPRS, and to be responsible for the existing functions of the Office of the Renewable Energy Regulator and the Greenhouse and Energy Data Officer. This will improve regulatory outcomes, reducing risk of conflicts or gaps emerging between regulators with separate functions; and will streamline procedures for reporting and surrender, reducing the burden for businesses that would otherwise need to deal with two or three separate regulators.

ACCRA will commence operations from the time that the CPRS legislation is passed by Parliament. ACCRA will manage the issuing and auction of emissions permits (including collection of revenue); and allocate permits to eligible entities under emissions-intensive, trade-exposed (EITE) scheme and Electricity Sector Adjustment Scheme (ESAS). It will also maintain a registry to record the ownership of permits and renewable energy certificates, assess the liabilities of eligible entities for the CPRS using information provided under the NGER Act; and promote and enforce compliance with the CPRS, the RET and NGERs.

To assist decision-making around new sectors entering the CPRS in the coming years, the Government will develop the National Carbon Accounting Toolbox (NCAT). NCAT will be a cost effective, nationally consistent emissions estimation tool for forestry and agriculture. The Government will make the NCAT operational for forestry before that sector begins voluntary coverage within the CPRS from July 2010. Preliminary development of agriculture emissions estimation capability and approaches will also be undertaken to provide for trial reporting in 2011. The Government is dedicating $16 million over four years to intensive development of the NCAT.

Clean Energy Initiative

The $4.5 billion6 Clean Energy Initiative will help give investors the confidence they require to back low-emissions technologies and industries to assist Australia's transition to a lower emissions path.

As part of the Clean Energy Initiative, the Government is establishing a new body, Renewables Australia, with an overall investment of $465 million, to support leading-edge technology research, development and demonstration projects. It will help bring renewable technologies to market at acceptable cost, advise Governments and the community on the implementation of renewable energies, and support growth in skills and capacity for domestic and international markets.

Also under the Clean Energy Initiative, the Government will invest $1.5 billion in large-scale solar power generation projects under the Solar Flagships Program. The Solar Flagships Program will set a target to create an additional 1000 megawatts of solar power generation capacity in Australia. This is three times the size of the largest solar energy project currently operating anywhere in the world. The program will help position Australia to be a world leader in solar power generation capacity. It will support four power generation projects that demonstrate both solar thermal and solar photovoltaic technologies with capacity equal to or greater than a current coal-fired power station.

The third element of the Clean Energy Initiative is the Carbon Capture and Storage (CCS) Flagships Program. The Government will invest $2 billion in industrial-scale carbon capture and storage projects to complement the Government's National Low Emissions Coal Initiative and Global Carbon Capture and Storage Initiative. Through the CCS Flagships Program, the Government will ensure Australia continues to be a world leader in the development of this technology by supporting the demonstration of large industrial-scale projects in Australia. The program will support the demonstration of two to four large industrial-scale projects in Australia, which may include a carbon dioxide storage hub.

In addition to the Clean Energy Initiative, the Government will provide $14.9 million to implement a three year Clean Energy Trade and Investment Strategy, to assist Australian businesses respond to the new global opportunities being created by climate change policies. Austrade will target foreign investors and promote Australia as a clean energy investment destination and assist Australian clean energy companies to access international markets through export and investment. This delivers the Government's election commitment to fund a clean energy export strategy.

Households and Homes

In 2009‑10, the Government is delivering the Energy Efficient Homes Package, part of its Nation Building — Economic Stimulus Plan. Funding of $3.9 billion will improve the energy rating of Australian homes through the installation of insulation and increased rebates for solar and heat pump hot water systems. This will make Australia's homes more comfortable and help households save up to 40 per cent on their electricity bills. The package also provides help to renters, with an increased insulation rebate for landlords or tenants.

The Solar Homes and Communities Plan provides cash rebates for the installation of solar power systems on homes and community use buildings. This Budget includes funding of $271.77 million to address the increased demand under the Solar Homes and Communities Plan. Total funding under this program is almost $500 million, including funding for the Solar Homes and Communities Plan of $339.7 million since the 2008‑09 Budget. This initiative will transition to the Solar Credits scheme under the Government's expanded national Renewable Energy Target.

The Energy Efficient Homes Package and the Solar Homes and Communities Plan will be complemented by a reshaped Green Loans program. This program will focus on home environmental assessments as a central feature, as this supports jobs and provides real advice for households on practical environmental actions they can take at home. The reshaped program will also retain capacity for 75 000 green loans to be serviced through participating financial institutions. The increased availability of Government rebates, including through the recently announced Energy Efficient Homes program, is expected to reduce demand for low-interest loans under the program.

The Government recognises the important role that household action has to play in moving to a low emissions future for Australia. In this Budget, as part of the Australian Carbon Trust (see box 4.3), $25.8 million is dedicated over 5 years to establishing the Energy Efficiency Savings Pledge Fund. This will support the uptake of energy efficiency measures by households and small businesses. It also provides an easily accessible means for individuals and businesses to achieve emissions reductions beyond Australia's emissions reduction targets.

Households and businesses that purchase accredited GreenPower increase the supply of renewable energy and assist in the transition to cleaner energy sources. To recognise individual action in purchasing more GreenPower, the Government will take additional GreenPower purchases, above 2009 levels, into account in setting Carbon Pollution Reduction Scheme caps. Additional GreenPower purchases will be measured annually and used to set caps five years into the future, on a rolling basis. The Government remains committed to setting initial CPRS caps in 2010.

4.3 The Australian Carbon Trust: supporting emissions reductions through energy efficiency

The Government will commit $75.8 million over 5 years to establish the Australian Carbon Trust to support households and businesses to engage on climate change, particularly though cutting energy use.

As part of the Australian Carbon Trust, the Government will allocate $25.8 million over five years to establish the Energy Efficiency Savings Pledge Fund to help households and small businesses understand the greenhouse gas benefits and dollar savings to be gained from cutting energy use. Web-based tools provided by the Government will enable households and small businesses to calculate their energy use and the dollar savings that can be made through actions to reduce energy use such as installing energy efficient appliances. Individuals will then be able to pledge the savings, or any other amount, to the Energy Efficiency Savings Pledge Fund. The fund will buy and cancel carbon pollution permits to create additional emissions reductions. Pledges will be tax deductible.

As part of the Australian Carbon Trust, the Government will inject $50 million into an Energy Efficiency Trust that will provide seed funding to promote and demonstrate innovative energy efficiency activities for commercial businesses and other organisations. Upfront investment in energy efficiency projects by the Trust will be repaid through energy savings, creating a revolving fund for further investment. Through engaging with business and demonstrating the potential to reduce emissions and energy use while saving money and improving business performance, the Trust will have a lead role in showcasing energy efficiency opportunities.

Energy Efficiency

Energy efficiency offers a significant opportunity to achieve low‑cost reductions in emissions. From 2009‑10 the Government will provide new funding of $164.6 million for a range of energy efficiency measures that will deliver a step change in energy efficiency improvement in Australia, drive further growth in the number of highly energy efficient homes and commercial buildings across Australia, and ensure that appliance energy performance standards continue to improve.

The Government will provide $100 million in 2009‑10 for the National Energy Efficiency Initiative to develop an innovative smart-grid energy network. Combining broadband with intelligent grid technology and smart meters in homes, this demonstration project will enable greater energy efficiency and better integration of renewable energy sources, such as solar and wind power. Funding will be provided to a consortium of state and local government, public and private energy companies and other private sector investors for the large scale demonstration of integrated smart grid technologies.

The Government has also allocated $64.6 million to measures that complement the National Energy Efficiency Initiative and the Energy Efficiency Trust (see box 4.3), and include:

  • implementing enhanced energy efficiency labelling, so that consumers can make better choices when purchasing new appliances — $18.3 million over four years;
  • expanding minimum energy performance standards for appliances and equipment, so that efficiency continues to improve — $16.6 million over four years;
  • new minimum energy performance requirements for residential buildings and major renovations (to be included in the Building Code of Australia), so that new homes use less energy and are cheaper to run — $8.7 million over four years;
  • mandatory disclosure of energy performance for residential buildings at the time of sale or lease, to provide incentives for improving the comfort and reducing the running costs for existing homes — $7.8 million over four years;
  • new energy efficiency performance requirements for commercial buildings and major refurbishments to be included in the Building Code of Australia — $3.3 million over four years;
  • mandatory disclosure of energy performance of commercial buildings at the time of sale or lease, to assist tenants and purchasers to make better choices — $5.3 million over four years;
  • upgrading commercial building rating tools to assist building operators to measure and manage energy use — $2.6 million over four years; and
  • a suite of new activities to reduce energy used for heating, ventilation and air conditioning systems in commercial buildings — $2 million over four years.

In 2009‑10, the $2.75 billion Climate Change Action Fund (see box 4.4) will begin helping business, industry and community organisations prepare for the impacts of a carbon price, by providing information and capital grants.

4.4: The Climate Change Action Fund

As announced in the CPRS White Paper in December 2008, the Climate Change Action Fund (CCAF) will provide targeted assistance to businesses, community sector organisations, workers, regions and communities to smooth the transition to a carbon constrained economy. It will provide assistance by addressing both the distributional impacts of the CPRS and persistent market failures that impede the uptake of lower emission technologies and processes.

CCAF activities will include:

  • providing information to businesses and community service organisations about the operation of the Scheme and how these entities can manage the expected financial impacts
  • grants and incentives for businesses and community service organisations to invest in energy efficiency projects and low emissions technologies, processes and products
  • structural adjustment assistance in the event workers and communities are significantly impacted by the introduction of the Scheme; and
  • structural adjustment assistance for coal mines with high fugitive emissions which will be significantly impacted by the introduction of the Scheme.

To prepare business in advance of the introduction of the CPRS, the Government has allocated $200 million in 2009—10 of the CCAF. This first tranche of CCAF funding will support business to take early action in identifying energy efficiency opportunities and to invest in energy improvements. It will also support the continuation of the Energy Efficiency Opportunities measure. The funding will allow Australian businesses to achieve savings on their energy bills and deliver significant low cost carbon pollution abatement.

The Government has allocated $20 million in 2009‑10 to a business information package that will provide advice to business on the operation of the CPRS and identify potential opportunities and impacts that may arise. It will be developed in close consultation with business groups and will proactively harness the expertise and networks of these representative bodies. It will be targeted at businesses that fall below the emissions-intensive, trade-exposed assistance package thresholds.

The Government will establish the Early-Action Energy-Efficiency Strategies for Business measure that will drive forward knowledge and investment in energy efficiency opportunities. The Government has allocated $100 million in 2009—10 to support this initiative which will assist business and community sector organisations to identify energy efficiency opportunities.

To further enhance early action the Government has allocated $80 million in 2009—10 for capital energy efficiency improvements. This will allow Australian businesses to achieve savings on their energy bills and deliver significant low cost carbon pollution abatement.

The community service sector supports some of the most financially vulnerable in our society. Such organisations may experience higher operating costs as a result of putting a price on carbon, which may put pressure on their service delivery activities.

The Government will use a portion of the funding identified above to assist community service sector organisations to identify energy efficiency opportunities that may arise through the introduction of the CPRS. By helping to identify cost-effective opportunities to reduce energy use, the Government will help position these organisations to make savings on their energy bills and to minimise the impacts of moving to a low carbon future.

This new support is in addition to the Community Organisation Capital Allowance measure of the CCAF announced as part of the CPRS White Paper.

On 4 May 2009, the Government announced a funding enhancement of $300 million for the CCAF, bringing total funding for CCAF to $2.75 billion.

These measures demonstrate the Government's commitment to building a comprehensive approach to dealing with climate change and making our homes and communities more sustainable, and form part of the Government's response to the Strategic Review of Australian Government Climate Change Programs (the Wilkins Review, see box 4.5). The range of new initiatives, and the Government's recently announced Energy Efficient Homes Package, demonstrate the Government's commitment to a more strategic and comprehensive approach to dealing with energy efficiency within our homes and communities.

4.5 Response to the Wilkins Review

The Government established the Strategic Review of Australian Government Climate Change Programs ('the Wilkins Review') in February 2008 to determine whether existing climate change programs were efficient, effective, and complementary to the Carbon Pollution Reduction Scheme, so that climate change can be addressed at least cost to the economy.

The Wilkins Review considered 58 active climate change programs and made recommendations as to whether or not they would complement the CPRS, should be considered as transitional programs, or did not complement the CPRS.

Through the Wilkins Review, the Government has refocussed climate change programs to ensure that existing and planned measures are appropriate once a carbon price signal was in place, and that they provide a comprehensive package to meet the Government's environmental objectives and help transition Australia to a low carbon economy.

As part of its response to the Wilkins Review, the Government will implement energy efficiency measures worth $64.68 million; and has rationalised the delivery of some existing climate change programs to ensure that programs are more effective in combating climate change. Some existing climate change programs will no longer be required once the CPRS is introduced, and in line with the recommendations of the Wilkins Review, a number of current measures will be transitioned or will cease. Many of these programs were due to lapse on 30 June 2009. The programs that will cease are:

  • Coal Mine Methane Reduction
  • Greenhouse Gas Abatement Program
  • Renewable Energy Equity Fund
  • Low Emissions Technology and Abatement
  • Greenhouse Challenge Plus9
  • Greenhouse Action in Regional Australia
  • Local Greenhouse Action9
  • Small Business and Household Action Initiative
  • Wind Energy Forecasting Capability
  • Low Emissions Technology Demonstration Fund
  • Renewable Energy Development Initiative
  • Advanced Electricity Storage Technologies
  • National Climate Change Adaptation Program

The Wilkins Review final report can be found at www.finance.gov.au and the Government's response to the Wilkins Review, including treatment of programs, at www.climatechange.gov.au.

Business, Industry and Government

Australian industry accounts for almost half of Australia's energy end use and around two thirds of stationary energy use. Australia has one of the more energy-intensive industrial sectors amongst developed countries (reflecting Australia's relatively low energy prices and high levels of energy‑intensive raw material production). There is significant potential for energy efficiency improvements both in the industrial sector and in small and medium enterprises.

As part of the $2.75 billion Climate Change Action Fund, the Government will provide assistance to business and industry to improve energy efficiency and prepare for the impacts of the CPRS (see box 4.4).

The Government will commit $26.9 million over four years to progress the 2020 Summit idea that by 2020, Australia should be the world's leading green and sustainable economy, making a major contribution to a comprehensive global response to climate change. Skills for the Carbon Challenge will drive the development and trial of qualifications and training resources that incorporate sustainability principles, green skills and responsive educational approaches in a number of key industries.

The Government will also work to improve energy efficiency and energy performance in its own operations. As outlined in 2008‑09 Additional Estimates, the Australian Government will provide funding of $1.2 million over four years to improve energy efficiency in Government workplaces. The Department of the Environment, Water, Heritage and the Arts, in partnership with the Department of Finance and Deregulation, is developing a Whole of Government Information, Communication and Technology plan. The plan will identify ways of improving environmental performance across government departments, particularly energy efficiency.

The Department of Climate Change will also renovate the 20 year-old offices it currently occupies, to reduce the average office energy load to no more than 75 per cent of its original rating and to achieve a 5-star National Australian Built Environment Rating System rating. The completed project will showcase a number of environmental initiatives as a way of encouraging the modification of existing buildings to improve energy performance.

Research and Development

The Government is investing in the development of new technologies that will be needed in the future to further reduce emissions.

The Green Car Innovation Fund ($1.3 billion over ten years from 2009, part of the $6.2 billion New Car Plan for a Greener Future) will enhance research and development and the commercialisation of Australian technologies that significantly reduce fuel consumption and/or greenhouse gas emissions of passenger motor vehicles.

The Government will also encourage innovation through the Climate Change Action Fund (see box 4.4), providing grants for low emissions technologies, process and products, and high‑energy saving projects.

Adapting to Climate Change

The Australian Government is developing a comprehensive adaptation policy to prepare Australia to deal with the social, economic and environmental risks of climate change impacts.

It is also continuing to invest in the research needed by all Australians to inform good policy making through continuing the $126 million Climate Change Adaptation Program. It has provided $20 million from existing funding to establish its National Climate Change Adaptation Program, and it is investing $30 million to fund research plans across eight priority areas.

The Government is also continuing to support the CSIRO's $44 million Climate Adaptation Flagship which is making a vital contribution to adaptation research across a range of areas, from urban coastal vulnerability to national reserves, health impacts and primary industries.

This important suite of research measures will enable Australia to adapt more effectively to the impacts of climate change and variability and informing national planning, regulation and investment decisions.

Helping Shape a Global Solution

In his address to the 13th Conference of the Parties to the Kyoto Protocol in Bali in December 2007, the Prime Minister committed Australia to contributing effectively to multilateral efforts within the United Nations and in other fora where climate change objectives were being progressed, and engaging with key countries bilaterally.

Australia's domestic climate change efforts depend for their effectiveness on strong global action to reduce emissions. Through the $12 million program, Shaping an International Solution to Climate Change, Australia will strengthen its efforts to shape and influence the international climate change agenda. Australia will meet its obligatory financial contributions as a Party to the UN Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol and the Intergovernmental Panel on Climate Change and support voluntary activities under the UNFCCC which help improve prospects for a successful outcome to the UNFCCC negotiations. The program will also deliver outcomes under the Bilateral Climate Change Partnerships Program, which builds key bilateral relationships through discrete project activities to help garner support for Australia's international climate change objectives. Formal Partnerships are in place with China, South Africa, the United Kingdom, the European Union, New Zealand, the United States and Japan.

The Government will also continue support for the global Carbon Capture and Storage Institute. Key activities include establishing the early project work of the Institute and developing a commitment to the longer term program to support fully integrated large scale CCS projects globally by 2010. Sharing the knowledge generated by the Institute's activities will be critical to enable broad deployment of CCS by 2020. This initiative will be complemented by the Government's Clean Energy Initiative investment of $2 billion in the CCS Flagships Program, playing our part in achieving the G8's target of 20 industrial-scale CCS projects operating around the world by 2020.


6 The Clean Energy Initiative has new funding of $3.465 billion, and incorporates existing programs totalling $1.025 billion.

7 Includes $26.4 million for 2009‑10 published in Department of the Environment, Water, Heritage and the Arts Portfolio Budget Statements 2008‑09 (Pg 16) that will be reflected in Budget Paper No.2 2009‑10

8 See page 32 for a breakdown of this figure by measure

9 The information provision component of these programs will continue through the Climate Change Action Fund

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