The Oil Drum: Australia/New Zealand

Budget Update 2

Posted by Big Gav on May 15, 2008 - 7:27am in The Oil Drum: Australia/New Zealand

Now everyone has digested the budget fully there are a few late pieces of commentary I thought worth highlighting.

First off is Kenneth Davidson in The Age, who rightfully notes that in an era of soaring oil prices, encouraging people to drive around (a lot) in a company car isn't a wise use of tax dollars.

In an era of peak oil, when oil prices have broken through the $120-a-barrel barrier and are heading for $200, it is crazy to encourage car dependence through tax concessions on company car use, costing $1.5 billion this year. Given the extent of the problem, the statement on the environment and water is pathetic. The new money allocated this financial year - just over $100 million, rising to $200 million next financial year - amounts to a flea bite compared to the more than $2 billion allocated to the highly profitable fossil fuel industry; and it dwarfs the assistance to renewable energy.

The long term "Water for the Future Fund" seems designed mainly to subsidise state desalination plants even though they will be an economic and environmental disaster and could be made redundant with serious commitment to recycling, stormwater harvesting and dams.

Crikey has a column from Greens Senator Christine Milne slamming the effective demolition of the solar PV industry courtesy of Rudd and Swan's decision to means test solar panel installation. She even compares them unfavourably to Howard and Costello !

Tuesday night’s Budget was a slap in the face for all those Australians who voted for the Labor Party at the last election in the belief that a new government would be willing and able to make Australia a true global climate leader.

From the day he took leadership of the Labor Party, Kevin Rudd worked hard to present himself in contradistinction to John Howard on climate change. Climate was, more than anything else, supposed to be symbolic of the generational change from Howard to Rudd. My warnings at the time, that the Rudd Opposition had not fully digested the science, did not understand what was required, and was not offering well-thought out policy alternatives, did not fit into that narrative and were largely ignored. Hate to say it, but ...

The first Rudd-Swan Budget was qualitatively barely different on climate change from the last Howard-Costello Budget. Investment was not substantially increased, nor was it reprioritised. If anything, it was shifted further into the future and skewed more towards coal and away from renewables. We still have tokenistic, ad hoc gestures dressed up for press releases and photo opportunities rather than a comprehensive, prioritised effort at rebuilding Australia for the post-carbon economy.

Howard and Costello scraped through last November, we would have had an emissions trading scheme, a significantly higher renewable energy target and continued minimal and piecemeal Budget investment in renewables, efficiency and mass transit. Spot the difference.

The Government is already scrambling to fix up one mistake: the allocation of absolutely no funds to the renewable energy commercialisation program until 2009-10. When so many renewables technologies are ready for that funding, the proposed patch-up job of funding geothermal drilling is a band-aid when a complete rethink is needed. What’s more, the proposed solution is robbing Peter to pay Paul, taking funds from R&D for solar energy storage rather than from the coal corporations’ overflowing coffers.

A second clanger is gaining momentum: the ludicrous decision to means test the rooftop solar panel rebate. While means testing is generally policy that we Greens support and advocate, applying it to a policy geared at bringing down the price of what is currently the Rolls Royce of renewables is either an utter failure to think or a deliberate move to undermine the industry. What family on less than $100,000 will spend $20,000 on solar panels? The move has already sent shockwaves across the country, with speculation that the installation and manufacturing industries could collapse, along with the Solar Cities program and other so-called government priorities.

Kevin Rudd has called climate change the greatest moral, economic and environmental challenge of our time and a top priority for his government. This is reflected in his first Budget by giving it one fortieth of the funding allocated to Defence. Defence’s $100 billion over the next four years stands in stark contrast to the $2.3 billion for climate change over that time.

In the next decade, Defence will get over a quarter of a trillion taxpayer dollars. Let’s just imagine for a moment where that kind of prioritising could take Australia’s climate change effort.

Within the decade, we could retrofit the whole nation for energy efficiency, replace all existing generation capacity with renewables, with solar thermal and bioenergy providing baseload, compensate existing generators, stop all logging of our native forest carbon stores, set up Just Transitions retraining programs for all workers affected by those transitions, move towards an electrified vehicle fleet and begin the re-design of our cities for sustainability with mass transit and cycleways.

And finally, the government's decision to include condensate in the oil production excise (provoking yesterday's dummy spit from Don Voelte, but a much more muted reaction from the APPEA) has been a little more clouded by hints that they may well give the money back via incentives for GTL production (and other LNG projects) - one of energy minister Ferguson's pet schemes for achieving energy independence.

THE $2.5 billion saved in the budget by cancelling a tax break for the North West Shelf gas project could be offset by another round of government tax breaks or assistance for new "nation-building" multi-billion-dollar gas projects, Resources Minister Martin Ferguson has indicated.

A spokeswoman for Mr Ferguson said the Government's planned review of taxation would look at why multi-billion-dollar gas ventures such as the Chevron-led Gorgon project and Woodside's Browse fields and Sunrise fields in the Timor Sea were "struggling to get off the ground". "The tax incentive removed on Tuesday was put in place to get the original investment in the North West Shelf project 25 years ago," she said. "Now we need a policy framework to get the next generation of LNG projects off the ground and we need policy frameworks to encourage the development of gas to liquids."

Budget Update 2

PDF version

11 comments

Matt on May 15, 2008 - 8:30am Permalink | Comments top

The Government is already scrambling to fix up one mistake: the allocation of absolutely no funds to the renewable energy commercialisation program until 2009-10.

And when will they fix up the 1st cardinal sin they have committed: Peter Garrett's approval of a new coal terminal in Gladstone, 1 DAY AFTER THE SUMMIT 2020!!!

For those who don't believe it, here is the link:
http://www.news.com.au/couriermail/story/0,23739,23574040-3102,00.html

ONE of Australia's largest coal terminals has been approved for central Queensland.

Federal Environment Minister Peter Garrett has signed off on the environmental impact study for Wiggins Island Coal Terminal, an expansion of Gladstone port's coal terminal.

25 million tons of coal => 2.4 x 25 = 60 million tons of CO2 pa. On the fastest way to a different planet Earth. Peter Garrett himself quoted this from NASA climatologist James Hansen during an NSW election ralley in Surrey Hills in early 2007.

More disastrous cyclones in Bangladesh and Burma.
Hansen:

"Contrary to lethargic ice sheet models, real world data suggest substantial ice sheet and sea level change in centuries, not millennia. The century time scale offers little consolation to coastal dwellers, because they will be faced with irregular incursions associated with storms and with continually rebuilding above a transient water level"

http://www.columbia.edu/~jeh1/2006/NewSchool_20060210.pdf

http://news.nationalgeographic.com/news/2008/05/images/080508-cyclone-pi...

DRAGONDONK on May 16, 2008 - 3:15am Permalink | Parent | Comments top

Peter Garrett's approval of a new coal terminal in Gladstone, 1 DAY AFTER THE SUMMIT 2020!!!

My prediction is that Garrett will quit as Environment Minister, and possibly the ALP, sometime late next year, citing a complete lack of committment by the party to tackling climate change, and other environemtnal issues. He will be particularly scathing about the Prime Minister's interference in his portfolio and being unable to exert any influence on environment policy and simply being directed to approve things that his inner greenie is going apeshit over. I'm sure he must have a purging bucket in his office which he can vent into after each of these approvals and the assocaited press conferences his is forced to give.

Bellistner on May 17, 2008 - 6:45pm Permalink | Parent | Comments top

Garrett sold his soul the moment he joined any of the Big Three. I had little time for him beforehand, and absolutely none afterwards.

Phil Hart on May 16, 2008 - 1:38am Permalink | Comments top

I was a bit slow getting my comment in yesterday.. so here it is again..

The company Beyond Building Energy had developed a great supply chain and business model around the Government rebate. Their future must now be in doubt.

They approached reasonably wealthy suburbs and got 50 households in a small area to sign-up to solar panel installation, which enabled them to dramatically reduce the costs of delivering materials and installation.

I'm not going to lose any sleep over the Government cutting the tax exemption on condensate for the oil and gas companies, despite their justified annoyance at not being given any warning. But start-up businesses must have confidence that financial support is not going to be removed leaving them high and dry. We've shafted different segments of the renewable energy industry several times in this country already - there's no worse way to hinder developing industries than to keep changing the rules.

Let's have a proper bloody renewable feed-in tariff with some certainty that it's in for the long haul and then see what happens. Seems to be working pretty well in Germany.

DRAGONDONK on May 16, 2008 - 3:20am Permalink | Parent | Comments top

More examples of Chairman Rudd trying to out ideologise the bastards he replaced. Keep the markets happy at all costs seems to be the governments priority while patting the masses on the head.

Don't know about anyone else but as a thinking person I'm starting to wonder if my vote was well placed last November?

Big Gav on May 16, 2008 - 7:03am Permalink | Parent | Comments top

At the moment the only thing I'm happy about with Rudd is that he is getting out of Iraq.

Everything else seems to be no improvement on Johnny and co (who deserved to be booted out regardless) - they've even mandated internet filtering I think, which is about the worst sin any government could commit under my personal value system.

As I voted for the Greens I don't feel any personal sense of responsibility - a protest vote is the highest moral ground of all.

I'm hoping Malcolm T will sense where the wind is blowing long term and position himself as a blue-green liberal rather than competing with labor for the greenhouse mafia's affections - then I might go back to my old voting patterns...

Big Gav on May 16, 2008 - 9:17am Permalink | Comments top

Disgruntlement about the solar rebate has built up a head of steam - The Age has a typical story - "Anger as shadow falls on solar rebate".

Robert Merkel at Larvatus Prodeo has a contrary view, pointing out that piecemeal subsidies for solar panels is a very expensive way of achieving the desired outcome (of building out large scale clean energy infrastructure) - "Killing solar PV softly".

As discussed on a couple of previous LP threads, the rebate, while great for the beneficiaries, is in my opinion woeful public policy. To summarise, solar cells are currently way more expensive than just about any other renewable option, including wind, utility-scale solar thermal and CSP, small-scale hydropower, biomass, possibly geothermal and especially energy efficiency - you name it, it’s better value. But even if you specifically want to subsidise solar panels on roofs, it’s dumb policy, because it encourages them on the wrong roofs. For the same amount of money, you can put a lot more solar panels (and the extra support gear required) on the roofs of factories, schools, and offices, and generate a lot more power, than you can with domestic-size installations. Furthermore, if you look at what other forms of generation rooftop solar is likely to displace, it’s not coal or gas. It’s those other, arguably more promising, forms of renewable generation, because of the vagaries of the real, substantial incentive in place for renewable energy, the Mandatory Renewable Energy Target.

Whether you personally agree with that or not, it seems that there are plenty in the government who do, and decided they’d like to spike the program. But - as any thread on the topic at LP reveals - there are plenty of people who like solar energy, and like the idea of incentives to see it deployed on rooftops. So how to square the desire to stop this perceived waste of resources, with the desire not to have the supporters of solar panels - many of whom inhabit the political territory between Labor and the Greens - get too publicly upset?

Simple. You look around at who’s claiming the rebate, and you find out that most of them are reasonably well-off types. Who else can afford to blow upwards of three and a half thousand dollars on something that, even with the rebate, takes forever to pay for itself? And, then, you note that a bunch of welfare benefits have just had a means test slapped on them. Put two and two together…and put a means test on the rebate. And, surprise surprise, the market for solar systems disappears overnight, according to the linked Age story ...

But it’s very hard for the rooftop solar industry’s natural friends to make a case against means testing. Christine Milne tries valiantly on Greensblog, but the subtleties of the argument - that in this particular case the long-term environmental benefits of middle-class welfare outweigh the ick factor of giving the already wealthy government rebates - are difficult to make. And, I suspect, the government will get away with killing the grid-connected solar industry without provoking a backlash outside a relatively small group of people.

commuter on May 16, 2008 - 3:56pm Permalink | Parent | Comments top

Robert Merkel's take on things is less than helpful, though it probably does describe some of the government's thinking.

The problem is that it implies that the only way other "better" renewable energy can be funded is to remove the funding from "inefficient" solar PV. What a load of crock. How many billions are going to the coal industry and on new road construction again? How much money did they allocate to these new renewables instead of solar PV? Riiiight.

I think its pretty clear where this government's priorities lie - in supporting their mates in the fossil fuel industry while paying token lip service to anything else.

Big Gav on May 16, 2008 - 10:37pm Permalink | Parent | Comments top

True.

I would agree with this reasoning if we didn't spend billions subsidising fossil fuel industries.

If they remove all that expenditure and tax breaks, I'd support means tested PV subsidies (as long as the MRET was raised to a reasonable level).

SP on May 16, 2008 - 11:29am Permalink | Comments top

We don't means test seat belts!

IE If it's a good idea it's a good idea. This crap "equitability" argument as put forward by Minister Short Memory... what was the quote in The Age "target the people who need it"... is risible.

Hello?! The "Minister" for the Environment has forgotten his portfolio. Is "idiot" too harsh or too kind?

Bellistner on May 17, 2008 - 6:52pm Permalink | Comments top

The more I read about the environmental aspects of this budget, the more angry I get. I expected this kind of [Expletive deleted by Government Filtering System] from the previous bunch of Coal Jockeys.

I didn't vote for any major party, so i'm not responsible, but I'm still angry as hell. I already had a number of 'irons in the fire' I was procrastinating on, but now they're moving into top gear.

One of those irons is: Who wants to start a Green Power Co-Operative?