The future of the Clean Energy Future package

A statement of the current and future impacts of the government’s Clean Energy Future package has been released. The package is working to tackle climate change and enable Australia to play its part in reducing greenhouse gas emissions.

The government’s policy encompasses four areas: a carbon price; innovation and investment in renewable energy; encouraging energy efficiency; and creating opportunities in the land sector to cut emissions.

The carbon price commenced with a three-year fixed price from 1 July 2012 and moves to an emissions trading scheme (ETS) with a market price from 1 July 2015. The fixed price is driving investment in renewable energy sources and has reduced emissions in the National Electricity Market (NEM). It will provide stability as businesses make the transition to an ETS.

Price impacts have been modest and households have received assistance averaging $10.10 per week. Jobs and competitiveness have been protected as the most emissions-intensive, trade-exposed companies pay an effective carbon price of $1.30 a tonne, rather than $23 a tonne.

Moving to emissions trading

In 2015 Australia’s carbon price will be linked to international carbon prices through the ETS. Due to economic weakness in Europe and its carbon market, the Australian carbon price is now projected to fall from $25.40 in 2014-15 to $12.10 in 2015-16.

Taking into account revised emissions estimates, the revised permit price is estimated to reduce carbon price revenue (including both free and auctioned permits) by around $6 billion over the four years to 2015-16 compared with the 2012-13 MYEFO.

A large part of the expenditure funded by carbon price revenue is in free carbon permits. As a result, the cost to the Budget of industry assistance arrangements, such as free permits which adjust with the value of the carbon price, is expected to be $3.9 billion lower over the four years to 2015-16 compared with the 2012-13 MYEFO.

The government has made the following adjustments to clean energy and related expenditures:

• As there is no longer expected to be an additional impact from an increased carbon price from 1 July 2015, additional tax cuts will be deferred until the carbon price is estimated to be above $25.40, which is projected for 2018-19. This will save $1.5 billion over the forward estimates. The 2012-13 tax cuts will continue to meet commitments to low- and middle-income households;
• $274 million of coal industry assistance will be reduced in line with the revised price, over the forward estimates;
• $662 million of uncommitted funds for low emissions coal and carbon capture and storage will be returned to the Budget;
• Funding for the Biodiversity Fund is to be adjusted - expenditure for the program will total over $1 billion over the eight years to 2018-19;
• Adoption of new land sector accounting rules will allow the Carbon Farming Initiative Non-Kyoto Carbon Fund to be returned to the Budget, saving $235 million over the forward estimates;
• Australian Renewable Energy Agency (ARENA) funding will be extended by two years to 2021-22;
• $135 million of uncommitted funds in the Regional Structural Adjustment Assistance Program will be returned to the Budget over the forward estimates as no region has been strongly, negatively affected by the carbon price;
• $160 million of funding for the Clean Technology Programs will be brought forward to 2014-15 to provide additional support and respond to demand from Australian manufacturers;
• $98 million of uncommitted funds from the Low Carbon Communities Program will be returned to the Budget.

The government will continue to monitor the carbon price to ensure that households are adequately assisted. Should revenue be higher than anticipated when we move to an ETS, the government will also prioritise investments in land and biodiversity programs.

Carbon price is already delivering cuts to emissions

In the 10 months since Australia’s carbon price was introduced, emissions from electricity generation are decreasing, renewable energy investment is increasing and businesses are finding new ways to cut emissions and save on energy costs. Emissions from the NEM are down 7.7% in the first nine months of the carbon price - a reduction of around 10 million tonnes of pollution.

The carbon price works alongside the Renewable Energy Target (RET), ARENA and, from July this year, the Clean Energy Finance Corporation (CEFC) to ensure there is sufficient renewable energy capacity in Australia. Renewable energy generation is up almost 30% in the financial year to date.

Consumer demand for electricity is down in the NEM as businesses and households become more energy efficient and more self sufficient in energy. Supported by the RET, over one million households have installed solar panels since Labor came to office in 2007.

Local governments and community groups are being supported to make energy-efficient upgrades to council and community facilities, while the Clean Technology Investment Programs are helping businesses in manufacturing and food processing to invest in clean technologies and energy-efficient equipment.