More hot air on climate – and we’re not just talking about hydrogen

Looking through this year’s budget papers, some of the big-ticket line items sound impressive—a $2 billion Hydrogen Headstart program, $1.3 billion for a Household Energy Upgrade Fund and $300 million for the Small Business Energy Incentive—but, perhaps unsurprisingly, when they’re examined more closely none of these initiatives are as impressive as they sound.

The Hydrogen Headstart funding, for example, will come from money that is held in what is called the ‘Contingency Reserve’. The use of this mechanism is very unusual. It means that the Government will only spend the money if a project looks viable. Actual spending on the initiative will be under $200 million over four years. And that’s before you get to whether Australia’s long-promised hydrogen industry is even viable – regardless of whether it’s built on gas or renewable energy.

The Household Energy Upgrade Fund relies on the off-budget Clean Energy Finance Corporation (CEFC) to facilitate private sector loans for upgrades. That means it’s not directly funded, but will instead depend on a fairly elaborate mechanism involving loans, intermediaries and the private sector to achieve the outcome. Interestingly, it looks like the CEFC is going to make money from the scheme. In fact, the Budget Measures show that the CEFC will actually pay the Government around $61 million from the policy!

In a climate emergency – during what the United Nations calls the critical decade – it would seem wise to spend up big on energy efficiency, and not just help the private sector invest in projects that will generate a high rate of return. No one expects our expenditure on submarines to repay their cost, with interest.

Of the $1.3 billion in the Household Energy Upgrade Fund, $300 million does actually look like it will be spent in the future to upgrade energy efficiency in social housing. Not bad, but not big, especially as that money is also held in the contingency reserve mentioned above, and is spread out over four years.

There are a number of other smaller line items strewn through the budget papers that fall under what the government defines as ‘Key climate-related spending measures’. This assortment of small measures sounds appealing, but they are largely a distraction from the fact that there is actually nothing substantive in the budget for climate, energy efficiency or decarbonisation.

Altogether, the Government has put $4.5 billion under the ‘climate spending’ heading.  But that $4.5 billion includes the $2 billion for Hydrogen Headstart (which in reality is only $200 million) and the $1 billion Household Energy Upgrade Fund loan to the CEFC. If you remove those measures, what the government calls new ‘climate spending’ is really only about $1.5 billion.

That’s not much of an investment when you consider that, in the same budget, the total increase in fossil fuel subsidies under the Fuel Tax Credits is $3.8 billion over four years. This is despite Minister Bowen’s regular reminders that when it comes to climate ‘we now don’t have a second to waste’.

‘Green Wall Street’ won’t save the Environment

Things don’t look vastly different when it comes to spending on environment and biodiversity, despite Minister for the Environment and Water, Tanya Plibersek, announcing that there is “Lots in the Budget for the environment”.

Bear in mind that conservative estimates put the amount of money required to protect and restore Australia’s rapidly collapsing ecosystems at around $2 billion a year. But the Government’s ‘Nature Positive Plan’, Australia’s flagship environment policy, has been allocated just $214 million over the next five years, or about $40 million per year! $121 million of this has been set aside to establish ‘Environment Protection Australia’, an independent agency to enforce environmental laws. Another $51.5 million is for the establishment of ‘Environment Information Australia’, which aims to be a central, authoritative source of environmental information. There is also $34 million over two years for legislative reforms and the implementation of national environment standards. These are welcome, though wholly inadequate steps towards restoring public trust in the government’s ability to manage Australia’s unique environments.

Funding for the Nature Positive Plan includes $7.7 million in 2023-24 to develop methods and rules for the Government’s forthcoming ‘Nature Repair Market’, a national biodiversity market that Minister Plibersek has described as ‘Green Wall Street’. The details around the Nature Repair Market are still vague, but the Government has indicated that it expects trading to begin in 2024. Given the widescale and manifest integrity issues with Australia’s carbon credit scheme (a scheme that has had millions spent on it over almost a decade), it seems unlikely that this spending measure will be adequate, and even less likely that whatever trading unit the government plans on conjuring up will be ready or fit for purpose in time.

While the money allocated to the Nature Positive Plan is new, other line items in the budget are simply a reallocation of existing funding rebranded as ‘environment’. This includes $341.2 million over five years for the protection of nature, threatened species and habitats, including for the BushBlitz species discovery program, conservation and restoration activities, and natural resource management partnerships. There’s also around $100 million for the protection of Australia’s world heritage sites.

As we are constantly told by all sides of government, budgets are about priorities. Even former Australian Treasurer, Josh Frydenberg, noted that “everything is affordable if it’s a priority”. It would appear from this week’s budget that climate and biodiversity are low down the list of this government’s concerns.

A word on ‘Classification’

If the government wants to prove it is serious about climate and biodiversity, a good start would be to make structural changes to the way we officially view and ‘classify’ our economy.

The Australian Government lists expenditure according to something called ‘functional classification’ – this sounds dry, but it gives an indication of the general purpose of the funds. There are 11 major functions, including things like ‘health’, ‘fuel and energy’ and ‘recreation and culture’. Neither climate or the environment are included.

How can either be taken seriously if they do not have their own budget classification? It would be easy enough for the government to create a new functional classification for climate and biodiversity, and this could happen in next year’s budget.