Unpacking Gillard’s green program cuts

January 31, 2011

All the focus right now is on the flood levy. Gillard’s announcement last week that for one year, Australians will pay a small amount to help fund rebuilding infrastructure in areas devastated by the recent floods is the topic of the moment.

The rural Independents want a promise of a permanent natural disaster relief fund in return for their vote. New South Wales Premier Kristina Keneally wants a special deal so her constituents pay less than the rest of the country. The Opposition is determined to vote against the levy. In an extraordinary display of patronising false humility, Opposition Leader Tony Abbott even volunteered to help Gillard find more things to cut in the budget if it was too hard for her. If his intention was to portray himself as willing to be helpful, it backfired horribly – instead, he created an impression of someone with a superiority complex patting the ‘poor little girl’ on the head. It didn’t help that, over the weekend, he said that voting on the flood levy might be the opportunity his Coalition needs to oust Labor and get back into government.

But while all this is going on, the rest of Gillard’s announced plans to pay for flood recovery are flying under the radar. There was some initial comment from the Greens and the media, but it was quickly lost in the wrangling over the levy.

So let’s have a look at what else is part of this flood recovery package.

Funds will be redirected from infrastructure projects. In her address to the National Press Club, Gillard indicated six roads projects in Queensland would be delayed by one to three years, providing $325 million. Premier Anna Bligh endorsed these delays the same day as they were announced.

Gillard said she would announced a further $675 million, sourced from delays to existing projects, in the coming days.
She also announced caps on a series of programs, including the National Rental Affordability Scheme and the LPG Vehicle Scheme. In education, the Capital Development Pool and the Australian Learning and Teaching Council will be discontinued. Some existing programs – the Building Better Regional Cities and Priority Regional Infrastructure Program – will have their funds redirected to rebuilding flood-damaged infrastructure.

There’s been little, if any comment on this.

It’s the third part of the package, though, that has the Greens in particular hopping mad.

A whole suite of so-called ‘green’ programs are to be either scrapped, deferred or capped.

The Cleaner Car Rebate Scheme (dubbed ‘cash for clunkers’ by the media), Green Car Innovation Fund and the Green Start Fund will be scrapped.

The Solar Hot Water Rebate, Global Carbon Capture and Storage Institute and Solar Homes and Communities Plan will all have their funding capped. She explained that for some programs, the ‘cap’ was actually a reduction in the total funds available, as demand had not been as high as anticipated.

Finally, the Carbon Capture and Storage Flagships and Solar Flagships programs will be deferred.

It would be fair to say that much of Australia did a double-take when they heard this announcement. Although there is by no means ‘complete consensus’ on the effect of climate change on extreme weather, it’s safe to say the majority of people favour ‘greening up’, if only to reduce the country’s dependence on oil and tackle pollution. Add to that the facts that securing the Greens’ support was vital for Labor to form government, that the Greens will soon hold the balance of power in the Senate and look to be significant players in the upcoming New South Wales election – and Labor’s plan looks like political suicide.

At the very least, it seems to make no sense at all. Labor’s tried to position itself as serious about tackling climate change. Gillard’s rhetoric on the subject of a carbon price has an unmistakable ‘line-in-the-sand’ quality, and she has shown every sign of being willing to do whatever it takes to bring that about. Why, then, would she slash funds from programs linked to one of Labor’s avowed policy pillars??

The clue is in Gillard’s speech:

‘The key to these carbon abatement program savings is my determination to deliver a carbon price.’

All other initiatives, she asserted, flow from the establishment of a price on carbon. Indeed, the pressure of increased carbon costs practically guarantees investment in renewable energy.

Politically, this is a clear attempt to wedge the Greens. If they want programs to tackle climate change, they’ll need to support Labor’s eventual plan for a carbon price. It’s an incredibly risky move. Labor has to walk a fine line here to avoid alienating the Greens entirely, which could see us right back where we were under Kevin Rudd – with a hostile Senate pressuring the government from both the right and left.

Last time that happened, it brought down the Prime Minister. That Labor is willing to take that chance again may be a sign of Gillard’s confidence in her ability to sell something unpopular – or it may be a giant bluff.

This strategy may not have a formal name, but it’s familiar. It’s called ‘putting all your eggs in one basket’.

But politics aside, what are the practical consequences of the proposed cuts to these green programs?

By not going ahead with the Cleaner Cars Rebate, the government rids itself of a program that was unpopular from the start. Both the Opposition and the Greens rubbished the proposal, which would see car buyers given a modest rebate when they traded in old cars for newer, greener models. A similar program in the US suffered cost blowouts, and was widely seen to have done little to encourage drivers to choose energy-efficient vehicles. Although this program was part of Labor’s election promises, breaking it is unlikely to attract much criticism – especially given where the money will go.

And here’s a curious thing about that money – it was sourced, originally, from programs that included Solar Flagships and Carbon Capture and Storage. Both these programs are now slated for deferment as part of the flood recovery package.

Solar Flagships was scheduled to fund two large-scale solar power stations in 2011. This will now be delayed. Gillard has not said for how long, but confirmed that the project was not scrapped. The effect of the delay is difficult to calculate; it’s unknown how much time it would take to build the stations and get them connected to the national grid. Clearly, any further dependence on coal-fired power than is necessary presents a problem, however.

Carbon capture and storage (CCS) is an initiative fraught with problems. Apart from being a technology which seems increasingly unviable, with limited – if any – application in Australia, there are now indications that existing installations are now leaking dangerously. Greens Senator Christine Milne noted back in 2008 that the problems with CCS could lead to increased costs for Australian taxpayers, since the government would be liable for any leaks.

Deferring funding to the Carbon Capture and Storage Institute gives the government a bet each way. If the technology does indeed prove unviable, there can be no claims of waste. If, on the other hand, the Institute starts making real headway with CCS, the government can re-allocate funding in the future. Either way, there are few practical problems associated with re-directing money from this program to flood recovery.

The Green Start program is another millstone around Labor’s neck. Set up to replace their failed Green Loans program, Green Start had already been largely scrapped over a month ago. Gillard’s announcement at the Press Club was really only the final nail in the coffin. Funding was set aside to compensate businesses who might be adversely affected by the closure of Rounds 1 and 2. What little remains will now go towards flood recovery.

The Green Cars Innovation program has had real problems. Widely seen as supporting the automotive industry at the expense of ‘real’ action on climate change, money already granted to companies has seen little in the way of results so far. Of only four cars supposed to be manufactured with the help of the program, only one (the hybrid Toyota Camry) is on the road. The others are due to roll out some time this year. The program has already had its funding lowered due to lower than expected demand, and came in for serious criticism from the Greens.

The capped programs, whose funding pools are to be reduced guided by lack of demand, are still in place. Expected uptake for the Solar Hot Water and Homes and Communities plans did not eventuate. It’s arguable that demand may increase, especially in the areas affected by floods. As things stand, however, the money is unspent and some is able to be re-directed. Unless installation of solar hot water skyrockets in the near future, there will still be rebates available. The government also leaves the way open for raising the ceiling at a later date if demand does increase.

So these cuts to green programs boil down to scrapping two programs that was unlikely to have much beneficial effect on emissions, scrapping another that would have closed down in a month’s time, lowering the ceiling on programs whose uptake was lower than expected, and deferring funding for an initiative fraught with technological problems. As noted above, the effect of deferring Solar Flagships is unknown.

Other ‘green’ programs remain in place. These include school solar funding, the Renewable Energy Venture fund, money for getting renewable power generators connected to the grid, tax deductions for business that improve their energy efficiency rating, new mandatory standards for vehicle emissions and power stations, and a substantial Green Building fund.

Whatever the real situation as regards these proposed program cuts and caps, the problem is that they look bad. The government needs to do a lot more to sell this part of its flood recovery package to parliament and the public alike. They could do worse than start by giving people the information they need to truly assess the effect of these changes.

But then again, asking a government to treat its people as intelligent human beings with a right to know the facts of any given situation has always been a big ask. And we’re all culpable in this – we’ve let our elected representatives get away for too long with giving us only half the facts. This needs to change – and this is as good an opportunity as the current government is ever likely to get.


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