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Lack of climate policy in Budget leaves economy open to shock

Posted on May 8, 2016

Climate funding cuts and uncertainties dominate in a Budget that ignores the fact that if we do not invest in strong, effective action to reduce emissions now, it will simply cost us much more in the not too distant future. The consequences of ongoing failure to tackle climate change will be escalating energy, unemployment and other economic costs over the next few decades.

There is no extra funding for the government’s current principal policy tool the $2.55 billion Emission Reduction Fund now likely to be expended by the end of 2016 well before the policy review in 2017, threatening jobs and growth in the carbon farming and other emission reduction industries.

Support for climate adaptation research is to be slashed with no new money for CSIRO or the Bureau of Meteorology (BoM) to fully redress CSIRO climate impact research cuts with further uncertainty about BoM’s water forecasting capacity. Droughts, bushfires and the bleaching of the Great Barrier Reef are already major threats to jobs and growth, and weakening our knowledge base means we risk facing these threats blindfolded.

Taking action to achieve the bipartisan, business, investor and internationally backed Paris pollution goals will, out of necessity, be taken seriously in the near future and the lack of action under this Budget boosts the risks of a hard economic landing. Our emissions are going up, not down, and our clean energy industry is stalling, despite renewable energy growth globally outpacing investment in fossil fuelled electricity.

Since 2014 emissions from the electricity sector have rebounded by 5.5 per cent and the government’s own data is projecting annual national greenhouse gas emissions to rise almost 30 million tonnes by 2020*. Analysts from Bloomberg to BIS Shrapnel highlight Australia’s stalling renewable energy investment.

We need to stop kicking the climate and clean energy can down the road and face up to the fact that the electricity sector in particular needs to be modernised and decarbonised.

The Budget also contains no sign of extra climate finance commitments necessary to do our bit in assisting developing countries boost climate resilience and clean energy. We should be scaling up from the current $200 million annually to $1.5 billion by 2020 to help meet commitments made in Paris last year.

The ups, downs and uncertainties of the annual Budget process highlights why broader, sustained regulatory and/or market mechanism approaches are more appropriate. A coherent plan for climate and clean energy needs to include a plan to replace coal burning power with clean energy, risk reduction for clean energy, and penalty or price signals to large polluters to clean up their business.

Without a plan to end climate pollution with net zero emissions by 2050 the government doesn’t have a plan for the future let alone a plan for climate change. This Budget of delay is piling up the risks of shocks to electricity prices, energy security and the jobs that depend on both.

John Connor is chief executive officer of the Climate Institute.

*Latest March 16 National Update, national emissions in Sept 15 just under 550 million tonnes. April 16Tracking to 2020 estimates 577M tonne emissions in 2020. Electricity data from March 2016 Pitt & Sherry Carbon Emissions Index