Tony Abbott's climate policies a $40 billion budget slug, says Climate Institute

The Abbott government’s changes to existing climate change policies would cost the budget as much as $40 billion by 2020, according to the Climate Institute, and the cost will blow out even further if it weakens the renewable energy target.

The estimated costs stem in part from payments to polluters to curb greenhouse gas emissions under the government's Direct Action emissions reduction plan. This tally includes the $2.55 billion for the first four years of the Emissions Reduction Fund and an estimated $1.2 billion annually after that.

"This is a friendless piece of policy and not many people are standing up to defend it," said John Connor, chief executive of the Climate Institute.

A bigger blow to the budget, though, will come from the loss of the carbon tax revenues if, as expected, the new Senate votes to repeal it after July 1. Current laws indicate the price – now a tax but due to convert to a floating price by mid-2016 at the latest – will bring in more than $18 billion.

That combined tally, at about $24 billion, swells to more than $40 billion by 2020 if the Abbott government sticks with its plan to block the purchase of cheaper international emission reductions to meet domestic commitments, the institute said.

Both the Coalition government and the Labor opposition are committed to cutting carbon emissions by 5 per cent by 2020, although the two parties have proposed different methods to meet that target.

Mr Connor said the government has already changed its position to cut its paid parental leave package and was reportedly reviewing other policies such as fuel tax rebates for miners and farmers worth some $3 billion a year. He should the government should also change its stance of carbon pricing if it is serious about dealing with budget constraints.

"The urgency of this budget situation seems to make this [change] possible as well," Mr Connor said.

The costs of the Direct Action will balloon further if the government undermines other policies limiting carbon emissions, such as the Renewable Energy Target. The target, now set at supplying 41,000 gigawatt-hours of renewable energy by 2020, is currently being reviewed by businessman and climate change sceptic, Dick Warburton.

The current climate policies of the government are “a growing slug on taxpayers, and barely tenable now”, Mr Connor said. “If they start to weaken other measures, they’ll have to buy more” carbon abatement, he said.

Fairfax Media sought comment from Environment Minister Greg Hunt on whether the government accepted the modelling used by the Climate Institute, or could provide other figures used for the Emissions Reduction Fund white paper released last week.

“The government has a clear mandate to scrap the carbon tax and this will deliver much-needed relief to families,” a spokesman for Mr Hunt said. “Households are forecast to be around $550 a year better off, on average.”

The first four years of the Emissions Reduction Fund are fully costed and capped at $2.55 billion, he said.

“In it its first year of operation the carbon tax was a $7.6 billion hit on the economy, yet emissions fell by just 0.1 per cent,” he added.

Data from the National Greenhouse Gas Inventory, though, shows emissions from the electricity sector – the industry most directly covered by the carbon tax – fell 7.6 per cent in the first year of the carbon price, or 14.8 million tonnes.

Big increases in emissions from the coal mining and gas industries, only partially covered by the carbon tax, helped blunt gains in the electricity sector.

With Lisa Cox

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The story Tony Abbott's climate policies a $40 billion budget slug, says Climate Institute first appeared on The Sydney Morning Herald.

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