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The federal government has reduced funding for climate change and emission reduction measures but increased spending on LNG, gas, carbon capture and storage and clean but not green hydrogen.

According to the Institute for Energy Economics and Financial Analysis (IEEFA) the government has committed $1.3 billion to energy and emissions reduction measures in the 2022-23 budget.

However, IEEFA LNG gas analyst, Bruce Robertson, said putting these two categories together is problematic as a lot of the spending is going to high emitting energy projects.

“This funding allocation shows a strong focus on gas, carbon capture and storage (CCS), carbon capture utilisation and storage (CCUS), and hydrogen, all of which add to Australia’s emissions, it doesn’t reduce them,” he said.

“While important centres in Queensland and New South Wales are suffering flooding for the second time in a month, and it’s just over a year since the east coast of Australia was affected by extreme bushfires, the government is putting money into the very energy projects that globally have been recognised as increasing climate damaging emissions.”

The government is planning to heavily subsidise the production of blue hydrogen in the Pilbara and Darwin. Blue Hydrogen is produced from natural gas with Carbon Capture and Storage (CCS).

“This is far from reducing emissions. Blue hydrogen produces more greenhouse gases than just burning the gas according to Stanford and Cornell University scientists,” Robertson said.

“The Carbon Capture Utilisation and Storage (CCUS) proposed in the Pilbara involves pumping carbon dioxide into depleted oil and gas wells to produce more oil and gas. Hence yet more emissions.” 

At the same time climate spending in the budget dropped from $2 billion in 2021-22 to $1.9 billion in 2023-24, $1.5 billion in 2024-25 and $1.3 billion in 2025-26.

IEEFA’s electricity analyst, Johanna Bowyer, said the climate spending category in the Budget includes payments to the Clean Energy Finance Corporation (CEFC), Australian Renewable Energy Agency (ARENA) and the Clean Energy Regulator (CER). 

“So, this reduction means that payments to these entities decline over time,” she said.

The Clean Energy Regulator administers the Emissions Reduction Fund (ERF) and has recently announced that fixed delivery contract holders of carbon credits can exit their government contracts and sell into the more lucrative voluntary private market.

Voluntary buyers such as big corporates going to “net zero” can buy these certificates and surrender them, to meet their own targets, instead of the government buying and surrendering them.

“Many of the suppliers of carbon credits will be better off as they can receive higher payments for their abatement in the private market than previously expected from the government,” Bowyer said.

“The government will therefore be reducing its payments to the Clean Energy Regulator for emissions reductions due to this change. The government will also receive revenue from the fee that these contract holders must pay to exit their contracts.

“However, if voluntary emission reductions are not counted towards meeting the government emissions reduction forecast of 35 per cent as they are additional “voluntary” actions (this appears to be the case), this move then puts the government emissions reduction forecast at risk.”

 

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