Wed Oct 26

Labor's 'sensible' budget leaves Australians short-changed on climate action. Here's where it went wrong

Written by Timothy Neal, Senior research fellow in the Department of Economics, UNSW Sydney

Treasurer Jim Chalmers last night delivered a budget he declared was “solid, sensible and suitable to the times”. But what does a sensible budget look like in a world that is fast running out of time on climate change?

Lowy Institute polling ^[1] this year suggests most Australians believe immediate and substantial action on climate change is eminently sensible. Some 60% agreed global warming was a serious and pressing problem for which “we should begin taking steps now even if this involves significant costs”. A further 29% want mitigation to occur gradually.

Chalmers unveiled his budget in a precarious economic environment and amid fears of a looming global recession. But while the national conversation is focused on short-term economic pressures, the world is entering unprecedented territory ^[2] of climate disruption.

This federal budget was Labor’s first opportunity to establish its economic vision for emissions reduction. Even as Chalmers prepared his speech ^[3], parts of Australia’s east coast were battling floods, and the summer rain outlook looks grim ^[4].

The budget earmarked a suite of worthwhile climate-related measures, but many are relatively piecemeal. As extreme weather events occur at a record-breaking frequency and severity, federal spending on climate action still falls well short.

The budget was Labor’s first opportunity to establish its economic vision for emissions reduction. Lukas Coch/AAP

Where’s the tangible action?

Over the past few months, Labor has generated significant headlines on climate change.

It’s Climate Change Bill ^[5] passed parliament last month. It means Australia’s greenhouse gas emissions must fall by 43% (relative to 2005 levels) by 2030, and emissions must reach net-zero by 2050.

Labor on Sunday also announced Australia will sign a global pledge ^[6] to reduce methane emissions by 30% by 2030.

But setting these targets is just the first step. Limiting climate change to 1.5℃ degrees – the goal of the Paris Agreement – requires immediately reversing the upward trend in global emissions and making significant cuts over the next two decades. That means tangible actions must occur right now.

But looking at the budget papers released last night, it’s hard to see how Australia’s climate targets will be met.

What’s in the budget for climate?

Most budget measures related to climate change and the environment formed part of Labor’s pre-election platform. They include ^[7]:

A$224 million over four years to fund 400 community batteries, and $100 million for community solar banks
the Rewiring the Nation plan: $20 billion of low-cost finance to improve Australia’s transmission network, and new investments in renewable electricity generation which aren’t yet detailed

Labor’s $20 billion Rewiring the Nation plan will improve Australia’s transmission network. Lukas Coach/AAP

Also worth noting are measures to mitigate the future impact of climate change:

the Disaster Ready Fund to support adaptation measures such as flood levees, sea walls, fire breaks and evacuation centres
$225 million over four years to implement the Threatened Species Action Plan and funding to establish Indigenous Protection Areas and protect heritage places
increased funding to preserve and restore the Great Barrier Reef.

These initiatives are, in part, funded by a $747 million reduction ^[9] in environment spending over the next four years. The cancelled spending includes projects for gas and carbon capture and storage, funding earmarked for the Murray Darling Basin, and other Morrison government measures.

The budget also contained subsidies and infrastructure investment to support the uptake of electric vehicles. This includes 117 electric vehicle charging stations on highways, exempting electric cars from the fringe benefits tax and removing custom duties on electric car imports.

Electric cars will reduce Australia’s dependence ^[10] on international oil markets made volatile by Russia’s invasion of Ukraine.

But whether electric cars significantly reduce Australia’s transport emissions depends on the extent ^[11] to which renewables power the electricity grid. Until coal and gas are phased out, many electric cars in Australia will be powered by fossil fuels.

The budget contained support for the uptake of electric vehicles. Lukas Coch/AAP

Is it enough? No

Chalmers said the budget drives investment in renewable energy and delivers thousands of new jobs. But what’s lacking are mechanisms that encourage or compel companies to reduce their emissions in line with nationally legislated targets.

Of course, it’s hardly the present government’s fault that such mechanisms are not in place. The former Coalition government’s decision to axe ^[12] Labor’s carbon price left a gaping policy hole that put Australia at the back of the global pack on climate action.

The initiatives outlined in this budget should be applauded. But many Australians who voted for Labor, the Greens or the Teal independents wanted significant action on climate change – and they’re still waiting.

So what climate measures should the government be taking?

Many of the policies at its disposal would require new legislation and would not necessarily appear in the budget. They include ending logging of old-growth forest to reduce forestry emissions, and changes to the safeguard mechanism.

The government has flagged reforms ^[13] to this policy, a legacy of the previous government that purports to set limits on emissions from big industrial polluters.

Given a price on carbon is politically challenging in Australia, the safeguard mechanism appears the most likely means through which industrial emissions reductions will be curbed.

The budget is likely to disappoint those wanting drastic action on climate change, including those who voted for independent Teal candidates. Mark Baker/AAP

Hopefully other initiatives appear in future budgets, in good haste. They should include:

larger capital investments in renewable electricity generation and battery storage
a very significant funding boost for science and engineering research to produce further technological breakthroughs in low-carbon manufacturing and green steel production
electric vehicle charging stations powered by 100% renewable energy in every city and major highway
taxes on the worst climate offenders such as the beef ^[15] and dairy industries and other sources of methane emissions.

And then we come to the elephant in the room: the emissions created when Australia exports fossil fuels to countries where it’s burned for energy.

Domestically, Australia is responsible for about 1.5% of global emissions. But factor in our fossil fuel exports and that rises to about 5% – and may jump to ^[16] up to 12% by 2030.

So perhaps the most significant decisions Labor will make for the climate change aren’t budget initiatives at all – but rather, what fossil fuel exploitation the government allows in coming years.

Let’s get started

This budget included ^[17], for the first time, a statement on the fiscal impact of climate change.

It outlined the damage climate change can cause to government budgets including the cost of “responding to extreme weather events, which are likely to increase in severity and frequency”.

One thing is clear: Australia must reduce its greenhouse gas emissions and transition away from its reliance on fossil fuel exports. It’s in the nation’s best economic interests – and there’s no better time than now to begin this work in earnest.