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Monday, 21 November 2011
Page: 9116

Climate Change and Energy Efficiency

(Question No. 1216)

Senator Boswell asked the Minister representing the Minister for Climate Change and Energy Efficiency, upon notice, on 19 September 2011:

In regard to cost estimates of the Coalition's direct action scheme:

(1) Given that on 2 March 2011, the Minister put out a press release on cost estimates of the 'Coalition's Direct Action policy', citing analysis undertaken by the Department, is the Minister familiar with that analysis?

(2) Given that the Minister's statement claimed that the department's figures showed that the Coalition's Direct Action policy would cost more than $30 billion by 2020 rather than the claimed $10.5 billion, is the Department comfortable that the figures in its analysis are reliable?

(3) With reference to evidence given in a Senate hearing on 10 August by Treasury officials that, on Treasury advice, the Gillard Government had not prepared fiscal impact estimates of the Clean Energy Future package beyond the forward estimates (e.g. beyond 2014-15), and in particular, Ms Luise McCulloch, General Manager, Industry, Environment and Defence Division at Treasury who stated that estimates of fiscal impact beyond the forward estimates were 'unreliable' and 'misleading':

   (a) does the Department agree with Treasury that any fiscal estimate of climate policy proposals beyond 2014-15 would be 'unreliable' and 'misleading'; and

   (b) why has the Department issued cost estimates of the Coalition/Direct Action policy through to 2020 when Treasury has concluded that any fiscal estimate of climate policy proposals beyond 2014-15 would be unreliable and 'misleading'?

Senator Wong: The Minister for Climate Change and Energy Efficiency has provided the following answer to the honourable senator's question:

(1) The Minister is aware of the analysis contained in his media release of 2 March 2011.

(2) The Department considers that, based on the information available at the time, its analysis that the Coalition's Direct Action policy would be unlikely to achieve sufficient abatement to meet Australia's 2020 emissions targets remains valid. The Department's estimates of the fiscal cost of the Direct Action policy were based on the following public information sources from the Coalition and the Department:

the Coalition's Emissions Reduction Fund policy as outlined in the Coalition's Direct Action Plan;

the Coalition's policy to achieve a 5 per cent reduction in Australia's emissions as outlined in the Coalition's Direct Action Plan;

the most up-to-date emissions projections released by the Department; and

departmental analysis of the abatement potential of the Direct Action policy.

The Department's analysis of the cost of the Coalition's Direct Action policy comprised two elements: the estimated cost of the Emissions Reduction Fund and the cost of purchasing international abatement to achieve the 5 per cent reduction.

(3) (a) The Department agrees with the Treasury that longer-term fiscal costings have a lower reliability than those over the forward estimates. The Department agrees with the Treasury that the fiscal estimate of climate change policies can only be prepared to budget quality over the forward estimates period.

   (b) The Department analysed the Coalition's Direct Action policy to the year 2020 in order to determine whether the policy would deliver Australia's 2020 bipartisan greenhouse gas emissions reduction target. The Department's analysis showed that the Direct Action policy could achieve approximately 25 per cent of the required emissions reduction. In the absence of further action, the Department considered the cost of achieving the shortfall in abatement through the purchase of international carbon permits.