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The problem with green corporate welfare

Date

Julie Novak

 If the opponents of the first Abbott Budget genuinely care about the interests of the poor, they should offer green corporate welfare, as the first item for the chopping block, writes Julie Novak.

Corporate welfare: Solar panels at Newington - former Olympic village.

Corporate welfare: Solar panels at Newington - former Olympic village. Photo: Michele Mossop

Efforts by opponents of the first Abbott budget to protect green corporate welfare  measures  undercuts their portrayal of government policies as inherently unfair.

Over   months critics of the Abbott government have waged a highly charged publicity campaign opposing moves to consolidate a federal budget in structural deficit, and to deregulate an economy whose  potential is constricted by red tape.

The Labor opposition and the Greens have already sided   to oppose several expenditure reduction measures announced in the May budget, while the crossbench Palmer United Party has obstructed the passage of the budget through the Senate.

Reflecting a sense of community animosity against proposed spending cuts, and as a strategy to foment continuing animosity, activist groups organised by trade unions have rallied under the "Bust the Budget" banner throughout our major cities. It now seems increasingly likely that these political agitations will finally bear   fruit, no doubt bitter from the Abbott government's perspective, as senior government personnel look to negotiate concessions with crossbenchers to ensure its fiscal plan passes  the upper house.

The government's detractors appear to have reasonable claims that some of their announced measures, such as more stringent job-seeking activity tests for Newstart recipients amid a more tightly regulated labour market and persistently slow economic growth, may need amending. But when invoking the argument that government policy measures will hurt low-income earners, these groups rely upon a highly selective citation of those policy issues exerting the claimed effects. 

Strangely silent are the opposition, the Greens, most Senate crossbenchers, and the Bust the Budget crowd about how some long-standing government policies effectively serve to line the pockets of renewable energy suppliers and other crony eco-businesses, more often than not at the expense of poorer members of our community. 

Even worse, the influential Greens have long supported economically wasteful and morally dubious green corporate welfare (as reflected in spending measures, tax concessions and regulatory mandates)  as a political imperative, and have won undertakings from successive governments to implement these perverse exercises in redistribution. 

Moves by the Abbott government to abolish the Clean Energy Finance Corporation, backed by a $10 billion fund from taxpayers to bankroll renewable energies, low-emissions technology and energy efficiency ventures, has already been frustrated by opposition in the Senate.

The very mission of the CEFC is confused by statements, on the one hand that it aims to assist those projects that cannot attain finances through conventional financial channels, but on the other claiming to only finance projects that can repay investible funds and also achieve a positive rate of return. 

It is reasonable to presume that clean energy projects expected to repay borrowings and achieve a good return will be funded by banks and other financial institutions as a matter of course, thus the CEFC threatens to crowd out private financing in its quest to pick politically attractive, yet economically dubious, winners.

There is also active political resistance against the proposed abolition of the Australian Renewable Energy Agency, bankrolled by taxpayers, to the tune of $2.5 billion, in order to redistribute funds towards renewable energy project proponents and other speculative green high-rollers. 

And this is not to mention all the other expenditures littered across other federal government portfolios, unrelated to environment or industry functions, and state government green programs including solar feed-in tariffs adding about 3 per cent to the average household electricity bill. Thankfully the carbon tax is now an unwanted relic of the past, its abolition in itself the subject of drawn-out political intrigues in the Senate. But it would be a mistake to conceive of green corporate welfare as being limited to the fiscal aspects of governmental activity.

The former Howard government introduced renewable energy requirements for electricity supply in 2001, with the goal of sourcing 20 per cent of Australia's energy from renewables by 2020, including 41,000 gigawatt-hours of electricity for larger wind and solar farms and 4000 gigawatt-hours for rooftop solar installations.

Since unconventional renewable energy technologies generate electricity at costs well in excess of conventional, coal-fired generation, regulatory targets mandating that renewable energies make a greater contribution to the supply mix leads to, other things being equal, upwards pressure on electricity prices passed through to the consumer.

It is estimated that the renewable energy target, currently subject to a government review, and even speculated as a candidate for abolition, adds another 3 per cent to the average electricity bill paid by householders. 

Therefore, such green policies effectively transfer wealth from households and other consumers, including through higher electricity prices, to the big renewable industry players, all in the name of addressing climate change trends that Australian taxpayers alone cannot hope to resolve, even if they yearn to do so.

As University of Sydney academic Lynne Chester noted in a 2013 study, rising energy costs have led to low-income families forgoing basic material comforts, such as heating, and confronting other pressing hardships, a true indictment of the impact of green corporate welfare policy if there ever was one.

Randall Holcombe and Andrea Castillo, in their book Liberalism and Cronyism, explain that green-friendly policies typically serve as nothing more than old-fashioned crony capitalism dressed in the new garb of environmentalism, essentially as an appeal to current political fashion.

Environmental policies, in their words, "all share the common characteristic of putting government representatives in a position to choose the economic winners and losers.

 Modern environmental policy therefore resembles industrial policy in the sense that the government selects which firms should be favoured under the law."

Prime Minister Tony Abbott has asked Senate crossbenchers, and presumably other parties, to identify alternative savings as part of a fresh round of budget negotiations to secure some political order to fiscal proceedings. 

If the opponents of the first Abbott budget genuinely wish to see an end to political privilege, and truly care about the interests of the poor, they should offer green corporate welfare, together with all other forms of fiscal and regulatory favouritism for traditional industries, as the first item for the chopping block.

 Dr Julie Novak is Senior Fellow, Institute of Public Affairs (www.ipa.org.au

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