What does the Budget 2013 mean for the Environment?

Key interest of the week in Australia is the 2013 Federal Budget. There are many aspects of life affected by the annual budgeting ritual: health, education, employment, and … the environment. It is interesting how the Environment gets so little attention on the Budget night. The same is also true on the Election Day, a phenomenon known as ‘lack of saliency’. People seem to talk a lot about the Environment and seem to genuinely care, but when it comes to ‘serious’ things in life, like the Budget or the Election, the Environment does not get very high priority.
So, what is the verdict for the Environment in the 2013 Budget? The news is actually not bad at all. A nice summary of the Budget items relevant to environmental issues is provided by EnviroInfo.
The main points are that many of the subsidies and compensations to C02 emitters are scrapped. This is a welcome development, given that those subsidies and compensations were in their own right a distorting element in the whole concept of Carbon price. So, not only will scrapping those fill in few gaps in the Budget, it will also remove perverse incentives that subsidies carry along. All good there.
Further, there is a mention of what seems to be a very marginal adjustment to the Biodiversity fund, which will not change substantially the operation of this program.
On the agriculture side of things, there seem to be an enhancement of the Carbon Farming Futures Program. This is good news in its own right, but the success of this program is somewhat in doubt if judged by some of the interesting stories around funding decisions under the Filling the Research Gap initiative of the program.
Finally, funding to the tune of $1.8 billion over 10 years from 2014-2015 is committed to environmental water requirements in the Murray Darling basin. It seems that majority of this funding is going to be devoted to technical projects aimed at improving irrigation efficiency, which is really a form of a subsidy to the irrigation industry. It would have been better to devote more funding to the Commonwealth Environmental Water Holder for the purpose of buying-back entitlements. The announced additional $10 million that are going to be devoted to research about how to best use environmental water holdings just strengthens the case for more buy-backs.
Overall, the 2013 Budget is not bad when it comes to the Environment. Most of the announced changes make good sense, and will eliminate some unjustified subsidies to polluters. There are no new big environmental initiatives, so after all it is perhaps not overly surprising that the Environment has not featured prominently in the media coverage of the Budget.

Author: Tiho Ancev

Tiho Ancev is a Professor of Agricultural and Resource Economics in the School of Economics, University of Sydney. His main research areas are agricultural, environmental, natural resource and energy economics. Tiho’s main contributions have been in water economics and policy, economics of energy, economics of air pollution and climate change policies, and economics of precision agriculture and agricultural input use. He has published widely on these topics in top international peer reviewed journals. Tiho has led and contributed to national and international research projects in these research areas. He is currently the Managing Editor-in-Chief of the Australian Journal of Agricultural and Resource Economics.