The Sustainable Urbanist: Cutting Polluter Subsides the Key to Budget Surplus?

Environmental groups are calling on Treasurer Wayne Swan to turn the $7.5 billion shortfall in Government revenue into a $2.5 billion surplus by cutting fossil fuel subsidies to companies.

Swan has revealed that lower terms of trade combined with a high Australian dollar has resulted in a hit to Government revenues “like a sledgehammer” totalling about $7.5 billion since the mid-year update.

Research released by Environment Victoria and Market Forces shows that the Federal Government could save over $10 billion in the budget by cutting fossil fuel subsidies in 2013/14.

Environment Victoria believes these cuts should be the solution to Australia’s budget troubles.

The $10 billion worth of handouts to polluters are in the form of tax breaks, carbon price compensation to power stations, research and development handouts for international companies and cheap fuel for the mining industry.

“These handouts are unfair, wasteful, and create an incentive for big industry to keep using polluting fossil fuels. This budget is a golden opportunity to cut the handouts, cut pollution, and put billions of dollars back on the table for important government priorities”, says Safe Climate Campaign Manager Victoria McKenzie-McHarg.

Research released by the Australian Conservation Foundation showed that 68 per cent of Australians agreed that the mining industry should pay the same amount of money in fuel tax as ordinary motorists.

The benefits of cutting these handouts would increase in the future, with $44 billion currently set to be lost to the budget due to fossil fuel subsidies between 2012/13 and 2015/16.

“Forty-four billion dollars would go a long way to supporting the sort of health and education programs Australians want to see delivered by our governments.

“Cutting polluter handouts could be the key to governments delivering these vital programs”, said Ms McKenzie-McHarg.

Greens Leader Christine Milne also calls for an end to subsidies saying, “In one year alone, Labor plans to spend $4.45 billion on these fossil fuel subsidies – that’s more than enough to increase Newstart by $50 a week and reverse cuts to single parent support.

“These billions of dollars are fuelling global warming by helping big mining corporations pay their fuel bills and get special tax treatment for exploration to pay for more fossil fuels.

“Australia’s international credibility is at risk because we committed at the G20 in 2009 to phase out fossil fuel subsidies but have failed completely to meet that commitment.

“It doesn’t make any sense to subsidise fossil fuels on the one hand, while trying to drive investment in renewable energy so that we transition to a clean, green economy – it’s like driving with your foot on the accelerator and the brake at the same time,” Milne said.

According to an International Monetary Fund report fossil fuel subsidies are worth US$1.9 trillion globally. If they were to be eliminated, CO2 emissions would be reduced by 4.2 billion tons – a 13 per cent reduction – and “major gains” would be seen for economic growth.

Matt O’Leary


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