Australia to Cut, Delay Clean-Energy Funding on Floods

The Australian government said it will cut or delay A$500 million ($498 million) of funding for solar power and carbon capture and storage projects to help pay for reconstruction after the nation’s worst floods.

Australia, where coal accounts for more than 80 percent of electricity production, will cut the A$1.5 billion Solar Flagships program by A$60 million and defer a further A$190 million of proposed grants, according to documents released today by Prime Minister Julia Gillard’s office.

BP Plc, AGL Energy Ltd. and CLP Holdings Ltd. unit TRUenergy Holdings Pty are among companies short-listed by Australia in a competition for solar funding. The government, which has a target of sourcing 20 percent of the country’s power from renewable energy by 2020, must decide this year on a way to put a price on carbon emissions, Gillard has said.

While imposing that cost on burning fuels “needs to be the long-term economic reform for a carbon constrained future, shorter-term complementary programs are also essential,” said Seb Henbest, a Sydney-based analyst with Bloomberg New Energy Finance. “The government still needs to support nascent clean energy and efficiency industries and technologies.”

Australia will also delay A$160 million of spending aimed at encouraging carbon-capture ventures, the documents show. The government will reduce the amount of funding in the A$1.9 billion initiative by A$90 million, the documents show.

Gillard pledged to restart an effort to curb emissions after replacing Kevin Rudd as prime minister in June.

Bonus Cut

“The key to these carbon abatement program savings is my determination to deliver a carbon price,” she said in Canberra today. “There is complete consensus that the most efficient way to reduce carbon” is to impose a cost, Gillard said.

Money that would have been allocated to solar and carbon capture ventures between 2011 and 2015 will now be spent in 2015, 2016 and “beyond,” the office of Australian Resources Minister Martin Ferguson said in an e-mailed statement today.

“The government remains committed to demonstrating both these technologies at commercial scale by 2020,” it said.

Australia will save A$160 million over two years by capping funding for a renewable energy bonus and solar hot water rebate program, the documents from the prime minister’s office show.

Gillard said today the government will save A$2.8 billion by reducing spending on climate control measures, including the so-called Green Car Innovation Fund and the Cleaner Car Rebate Scheme, among other cuts, and A$1 billion through delaying infrastructure projects.

Almost two months of torrential rains in the northeastern state of Queensland have killed as many as 32 people, affected about 30,000 properties, shut coal mines, cut rail lines and damaged crops. Economists estimate it may cost A$20 billion in repairs and rebuilding after the flooding that has also hit Victoria and New South Wales states.

To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net.

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.