Department of the Environment and Energy

Annual Report 2016–17

Chapter 1: Overview

www.environment.gov.au/annual-report-2016-17

© Commonwealth of Australia, 2017.

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OVERVIEW

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1 Overview

Secretary’s message

Secretary Finn Pratt AO PSM © Department of the Environment and Energy

It is a privilege for me to present the Department of the Environment and Energy 2016–17 Annual Report. Following my recent appointment as Secretary, I have been impressed by the complex and diverse set of issues managed by the Department. We invest and regulate to protect Australia’s environment and heritage, work with others in Australia, in Antarctica, in our region and internationally on environment and energy matters, and invest in the science and information needed to support evidence-based policy across the Department’s work. I would like to acknowledge my predecessor, Dr Gordon de Brouwer PSM, who was Secretary of the Department for the last four years. It is evident from this report that he successfully led the Department in achieving significant outcomes in environment and energy policy.

In 2016–17, we delivered major government initiatives to promote the conservation and sustainable use of Australia’s natural resources and work towards a secure and reliable, affordable and sustainable energy supply to support our economy and serve the Australian community as the energy market transforms. The successful delivery of these initiatives depends on effective engagement with government, industry and the community, a strong knowledge and information base and a high-performing, diverse and inclusive culture.

Community engagement and partnerships helped deliver outcomes in 2016–17. For example, our engagement and consultation with the Mirarr traditional owners, the Gundjeihmi Aboriginal Corporation and the Northern Land Council helped ensure our work in protecting the Alligator Rivers Region from the impacts of uranium mining remained transparent and accessible to the community. We worked with state and territory governments to implement the National Energy Productivity Plan. Under the plan we developed roadmaps for doubling energy productivity in five sectors including manufacturing, mining, and the built environment, and developed information to empower Australian households and businesses to improve their energy productivity.

In 2016–17, we continued to pursue our national interests, and secure environmental and energy outcomes through our engagement in international forums. For example, we represented Australia in international negotiations that led to the Kigali Amendment, an amendment to the Montreal Protocol, which will see the phase-down of production and imports of hydrofluorocarbons. It is estimated that implementation of the amendment will reduce greenhouse gas emissions equivalent to 72 billion tonnes of carbon dioxide between 2019 and 2050.

We supported evidence-based decision-making on environment and energy matters by providing information and tools to help others understand what we do and how they can engage with our

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work. For example, we delivered Australia State of the Environment 2016 and SoE Digital, and supported development of CoastAdapt—these provide access to unprecedented amounts of environmental information. Our state of the environment report assists federal, state and local government policymakers, scientists, academics, natural resource managers and citizen scientists to prioritise issues and make policy and management decisions that improve Australia’s environmental outcomes. We supported the Independent Review into the Future Security of the National Electricity Market (Finkel review), established to develop a national reform blueprint to maintain energy security in the National Electricity Market.

We invested in and delivered world-class environmental and climate science through the National Environmental Science Program, the Bioregional Assessment Program, the Australian Biological Resources Program and our Antarctic Science Program. Our ongoing investments through the Reef 2050 plan, the Threatened Species Strategy and the Australian Antarctic Strategy and 20 Year Action Plan recognise that long-term objectives require investment and sustained action over periods beyond annual budget cycles.

Ensuring our workforce is well supported and able to respond to future challenges helps us achieve results and pursue our long-term objectives in a changing public sector. Our focus in 2016–17 was on embedding a high-performing, diverse and inclusive culture across the Department and ensuring our core governance structures are robust.

Our Reconciliation Action Plan 2016–2019 is in its second year. In 2016–17, we expanded our cultural capability program and organised on-country cultural immersion tours to strengthen reconciliation and educate staff on Indigenous culture and the environment. We employed people with disability through the RecruitAbility scheme and offered paid internship positions through the Australian Network on Disability’s Stepping Into program.

Our best practice approach to managing risk helps the Department achieve its objectives. In 2016–17, we reviewed and updated our risk management framework to facilitate a positive culture of risk management at every level, create a clearer connection between the framework and our objectives, and integrate risk principles in business processes. Our governance committees enable the Department’s senior executive cohort to contribute strategically to the direction and content of the Department’s corporate policies and processes.

Administering our legislative responsibilities is central to achieving our purposes. To reflect this, we have integrated our legislative and performance reporting in the annual performance statements to provide a more comprehensive picture of our work. This is supplemented with further detail in the report’s appendices.

During the year we integrated our climate change and energy functions, helped strengthen multilateral bodies responsible for global biodiversity and made our data and information more accessible to decision makers and the community. We continued to provide expert, influential, responsive and impartial advice to Government. Collectively, these activities support our long-term objectives for improved environment and energy outcomes and help bolster our influence across government and build community confidence in what we do.

I am committed to developing and implementing sound environment and energy policy that supports the Government in achieving a healthy environment, strong economy and thriving community now and for the future.

Finn Pratt AO PSMSecretary, Department of the Environment and Energy

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Overview of non-financial performanceOur performance is determined by looking at each of our purposes and our cross-cutting science, information and research activity and measuring the extent to which we have achieved our objectives. Our performance encompasses the environment and energy policy, program, regulatory and research activities that enable us to effectively serve the Government.

In 2016–17, our purposes were to conserve, protect and sustainably manage Australia’s biodiversity and heritage; sustainably manage Australia’s biodiversity and heritage; advance Australia’s strategic, scientific and environmental interests in Antarctica; develop and implement a national response to climate change; and support the reliable, sustainable and secure operations of energy markets through improving Australia’s energy efficiency, performance, and productivity for the community. Underpinning these purposes was our environmental science, information and research activity.

The annual performance statements, a requirement under the Public Governance, Performance and Accountability Act 2013, examine our performance against what we set out to achieve in the Corporate Plan 2016–17.

Our performance in 2016–17 demonstrates a commitment to transforming the way we deliver outcomes across our four purposes. We consistently fulfil our core functions, as a best practice and trusted department of state, to a high standard. We are committed to becoming a stronger learning organisation, by trialling new approaches and systematically evaluating our activities. Our advice to Government is impartial, responsive and supports existing and emerging priorities. A mature approach to risk and strong policy development and implementation are fundamental to our success.

Environment and heritageIn 2016–17, the Department continued to enhance its capacity to target and address strategic priorities in natural resource management, recognising that it is critical to learn from, improve, build on and adapt our program investment and policy tools to achieve the best outcomes in priority areas around Australia.

Improving water quality in the Great Barrier Reef is critically important for ensuring that the Reef remains healthy and able to adapt in the face of other pressures. The Department has accelerated efforts to meet water quality targets under the Reef 2050 plan by focusing the majority of investment—$573 million over the next five years—on water quality actions. To facilitate the Reef Trust diversifying sources of investment, the phase V investment strategy has a strong focus on co-investment with the private and community sectors. Investment through this phase includes grant funding of $4.5 million to support an estimated $12.8 million investment by sugar milling company MSF Sugar and sugar cane growers to improve on-farm nutrient management and improve the quality of water entering the Reef.

The Threatened Species Strategy outlines Australia’s approach to protecting threatened species. In December 2016, the Threatened Species Commissioner released the strategy’s Year One Report, which confirmed progress made during the first year of implementation (2015–16). The report found that 21 of the 26 one-year targets were met in 2015–16. Another four were close to completion in 2016–17. Only one target was not achieved: to have 100 per cent of culled feral cats reported in the FeralCatScan phone app. This target was intended to promote use of the app across Australia and is not expected to be achieved. Due to limited ability to drive uptake of the app, not all cats culled are reported.

Since the appointment of the Threatened Species Commissioner in July 2014, over $228 million for more than 1000 projects has been mobilised to support threatened species recovery and improve their habitat. The launch of the Threatened Species Prospectus in February 2017 recognises the need for us to work in partnership with others. The prospectus is aimed at connecting project

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proponents with potential private sector investors to increase the total amount of funding available for threatened species recovery.

The 20 Million Trees Program, funded under the National Landcare Program, supports local environmental outcomes by improving the extent, connectivity and condition of native vegetation that supports native species. The program is progressing well towards the target of 20 million trees by 2020, with projects to plant 13.45 million trees contracted to date.

We continued to implement robust and practical business processes in the Department and with states and territories so that Australia can meet its international obligations under the Ramsar Convention. Australia’s active involvement in the Ramsar Convention governance arrangements and successful management of its wetland challenges means that we continue to be viewed internationally as a leader in wetland management and the wise use of wetland resources.

Following dry conditions for much of the previous 12 months, in 2016 the Murray–Darling Basin experienced its wettest May–September on record. This resulted in high flows and flooding throughout much of the Basin, particularly in the Macquarie, Lachlan, Murrumbidgee and Murray river systems. The natural high flows had widespread environmental benefits, with some wetlands, floodplain forests and woodlands receiving water for the first time in over 20 years. We used Commonwealth environmental water to build on these benefits, including sustaining major waterbird-breeding colonies and extending the inundation of important wetlands. This environmental watering mitigated some of the negative environmental impacts from the floods, such as poor water quality in the southern Basin.

We continued to identify, protect and conserve threatened species, ecological communities, internationally significant wetlands, whales and dolphins, migratory and marine species and heritage places. We delivered efficient and effective regulation on matters of national environmental significance under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) and under the Environment Protection (Sea Dumping) Act 1981, and we contributed to protection of the Alligator Rivers Region from the impacts of mining. We are committed to continually improving our regulatory capability and delivering environment and heritage outcomes through better practice regulation.

We listed two ecological communities and 14 species as threatened under the EPBC Act. Once listed, the species or ecological communities are recognised and protected as matters of national environmental significance through the EPBC Act’s assessment and approval provisions. New conservation advices were published for all assessed species and ecological communities to guide their management and recovery.

In 2016–17, four places were added to the National Heritage List: the Snowy Mountains Scheme, Australian Cornish Mining Sites—Burra and Moonta, and St Kilda Road and Environs. The Budj Bim Cultural Landscape was included on Australia’s World Heritage Tentative List in January 2017. Located in south-west Victoria, Budj Bim includes evidence of one of the world’s largest and oldest aquaculture systems, dating to about 6600 years ago. Budj Bim has been on Australia’s National Heritage List since 2004 and, if included on the World Heritage List, will be the first Australian property to be nominated exclusively for its Aboriginal cultural values.

In 2016–17, we progressed initiatives to streamline assessment and approval arrangements under the EPBC Act to ensure swifter decisions and more certainty for Australian communities and businesses. For example, we deployed an online referral application form for use by proponents. The form aims to improve access to information for stakeholders and be more efficient for the Department and proponents.

We led and contributed to resolutions and proposals to multilateral environment bodies that benefit the domestic and international environment. For example, we introduced new resolutions under the Convention on International Trade in Endangered Species to strengthen international cooperation on actions to address illegal wildlife trade, including increased offences for international wildlife crimes involving transnational organised criminal groups and investigation of new approaches to better enable forensic testing of seized wildlife specimens.

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We contributed to the protection of the Alligator Rivers Region by employing additional staff, and increasing our capability in critical areas such as project management and hydrogeology. There were no exceedances of the Ranger water quality objectives for the contaminants of potential concern (uranium, magnesium, manganese, ammonia) for both Magela and Gulungul creeks throughout the 2016–17 wet season.

The Department works to protect Australia’s environmental health by implementing national and international approaches to the management of hazardous wastes, substances and pollutants. We perform an important stewardship role as the Australian Government leader in developing and reforming air quality, fuels and chemicals frameworks.

In 2016–17, we supported negotiation of a global agreement to phase down hydrofluorocarbon (HFC) production and imports as part of the Montreal Protocol on Substances that Deplete the Ozone Layer. This is an important environmental achievement that will prevent up to 0.5°C of global warming by 2100. We helped manage the passage of legislative amendments through the Parliament, which will enable the HFC phase-down to commence in January 2018.

The Department worked with states and territories to develop national emission standards for non-road spark ignition engines and equipment. Emissions from non-road spark ignition engines and equipment are estimated to contribute up to 10 per cent of overall air pollutants in Australian urban environments at peak times. This is a key initial action under the National Clean Air Agreement established by Australia’s environment ministers in December 2015.

We worked with state and territory governments in developing a national standard for environmental risk management of industrial chemicals. We published a discussion paper, the draft national standard and an explanatory document, which provided the basis for broad consultation with governments, industry and the community.

We oversaw the recycling of 46,000 tonnes of e-waste under the National Television and Computer Recycling Scheme and 275 million litres of used motor oil under the Product Stewardship (Oil) Act 2000. We supported the launch of an industry-funded recycling scheme for waste paint.

Antarctica In 2016–17, we made significant progress towards achieving the staged commitments in the Australian Antarctic Strategy and 20 Year Action Plan, which sets out actions to support our national Antarctic interests. On 14 October 2016, the Government announced that, in addition to the $2.2 billion being invested to support the Australian Antarctic Strategy and 20 Year Action Plan, it would invest an additional $50 million in a new state-of-the-art research station on Macquarie Island. The new station will be the most advanced of its type in the Southern Ocean, and will support scientific research in the Australian Antarctic Territory that helps us understand and better predict the long-term future of the world’s climate.

We continue to support Antarctic and sub-Antarctic research through work with other institutions and by providing logistical support. In 2016–17, we undertook 98 Australian Antarctic science projects with 134 international institutions from 26 countries. For example, under the Polar Feedbacks between Ozone Recovery and Climate in the Southern Hemisphere or Polar FORCeS project, we worked with others to produce a set of state-of-the-art climate simulations that help scientists to anticipate how the southern hemisphere climate will respond to recovery in ozone levels. The project contributes to Australia’s efforts to anticipate the future state of the Antarctic environment.

We continued our work to ensure that Antarctica and the Southern Ocean are protected, valued and understood primarily through our engagement in the Antarctic Treaty system. We joined other parties to celebrate the 25th anniversary of the adoption of the Protocol on Environmental Protection to the Antarctic Treaty and reinforced the protocol’s importance to providing the comprehensive protection of Antarctica as a natural reserve devoted to peace and science.

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Climate changeAustralia’s ratification of both the Paris Agreement and the Doha Amendment to the Kyoto Protocol in November 2016 reaffirmed Australia’s commitment to shaping an effective global response to climate change. At the multilateral level, the Department supported the Minister to reinforce Australia’s commitment to the Paris Agreement, contributed to securing Australian influence in the UNFCCC negotiations and other international forums, and promoted international climate change action in line with Australia’s interests.

In 2016–17, we successfully implemented the Government’s climate change policies. This includes commencement of the safeguard mechanism, further purchasing of emissions reductions through the fourth and fifth Emissions Reduction Fund auctions and consultation on broadening the Carbon Neutral Program. The likelihood of achieving the 2020 renewable energy target improved significantly during 2016–17. The number of accreditations of new renewable power stations was higher in 2016 than in any of the previous three years, with 1024 MW of new projects committed between July and December 2016 and a further 1418 MW committed between January and June 2017. As at 30 June 2017, the combined total of committed and probable projects is more than half of the 6000 MW the Clean Energy Regulator estimates is required to meet the target. The share of renewable energy increased to 16 per cent of Australia’s electricity supply in 2016, which is its highest share since the late 1970s.

In December 2016, the Government’s emissions projections showed Australia is expected to surpass its 2020 abatement task by 224 million tCO2-e. Australia’s greenhouse gas emissions are tracking at 2 per cent below 2000 levels in the year to December 2016.

We are leading the Government’s 2017 review of climate change policies, with broad consultation, to ensure that Australia is in the best position to achieve our 2030 target. In 2016–17, the Minister released terms of reference for the review, and we engaged with business, industry and other organisations on its scope, and released a discussion paper for public consultation on issues, including opportunities and challenges of reducing emissions on a sector-by-sector basis. The review will be completed by the end of 2017.

The Department supports research and produces practical information and tools to help businesses, governments and communities to identify climate change impacts, take appropriate actions and build their capacity to adapt to a changing climate. For example, we worked with CSIRO to finalise the Climate Risk and Information Services Platform—a prototype online decision support tool—which brings together expertise on best practice adaptation, and climate data and projections. It assists decision makers in the infrastructure sector to consider how to manage implications from a changing climate on their project or program.

In May 2017, the National Climate Change Adaptation Research Facility released the final version of CoastAdapt, its online tool for managing coastal climate risk. Within the first quarter of its release, CoastAdapt had received 6152 visitors. As of May 2017, the overall number of new visitors rose to 14,317, with the monthly average rising to around 2000 visits. Results so far indicate that end users, including local governments, have found the online tool and other information products produced by the National Climate Change Adaptation Research Facility to be valuable resources.

Energy Australia needs a secure and reliable, affordable and sustainable energy supply to support our economy and serve the Australian community as the energy market transforms. On 7 October 2016, the COAG Energy Council announced the Independent Review into the Future Security of the National Electricity Market. Australia’s Chief Scientist, Dr Alan Finkel AO, led the review and delivered the final report to COAG on 9 June 2017. The Department provided secretariat support to the review. The final report contains 50 recommendations and provides a blueprint for the once-in-a-century transformation currently taking place in Australia’s energy system.

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In 2016–17, we provided high-quality, evidence-based advice on matters of national energy policy to the COAG Energy Council—a ministerial forum in which the Commonwealth, states and territories work together in the pursuit of national energy reforms. This included preparation of around 76 agenda papers and 60 briefs for the council. We provided timely and accurate information and advice to the Government in relation to energy security by participating in Australian energy supply emergency advisory committees, such as the National Electricity Market Emergency Management Forum and the National Gas Emergency Response Advisory Committee.

We continued to manage the Equipment Energy Efficiency Program. Activities to improve the energy efficiency of appliances and equipment include energy rating labelling, setting minimum energy performance standards, education and training. We delivered five consultation regulation impact statements implementing minimum energy performance standards on lighting products, swimming pool pumps, commercial refrigeration, domestic fridges, and non-domestic fans. Equipment and appliance regulations reduced Australia’s emissions by 23–35 million tCO2-e between 2000 and 2014. From 2015 to 2020 (based on current regulation developments) it is projected that emissions will be reduced by a further 27–44 million tCO2-e.

We support Australia’s consideration of global energy security issues, particularly through engagement with the International Energy Agency. Over 2016–17, a major focus was developing Australia’s International Energy Agency oil stockholding compliance plan and Australia’s contribution to a strong International Energy Agency reform and modernisation agenda.

Science, information and researchThe Department contributes scientific information and research to support the delivery of all four of our purposes: environment and heritage, Antarctica, climate change and energy.

An important achievement under this activity was the release, in March 2017, of the Australia State of the Environment 2016 report, which was published on a new interactive digital platform online for the first time. Published every five years, the state of the environment report provides a comprehensive and independent national assessment of the state, trends and management of Australia’s environment.

The state of the environment report confirms that our marine environment, natural and cultural heritage areas, the Antarctic environment and the air quality of our cities are in generally good condition. Our environmental watering activities are having a positive effect on waterbird and fish stocks and we are seeing urban populations using energy more efficiently. The main pressures facing the Australian environment remain climate change, land-use change, habitat fragmentation and degradation, and invasive species.

The digital platform allows audiences to explore and discover information in new ways providing unparalleled user ability to access, interact with and interrogate data. By the end of June 2017, the site had garnered around 25,000 unique visitors with an average session time of four minutes for each visit.

The National Environmental Science Program continues to deliver world-class environmental and climate science to assist decision makers at all levels of government, industry and communities, including Indigenous organisations. Six projects were completed in 2016–17. Information provided to the Department and other users through this program has already informed decision-making on a range of policy work including the implementation of the Reef 2050 Long-Term Sustainability Plan, and the planning and management of Indigenous Protected Areas and threatened species and communities throughout Northern Australia.

The Australian Biological Resources Study’s National Taxonomy Research Grant Program performed strongly in 2016–17, resulting in the discovery, description and publication of 409 species and other taxa and the financial support of 136 researchers. These achievements assist with the discovery and description of Australian flora and fauna and help inform environmental policy decisions.

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We continued to improve the knowledge of the water-related impacts of coal-seam gas and coal mining development. By 30 June 2017, the Bioregional Assessments Program had finalised 93 out of 105 technical reports and eight out of 10 supporting sub-methodologies. Over 900 datasets related to the program are now available online; these datasets were downloaded 3392 times in 2016–17.

Management and accountabilityIn 2016–17, we strengthened our capacity to serve the Government in achieving our purposes and activities by developing the six capabilities identified in our 2016–17 corporate plan.

We are improving our regulatory capability and delivering environment and energy outcomes through better practice regulation. In 2016–17, we established the Regulatory Maturity Committee and the Office of Compliance, co-designed our new regulatory framework with business and the wider community, clearly defined regulatory outcomes and performance measures, and rewrote our approach to engagement, starting with our website. Our regulatory framework will inform our decisions, our engagement strategy, our risk posture, and the approach we take to enforcement. It will help us communicate with the community who we are, what we do and how we will engage across our regulatory spectrum.

In addition to our strong commitments and other departmental initiatives for achieving a diverse workforce and an inclusive culture, the Department is expanding its cultural capability program. We are doing this through a series of workshops to give staff practical advice on how to better engage with Indigenous communities and develop culturally appropriate policies and programs.

A new enterprise agreement covering 2626 employees came into effect on 30 November 2016. Following reviews on how to further improve the performance of all employees and embed a high-performance culture, in 2016–17 the Department established a community of practice to build employee capability, central funding for staff development activities and a new performance framework.

Operating contextIn July 2016, responsibility for energy policy was transferred to the Department, as part of machinery-of-government changes. In September 2016, 223 employees from the Department of Industry, Innovation and Science transitioned to our Department. The integration of our energy and climate change responsibilities allows us to provide comprehensive advice to government.

Overview of financial performanceThe Department delivers major Government initiatives to promote the conservation and sustainable use of Australia’s natural resources and to maintain a secure and reliable, affordable and sustainable energy supply to support our economy and serve the Australian community as the energy market transforms. We do this across four purposes: environment and heritage, Antarctica, climate change, and energy (see Part 2, ‘Annual performance statements’, page 21).

During 2016–17, the Department demonstrated sound financial management and achieved a break-even departmental appropriation budget. Total departmental and administered expenditure managed was $1.18 billion, compared with $1.15 billion in 2015–16. The Department continued to successfully implement key government programs, notably Green Army, Reef 2050 Long-Term Sustainability Plan, Reef Trust and the National Landcare Program, including 20 Million Trees. The Department ran significant operations, including in remote locations such as Commonwealth national parks and the Antarctic. There were nine special accounts managed through legislation and cost recovery schemes.

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Departmental finances Figure 1.1 outlines the Department’s financial performance over the past four years and the budget for 2017–18.

Figure 1.1: Departmental financial performance, 2013–14 to 2017–18 ($ million)

The financial performance of departmental activities for 2016–17 is summarised in Table 1.1.

Table 1.1: Departmental financial performance, 2015–16 and 2016–17

Indicator 30 June 2017($’000)

30 June 2016($’000)

Variance($’000)

Operating expenses 514,104 526,971 (12,867)Own-source revenue 48,025 42,830 5,195Gains 10,512 2,350 8,162Net cost of services (455,567) (481,791) 26,224Revenue from government 410,360 398,902 11,458Operating (deficit)/surplus (45,207) (82,889) 37,682Changes in asset revaluation surplus 26,960 (37,739) 64,699Total comprehensive income/(loss) (18,247) (120,628) 102,381

The Department’s net cost of services was $455.57 million, with own-source revenue of $48.03 million and operating expenses of $514.10 million. Revenue from Government was $410.36 million, resulting in an operating deficit of $45.21 million. The total comprehensive loss (deficit net asset revaluation) was $18.25 million. This is an approved operating loss and includes non-cash expenses such as depreciation, amortisation and provision for restoration obligations in the Australian Antarctic regions.

The reduction in operating expenses in 2016–17 is primarily attributable to non-cash movements in the Antarctic make-good liability and a decrease in the Department’s depreciation expense. These

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movements are partially offset by an increase in employee expenses as a result of the transfer of staff to the Department associated with the Administrative Arrangements Orders made on 19 July and 1 September 2016.

The increase in own-source revenue of $5.20 million was largely due to contributions for the Council of Australian Governments Energy Council from states and territories.

The increase in gains by $8.16 million in 2016–17 was primarily due to the movement in bond rates applied to the make-good provision for the restoration of the Antarctic solid waste disposal sites.

The $11.46 million increase in revenue from the Government primarily reflected the net result of the Administrative Arrangements Orders made on 19 July and 1 September 2016, the transfer in of the energy functions to the Department from the Department of Industry, Innovation and Science.

Changes in asset revaluation surplus largely relate to changes in the relevant Australian Government bond rates used to calculate make-good and base restitution obligations for the Antarctic bases.

The Department’s financial position for 2015–16 and 2016–17 is summarised in Table 1.2.

Table 1.2: Departmental financial position, 2015–16 and 2016–17

30 June 2017($’000)

30 June 2016($’000)

Variance($’000)

Total assets 688,481 544,142 144,339Total liabilities 623,785 644,823 (21,038)Total equity 64,696 (100,681) 165,377

In 2016–17, the Department managed a total asset base of $688.48 million, an increase of $144.34 million over 2015–16, mainly due to commencing construction of the new science and resupply icebreaker ship. A further increase in trade and other receivables was associated with funds receivable for milestone payments for the new icebreaker.

Total liabilities managed by the Department decreased by $21.04 million in 2016–17. This was mainly due to the Department’s make-good provisions decreasing to reflect the time value of future cash flows. This decrease was partially offset by higher employee provisions resulting from the impact of implementation of the Enterprise Agreement 2016–2019, which came into effect on 30 November 2016.

Administered financesFigure 1.2 outlines the Department’s financial performance in relation to administered activities over the past four years and the administered budget for 2016–17.

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Figure 1.2: Administered activities, 2013–14 to 2017–18 ($ million)

The financial performance of the Department’s administered activities for 2016–17 is summarised in Table 1.3.

Table 1.3: Administered financial performance, 2015–16 and 2016–17

Indicator 30 June 2017

($’000)

30 June 2016

($’000)

Variance($’000)

Expenses administered on behalf of Government 663,412 618,906 44,506Income administered on behalf of Government 290,840 521,300 (230,460)Net cost of services (372,572) (97,606) (274,966)

The Department’s total administered expenditure during 2016–17 was $663.41 million. An overall increase in administered expenses of $44.51 million compared with 2015–16 was mainly driven by an increase in payments to corporate Commonwealth entities, specifically the Australian Renewable Energy Agency (ARENA). This increase is a result of ARENA’s large-scale solar competitive round of grants in 2016–17. This increase was partially offset by decreases in supplier expenses, mainly associated with the Green Army program following the Government’s decision to terminate the program in 2017–18. There were also net decreases in grant expenses, and reduced impairment expenses for water entitlement assets.

In 2016–17, the Department’s administered income from activities on behalf of the Government totalled $290.84 million. This amount was $230.46 million lower than in 2015–16, primarily due to lower impairment reversals of $271.56 million recorded against water entitlement assets in 2016–17. This amount was offset by $29.58 million in dividends received from Snowy Hydro Ltd following the company’s transfer to the Department during 2016–17.

The Department’s administered assets and liabilities for 2015–16 and 2016–17 are summarised at Table 1.4.

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Table 1.4: Administered assets and liabilities, 2015–16 and 2016–17

30 June 2017($’000)

30 June 2016 ($’000)

Variance($’000)

Total assets 13,361,682 10,304,260 3,057,422Total liabilities 7606 13,389 (5783)Net assets 13,354,076 10,290,871 3,063,205

As at 30 June 2017, the Department administered assets valued at $13.36 billion consisting predominately of water entitlements, the Government’s interest in the net assets of the Director of National Parks, the Sydney Harbour Federation Trust, ARENA, the Clean Energy Finance Corporation and Snowy Hydro Ltd, and cash held in special accounts. The increase of $3.06 billion in 2016–17 was mainly due to the Commonwealth's increased investment in the Clean Energy Finance Corporation and the Department's recognition of the Commonwealth's 13 per cent shareholding in Snowy Hydro Ltd, following machinery-of-government transfer in 2016–17 and subsequent revaluation.

The total assets held as at 30 June 2016 have changed from $4.83 billion to $10.30 billion due to the changes in the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 during 2016–17. The Department is now required to disclose special account balances held in the Official Public Account as cash equivalents in the Administered Schedule of Assets and Liabilities, Administered Cash Flow Statement, and Administered Reconciliation Schedule.

As at 30 June 2017, the Department had administered liabilities of $7.61 million consisting predominately of end of year supplier and grant payables. The decrease in total liabilities is the result of the decrease in Green Army program payables following the Government’s decision to terminate the Green Army program in 2017–18.

The Entity Resource Statement provides additional information about the various funding sources that the Department may draw upon during the year (see Appendix 2). For a summary of total expenses by outcomes, see Appendix 3.

Portfolio and Department structureThe Department’s main role in 2016–17 was to advise on and implement environment and energy policy to support the Government in achieving a healthy environment, strong economy and thriving community, now and for the future. Our activities covered four purposes: environment and heritage, Antarctica, climate change and energy. During 2016–17, we effectively administered regulations and implemented government programs, provided evidence-based policy advice and ran on-ground operations.

Information about the Department’s purposes and their alignment with outcomes, as outlined in the Portfolio Budget Statements 2016–17, Portfolio Additional Estimates Statements 2016–17 and Corporate Plan 2016–17, is in Part 2 of this report on page 21.

In 2016–17, the Environment and Energy portfolio included the following entities:

Department of the Environment and Energy (lead agency)

Australian Renewable Energy Agency

Bureau of Meteorology

Clean Energy Finance Corporation

Clean Energy Regulator

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Climate Change Authority

Director of National Parks (Parks Australia)

Great Barrier Reef Marine Park Authority

Sydney Harbour Federation Trust.

Website links to these portfolio agencies and their annual reports are on the Department’s website.

www.environment.gov.au/about-us/departmental-structure

The Department’s organisational structure as at 30 June 2017 is presented in Figure 1.3.

Machinery-of-government changes resulted in changes to the portfolio in 2016–17, including the addition of functions: energy policy, national energy market—including electricity and gas—and energy efficiency. These changes became effective under the Administrative Arrangements Order amendment issued on 19 July and 1 September 2016. Information on machinery-of-government changes at the departmental level is included in Part 4, ‘Financial statements’, page 187.

LegislationThe Department and our portfolio agencies administer, on behalf of the Minister, over 55 pieces of legislation that provide the legal framework for issues across environment and heritage protection, biodiversity conservation, Antarctica, climate change, renewable energy, and energy markets. Further information on the legislation is available on our website:

www.environment.gov.au/about-us/legislation

Ten Acts specify that an annual operational report should be prepared and tabled in Parliament. These legislative reporting requirements are acquitted through the respective appendices in this report (see pages 287–340).

MinistersIn 2016–17, the ministers responsible for the Environment and Energy portfolio were:

the Hon Josh Frydenberg MPMinister for the Environment and Energy(19 July 2016 to 30 June 2017 and beyond)

the Hon Greg Hunt MPMinister for the Environment (18 September 2013 to 19 July 2016).

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Figure 1.3: Department’s organisational structure as at 30 June 2017

Note: ERISS—Environmental Research Institute of the Supervising Scientist, ERIN—Environmental Resources Information Network, ARENA—Australian Renewable Energy Agency, GBRMPA—Great Barrier Reef Marine Park Authority, BOM—Bureau of Meteorology

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