Greg Hunt (Flinders, Liberal Party, Shadow Minister for Climate Action, Environment and Heritage) Share this | Link to this | Hansard source

In addressing the Clean Energy Finance Corporation Bill 2012 and related bills, let me begin with some history about the successes and failures of support for and management of renewable energy in Australia.

It was the coalition which created, developed and implemented the mandatory renewable energy target—successfully. It was the coalition which created, developed and implemented the then equivalent of the solar PV rebate—successfully. It was the coalition which created, developed and implemented the solar hot water rebate—successfully. By comparison, what we have had from this government is the Home Insulation Program, which on any account is arguably Australia's most dramatic policy failure on the domestic front since the Second World War. Two billion dollars were largely wasted, including $500 million simply to fix the roofs—over 70,000 repairs, removals or variations to the work done, and that is still knowing that there are hundreds of thousands of other jobs out there which will never be inspected by this government. There were, of course, 200 house fires, and the link to four of the most terrible tragedies.

But this government also created the Green Start program and the Green Loans program. Green Loans cost over $100 million for barely more than 1,000 loans: $100,000 per loan on average for loans which were literally a few thousand dollars. It was a monumental failure which in any other period of government would be classified as the standout failure of that administration, but it is dwarfed by the failures of the Home Insulation Program.

The Green Start program, which never actually started in any meaningful way, was terminated very shortly after it was announced. The cash-for-clunkers program was announced by this government as their centrepiece of the last election's climate change policy, only to be brought to its knees not that long after the new government was created because it was a policy that was so bad it should never have seen the light of day. The citizens assembly was created to randomly select 150 Australians from the phone book to determine the policy which the government dared not take to the last election.

And now we have potentially the largest waste of money of all, and that is the $10 billion Clean Energy Finance Corporation, the $10 billion clean energy fund which, even if it is successful, creates no net new renewable energy. It beggars belief that this government is proposing to spend $10 billion and there is not one megawatt, not one kilowatt and not one watt more of renewable energy which will be generated by 2020 as a consequence of this $10 billion. Let me look at the deep fundamental and structural flaws at the heart of this bill and explain why, whilst the opposition fully supports the 20 per cent renewable energy target, we believe that this bill is ill conceived, ill constructed and doomed to failure. I will do so in two phases: first by looking at the prospects even if there were the implausible case that all of the investments proposed were successful, and then by looking at the overwhelmingly more likely case of what happens if there are failures. Because, when you look around the world and at the history of investment by this government, this policy is doomed to failure and doomed to waste literally billions of dollars of taxpayers' money. This is money that comes from the work of shop assistants, plumbers, nurses and people who are working each and every day to pay their taxes, and their money will be wasted.

Let us begin with the concept, which is so fundamentally flawed. It would seem that spending $10 billion on renewable energy would get you something. What is proposed here is that the government will spend $10 billion and that therefore that will generate some form of new renewable energy. The problem, however, is that before this bill there was a 20 per cent renewable energy target. After the $10 billion included in this bill is spent, there will still be a 20 per cent renewable energy target. What does this mean? It means that any renewable energy generated as a consequence of the Clean Energy Finance Corporation investments will simply displace other renewable energy which would otherwise have come online between now and 2020. It is unarguable, it is without doubt and it is simply, palpably, absolutely the case that the government will spend $10 billion and, in a best-case, no-failure, no-problem, perfect-delivery scenario, will still produce not one gigawatt, not one megawatt, not one kilowatt and not one watt more actual renewable energy between now and 2020. That is an extraordinary example of conceptual failure.

I wonder if the minister at the table, Minister Shorten, or anybody else around the cabinet table considered the fact that for $10 billion there will not be an additional unit of energy generated at all between now and 2020. It is almost extraordinary that this policy could have been created, delivered and funded. But the answer is very simple. It was, of course, funded as part of the trade-off with the Greens to win their support for the carbon tax. The carbon tax, of course, is an entirely different story. We know that it was conceived in the breach. The Prime Minister famously said the very day before the election, 'I rule out a carbon tax.' On the Monday before the election, the Prime Minister said, now infamously, 'There will be no carbon tax under a government I lead.' So the price of that betrayal and of winning support for it included this $10 billion fund. But, as I have set out, in the best-case scenario, on the basis of perfect delivery, no new renewable energy will result. Our alternative is very simple. We have a renewable energy target. It is set to achieve 20 per cent by 2020. We support that, we helped negotiate it and it will achieve that. That will be the same result with or without this bill. It is unarguable, and anything else from the government would simply be misleading.

However—and this brings me to the second part of what I wish to say this evening—this bill will not be executed perfectly. The Clean Energy Finance Corporation and the clean energy fund will not be delivered as the government intends, and history shows us that on three fronts. Firstly, on the government's own performance in this country, as I mentioned at the outset, we have had pink batts, Green Loans, Green Start, cash-for-clunkers, the citizens assembly, the solar bubble and collapse and the solar hot water deception, where $44.7 million was ripped from the budgets of 2011-12 and 2012-13. This was only revealed in its full deception on budget night, and as a consequence we are seeing job losses at Rheem and Dux now. That is a list of seven failures from this government in this space.

Then we go to the broader question of comparable systems around the world. In the United States, we have seen the $700 million failure of Solyndra under the comparable US system. Beacon Power has collapsed. Ener1 has collapsed. Solar Trust of America was given a $2.1 billion line of credit from the US Department of Energy and has collapsed. It makes you think that perhaps there may be some systemic problems. The comparable program in the United States is the source of enormous division, enormous conflict and an ongoing scandal in relation to its administration, according to the Republicans in the way that they have presented. So, far from being a unifying program in the United States, it is a program which has had significant failures and is a source of deep, clear and ongoing division within the US congress.

What about Australia? Are there any comparable programs? There are. Let me point to two similar examples. The first is the ZeroGen project, which had over $100 million of co-financing from the Queensland government, delivered by Peter Beattie and, from the Australian federal government, by the then Prime Minister, Kevin Rudd. At the time that the ZeroGen project was proposed, Ian Macfarlane, who was the relevant spokesperson for the coalition, said that it would fail. He was clear on this front. The then Queensland Premier, Peter Beattie, famously said that Ian Macfarlane was on drugs—that, of course, was false. It also turned out that Ian Macfarlane was absolutely right: the ZeroGen project collapsed. It is gone; it is finished. The public money was done. Nothing was built. There is no low-carbon, let alone zero-carbon, ZeroGen project in Queensland. The money is gone. The project is gone. The idea was flawed from the beginning. It was not well executed. Therefore, we were not surprised when that which we had warned of came to pass.

But let me explain that that $100 million was money which came from everyday Australians. It was the taxes of everyday Australians, from all walks of life. It could be from members of the Health Services Union who are cleaning hospital wards and emptying bedpans. Their taxes go directly towards a project such as ZeroGen. It collapsed and failed. So all of that work and the payment of those taxes were wasted. So let us never forget that this is nothing hypothetical. When the government wastes somebody's money, it is real, because there is a shop assistant, an orderly or a small business person who has worked to pay that money. We hold their money in trust and we have a sacred responsibility to guard it carefully.

Let us also look at the Solar Flagships program: $700 million was announced over three years ago and yet no project has been successful. We have seen the Central Queensland project effectively collapse. We saw the Moree project collapse. I hope some success comes out of them. But many days, many months and three years have passed since the world's biggest solar array was proudly announced by the once and future Prime Minister. So that is another example.

We see the litany of failures of general environmental programs: pink batts, green loans, Green Star, cash for clunkers, citizens assembly, the solar bubble and the solar hot water bubble. We see the US examples of Solyndra, Beacon Power, Ener1 and Solar Trust of America, and we see the Australian examples of ZeroGen and also Solar Flagships where nothing has come to pass. The lessons must be fairly strong.

Let us, then, come to the costs of this bill. What we have seen is that, even on the government's own modelling, even in the explanatory memorandum, there is an expected loss, out of the first $6 billion, of $1.346 billion, or $1,346.4 million. That extrapolates out, over a five-year period, to more than a $2 billion loss—that is a combination of operating costs, write-downs for commercial failures and interest forgone for the government.

Let us understand that that is a best-case scenario—$2 billion being wasted over five years. That is a profound amount of money. And that is from a government which has not been highly successful in its other predictions in relation to comparable programs or allied environmental programs. Huge amounts of money have been wasted, to no effect. So, on its own best-case scenario, over five years we are looking at $2 billion of public money gone—written off; wasted.

Finally, we come to the fact that there is an impact on existing projects. It changes the financing regimes. It changes the competitive regimes. It changes the merit order. So it has a sovereign risk impact on existing investments in the space because, if they are displaced by subsidised projects, it has an impact on their ability to compete on level terms in the renewable energy space. That is another example of ill-thought-through consequences. I have a respect for the individuals involved who have sought to assist in this. But it is the fundamental design at the heart of government from people who have repeatedly shown an inability to apply government programs to the commercial environment with disastrous consequences.

Against all that background, what we saw yesterday was quite extraordinary: a two-hour hearing for $10 billion—$5 billion an hour—for a parliamentary inquiry. That inquiry was called on Friday. It was delivered on Monday. There was no ability for the public to have input. It was carried out over two days, and my understanding is that it will report tomorrow. What we had was not a parliamentary inquiry but a show trial. So that was an abuse of parliament and an abuse of the confidence of the public, and it is likely to be a fatal abuse of taxpayers' money.

In opposing this bill and the three related bills which extend the scope of the carbon tax to cover LPG, LNG and CNG, let me be clear on behalf of the opposition: the Clean Energy Finance Corporation $10 billion slush fund is destined to fail. Even in the unlikely event that it succeeds, what we will see is not one watt of additional renewable energy between now and 2020. In its design and its concept, this structure, this system will, on a best-case scenario, spend $10 billion and Australia will not have an additional watt of renewable energy between now and 2020. For those reasons, we oppose this bill and these allied bills, and we do so with every ounce of vigour.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I rise to voice my strong support for the clean energy bills before the House with a little bit more vigour than those opposite and than was evident in the member for Flinders's speech. The Clean Energy Finance Corporation Bill 2012, Clean Energy Legislation Amendment Bill 2012, Clean Energy (Customs Tariff Amendment) Bill 2012 and Clean Energy (Excise Tariff Legislation Amendment) Bill 2012 are all part of the Gillard Labor government's commitment to move Australia towards a clean energy future.

Obviously, we have seen bipartisan support for these endeavours at the 2007 and 2010 elections—the same targets in terms of combating dangerous climate change gases, and the same clean energy targets of 20 per cent, on both sides of the chamber. It is good to see this bipartisan support in acting to ensure that our grandchildren and great-grandchildren have a world to inherit. I welcome the creation of the Clean Energy Finance Corporation as part of a raft of government initiatives designed to support the way we combat the impacts of dangerous and costly climate change. Investment in the Clean Energy Finance Corporation will go a long way towards delivering major new private investment in clean energy projects and the supply chains that feed into these projects.

The bills outline numerous measures that serve to improve the Carbon Farming Initiative, enhance the security of the Australian National Registry of Emissions Units—which I think might have flowed from some Howard government initiatives from 2007—and develop working relationships with the Clean Energy Finance Corporation. Clean energy is a concept that has been much debated in this chamber, despite that bipartisan support for the same targets. Time and time again, the Labor government has taken action to set Australia on a course to a clean energy future, a gentle change in direction, but an important economic change of direction in terms of the glide path of where we will end up. As everybody knows, there are lower costs if we act now rather than later, but unfortunately time and time again the coalition has tried to sabotage these efforts in an attempt to score cheap political points rather than considering the nation's interests.

Today I went on the web to have a look at the coalition's direct action plan on environment and climate change—I presume the policy came out before the 2010 election—to get an idea of the details embraced by those opposite. I will be generous and say that the direct action plan is probably a little bit outdated, but it does seem to be very costly—over $3.2 billion forecast over four years. I am not quite sure whether that has moved on or whether it is going to be compressed, but it is the current policy as seen on the Liberal Party webpage. It is a little bit unrealistic, outdated and perhaps even counter-productive. I would be gravely concerned for our nation's environmental legacy and our economic preparedness under an Abbott-led coalition government.

A nation's environmental legacy is what these clean energy bills before the chamber are all about—that is, what we leave behind for our children. The decisions we make in this chamber and the decisions voters make at the ballot box shape this nation for our descendants to inherit. I want my sons and their children and grandchildren to live in an Australia that did what was needed and when it was needed, even if it meant losing a bit of political skin. We need to do this to preserve the environment and work with the rest of the world in addressing climate change. Australia, while a young nation, has always had a proud record of being a good global citizen, whether it be Billy Hughes' actions after World War I—there was a lot of skin in that game after 60,000 Australians died in that conflict—or Doc Evatt in the first days of the United Nations. More recently, we can look to the former Prime Minister Bob Hawke and his actions in Antarctica or to the former Minister for Foreign Affairs, the member for Griffith, with his endeavours in Libya. As a nation we do our bit and a little bit more, I would suggest. That is why this nation is putting a price on carbon in 30 or so days. It is about cutting pollution, creating clean energy jobs and making sure our economy is ready for this transformation that the world is undertaking. We proudly play our role in reducing global greenhouse emissions, and we will be well positioned to compete in a world moving to lower carbon technologies.

As a Queenslander, Madam Deputy Speaker Livermore, you know that we as a state, the worst per capita polluter in the world, are taking some action to prepare our economy. We will not be alone. We are joining many countries around the world that are already taking action. In fact, 89 countries have already committed, and many are acting right now to take steps to address climate change. We saw the courage of the Koreans, one of our major trading partners—I have certainly heard the member for North Sydney talk a lot about Korea—which overnight committed to putting a price on greenhouse gases by 2015. Globally, more money is now invested in renewable power than in conventional high-pollution energy generation. The rest of the world is acting, and we must act with them and, more importantly, not be left behind.

We are doing the right things for the right reasons, but it has not been easy. As anyone would know, there is a big scare campaign that is confusing and frightening many Australians with exaggerated cost estimates and exaggerated claims and hyperbole about what is going to happen. It suggests that the sky will fall in at midnight on 30 June and the world as we know it will end. That is not the reality. We are talking about a gentle change in direction, a glide path that will gently shape the Australian economy. This fear mongering, I would suggest, will be proved a foolish fallacy, come 1 July. In 20 years or in 50 years we will see just how stupid it was, just as if we look back 20 years ago to how people reacted to the High Court's decision on 3 June about Mabo. At the time there was hysteria—backyards were going to be taken—but, 20 years on, we look back and see that it was the appropriate thing to do at the time. It was a tough thing for Prime Minister Keating to do at the time, and perhaps he did not reach the decision as easily as he might have, but he then had the courage to lead the nation into doing the right thing.

The honourable member for Warringah has neglected to mention that many vulnerable Australians, including many pensioners, will end up coming out ahead after the carbon price starts in little over a month from now. In Moreton alone, 16,000 pensioners—I note Minister Macklin at the table—will receive a cash payment over the coming weeks ahead of the introduction of the carbon price. All full and part pensioners in Moreton will receive a lump-sum payment of $250 if they are single and $380 for couples. Local pensioners will get another boost with an ongoing increase to their fortnightly payments from March 2013. In total, local pensioners will get around $338 extra a year for singles and $510 extra for couples. About 93 per cent of all pensioner households will be at least 20 per cent better off because of these new payments. We are talking about a gentle tax to change behaviour. If they are like many seniors that I know—people who do know where to find their jumpers, do know where to turn the lights switches off—they will find that it will not be the fear and doom and gloom, the jeremiad that those opposite would suggest. And, obviously, the money that the member for Jagajaga is putting in their pockets will be a reward for their years of service to the Australian community.

The member for Warringah does not want to hear about that and he certainly does not want to admit this to the Australian public. He more than any other member of parliament at the moment can hear the clocks in this House ticking loudly, because he knows that, as the days tick down towards 1 July, his campaign, his house of cards, the flimflam attack, the flimflam man, will find out that the world is different. His continued negativity on tackling climate change unfortunately has created a little bit of uncertainty in some markets, particularly the electricity market, which has hurt our economy and damaged the efficient functioning of the NEM and our energy markets. He has come a long way from his 2009 Lateline statement, where he supported an emissions trading scheme. He said:

We don't want to play games with the planet. So we are taking this issue seriously and we would like to see an ETS.

I agree with him. It would have been great to have an ETS. Obviously, that was before the member for Warringah knocked off the member for Wentworth in the leadership change early in December 2009 on that climate change sceptic ticket. I think the votes were 42 to 41, from memory. One person was absent, so did not actually vote, and one person could not bring themselves to vote for either of them, so I am not sure what their intentions were, even with two people on the ticket. Unfortunately we have not seen that sort of commitment from the opposition leader. As I said, the direct action plan that I have had a look through is quite different.

Like many other MPs I do have serious questions about Mr Abbott's direct action plan, particularly in the context of our shared Renewable Energy Targets. I have a lot of concerns about how this will impact on investment in solar, because I do believe as a Queenslander that we have great opportunities in solar. I was a bit disappointed to see one of the solar programs of the Queensland government scrapped the other day. I also think we have great potential in geothermal. I look forward to the Queensland government and the federal government working together to develop some of those geothermal resources. I would like to snatch some of those projects away from South Australia, hopefully.

We are only 30 or so days out from the start of our price on greenhouse gases. It is at this moment that I would like to have a look at some of the direct action plan policy. They are talking about creating a band within the Renewable Energy Target which would be reserved for emerging technologies such as big solar. I have a bit of a concern about that. If there were an addition to the 20 per cent target I could see the logic in that. If the coalition were to introduce a banded RET it would see solar built at the expense of other projects that are already in the pipeline—perhaps some of those geothermals, perhaps some of those other renewables like wave. That would create instability for renewable energy investors, and that is not a mature investment sector at the moment, even though, as I said, there is a lot of global money being pumped into this area.

The other policy in the direct action plan is to invest $100 million each year for an additional one million solar energy homes by 2020. As I said, this is the 2010 election policy, so it is slightly out of date. We are already on track for one million rooves by the end of 2014, so this plan as printed today is out of date and behind the times. As at April 2012, we are already in excess of 677,000 solar power systems, whereas the direct action plan estimates 275,000 by the end of 2012. I think they might need to update this document.

In their solar cities program, which I think was touched on by the member for Flinders, projects were announced for Adelaide, Townsville, Blacktown, Alice Springs and Central Victoria, 'providing practical benefits for the community, including PV, solar hot water and smart meters on public and private buildings'. The reality is that these are already solar cities, so I am not sure why we would need to go back and have a policy where we are going to try and take lessons from these. I think we should just let the industry get on with what it is already delivering.

The other surprising commitment is to fund 125 mid-scale solar projects in schools and communities. But we had 784 schools provided with solar power systems in the last funding round of the National Solar Schools Program, and already over 4,000 have been installed. I know this, because it is something I have been trying to push in my electorate. The schools are already ahead of the politicians. When complete next year, 70 per cent of schools will have a solar power system.

I would suggest there are some serious funding questions as well in this direct action plan. That cost of $1,300 per household is too high. It is time for the coalition, obviously, to reconsider this policy. I would ask for it to reconsider the scare campaign, although I would suggest it is going to be ramped up on the shrill factor to 11 in the lead-up to 30 June.

As a parliament everyone agrees—both sides of the chamber—that we need to take climate change seriously. There are really not too many sceptics that have got a voice on that side of the chamber. We need to do more so that we take action. The bills before the House are part of this plan. The Clean Energy Finance Corporation Bill 2012, Clean Energy Legislation Amendment Bill 2012, Clean Energy (Customs Tariff Amendment) Bill 2012 and the Clean Energy (Excise Tariff Legislation Amendment) Bill 2012 are another step in the right direction and I commend them to the House.

Andrew Robb (Goldstein, Liberal Party, Chairman of the Coalition Policy Development Committee) Share this | Link to this | Hansard source

I rise to speak on the Clean Energy Finance Corporation Bill 2012 and related bills. Well, I had to go and look at the running order a few minutes ago because I was confused. The member for Moreton did not seem to talk to the bills in any sense. It surprised me because, as the lead speaker for the government on supposedly one of their most significant initiatives, all we heard was 15 minutes of negativity and an avoidance of the big issues in this. There was no attempt to justify this carbon tax and all the related regulations and difficulties and costs that are going to be incurred by businesses and households, by the whole community. All we heard was a whole lot of platitudes intermingled with endless negative abuse of this side of politics.

This Clean Energy Finance Corporation is the product, unfortunately, of grubby politics. It is the product of a desperate last-minute deal, a $10 billion political bribe to win the support of the Greens for a carbon tax—pure and simple. That is what it is. Once again the Prime Minister caved in to the demands of the Greens and once again Australians will pay very heavily for this weakness and this lack of principle in dealing with major policy issues.

Setting up a government bank with borrowed billions, underwritten by taxpayers, to invest in high-risk ventures should be a thing of the past in this country. Hasn't this government learnt anything from past debacles such as Tricontinental, Western Australia Inc. and the State Bank of South Australia? These were the investments and the types of organisations which helped create the brand image of those on the other side of politics of being unable to manage money—and it was a well-earned reputation. You would think people would learn from their mistakes, but here we go again, just because the Prime Minister sought to save her political skin at any cost to the taxpayer. Has this government not learnt from the US government's costly attempts to pick winners in renewable energy? Names like solar panel manufacturer Solyndra come to mind: it went bankrupt after receiving $500 million in loan guarantees and it cost 1,100 jobs. Others to go under in the US include Evergreen Solar, SpectraWatt and Beacon Power.

This Clean Energy Finance Corporation is the price Labor is happy to pay for Greens backing. It is the Bob Brown bank—the Bob Brown who has dictated so many of the stupid, irresponsible and dangerous decisions that this government has subsequently sought to introduce since the first weeks of this government when it caved in on so many things, and has since proceeded to cave in, in order to placate the Greens. The nation will pay heavily in all sorts of ways, and this Clean Energy Finance Corporation is another one.

Tricontinental was a merchant bank arm of the State of Bank of Victoria, and the State Bank collapsed under the weight of the $3.5 billion in bad loans made to the corporate cowboys of the 1980s by Tricon. The Review Panel of the Clean Energy Finance Corporation says of the CEFC initially that 'it is anticipated that the majority of its investment will be loans'. That reminds us very much of the State Bank and Tricontinental. For the CEFC, the $10 billion of borrowed money will be over five years starting in 2013-14, with the first $2 billion instalment to be paid into a special account in July 2013—in all likelihood, just prior to the election. It is to be invested in projects the banks would not touch with a barge pole. This is the stupidity of this proposal. It is money that will be mostly hidden from the budget bottom line, covering up their mistakes. If you did include this money you would see it eating into the forecast surplus. Over the forward estimates, $6 billion will be pumped into the CEFC. Just $320 million shows up in the underlying cash balance. This supposedly includes a 'prudent recognition that some investments will not be recovered'. Taxpayers will carry both the hidden debt exposure and the interest rate exposure. In Senate estimates, Treasury conceded it had factored in that 7.5 per cent of invested capital would not be recovered. On $10 billion, that is $750 million that is expected to be lost—just a lazy $750 million of borrowed money. This is a government with no sense of the value of money. It sees its value only in what it can deliver in a political sense to the government. It would be the most Pollyanna assumption that it will only lose $750 million. The way this government manages money, it will be billions.

The CEFC along with the National Broadband Network white elephant are reasons debt continues to rise despite Labor claiming to be returning to surplus. They have a $300 billion debt ceiling included in the budget legislation, an increase of $50 billion, and yet they claim they are going to surplus. It is an absolute joke. It is a deliberate deception. It is tens of billions of dollars that should be on the budget bottom line. It should be, but it is not. This is a government which is into deception and spin and irresponsible investment of taxpayers' money. Now they are borrowing billions and billions more, and the taxpayer will have to pay this back at some stage.

There are precedents in the budget papers as to why the CEFC should be on budget. There is an existing program which was announced as a budget measure only 12 months before the last one, in the 2011-12 in budget. At page 304 of Budget Paper No. 2 it is there in black and white:

The Government will provide $108.7 million over 14 years to support the development and commercialisation of renewable energy technologies by making early-stage equity investments that leveraged private funds.

Doesn't it sound very familiar? It sounds exactly like the description of the Clean Energy Finance Corporation. I would like the next speaker to explain to the parliament what the difference is. There is no difference, we all know that. This is a cheap political stunt to get money off the bottom line and to try to save the skin of this Prime Minister. The only difference is the scale of the investment. It is an identical fund—one is on the budget; one is off.

The government says that this corporation will be independent. The Leader of the Greens, Christine Milne, states:

It is an independent authority, it isn't something that's going to have political interference.

These bills make it clear that this will not be independent. The board members—the chair and up to six others—will be appointed and removed by the government. Of course, there is no political interference or political direction! The government's board will appoint the CEO after consulting key ministers, but there is no political interference! There is independence, of course, but they must consult key ministers before they make a decision. The government will inevitably also consult the Greens. These bills also give the responsible ministers 'powers of direction over the broad mandate of the Corporation'. It puts a lie to what Senator Milne had to say. They will say anything in order to justify the unjustifiable.

The most absurd thing is that the renewable energy target was 20 per cent before this was announced and it is 20 per cent after it was announced. This is the reason this finance corporation should never exist. There is no justification. $10 billion will not increase the level of renewable energy in the grid because the target remains the same. What an absurdity! They bring in a carbon tax which morphs into an emissions trading scheme and they set a target of 20 per cent, and the credits that are issued each year will relate to how well the economy is achieving against that target. All we are seeing with this corporation is that the sale of carbon permits will be adjusted to meet the target and all the CEFC will do is see what would otherwise be cheaper emission reductions replaced by more expensive emission reductions. That is a fact confirmed by so many and yet this government has gone ahead with the scheme. All it will do is increase the cost of achieving an emissions reduction. And this is the government that talks about implementing a market based scheme!

The expert advisory panel, in its report, highlights these inherent risks. It says that a commercial investment filter will be applied to potential projects. The panel says:

The filter will not be as stringent as the private sector equivalent, as the CEFC has a public policy purpose.

Consequently, it has different risk/return requirements. For a given return, the CEFC may take on higher risk and, for a given level of risk, due to positive externalities, may accept a lower financial return.

What all that gobbledegook is saying is that this is a recipe to waste money we do not have. It is a recipe to waste borrowed money which taxpayers will have to repay. It is another symbol of Labor not been able to manage money.

The bill's explanatory material states:

The investment mandate will be in the form of a written legislative instrument. Because the investment mandate represents the policy direction of the Government and has the potential to impact on the Commonwealth Budget, it will be a non-disallowable instrument.

It has just smashed through this parliament and it is indefensible. It will increase dramatically the cost of achieving emissions and it will do nothing to increase the emissions in the country because of the cap.

There is an inexplicable omission. The fund is barred from supporting carbon capture and storage initiatives. The review panel observed:

With the abundance of coal in Australia, our cost of electricity is one of the lowest in the world.

Under a section titled 'Exclusions' it states: The government has announced the CEFC will not invest in Carbon Capture and Storage projects or technology.

Again, this is the Greens lording it over the government and lording it over the community. It is blind ideology. To the Greens, fossil fuels are the devil incarnate. They cannot be used. Irrespective of whether we could make the coal cleaner in order to maintain comparative advantage and our cheap electricity that we have enjoyed for 100-plus years, the CEFC deliberately sets out to erode this. It just shows the extent to which this government and this Prime Minister have so tugged their forelocks to the Greens party, which has been at the centre of so many of the cost increases that have been incurred over the last 18 months to two years, and it is demonstrably and rapidly making many areas of Australian business uncompetitive. When this carbon tax comes in we will see a real manifestation of how our competitive position can be eroded so dramatically on so many fronts.

So who will benefit from this slush fund? We will see the white shoe salesman and the dodgy operators that give the many reputable renewable energy businesses a bad name. This is exactly what happened with the pink batts. We have union funds, of course. It is no coincidence that the super funds are heavily invested in renewable energy projects. It will be a great temptation for the CEFC to give support to many of the investments on a non-commercial basis.

This piece of legislation is extremely dangerous and unnecessary and it should be stopped in its tracks. We should return to managing government money in a sensible and proper fashion.

Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

After that performance I think the House could profit from some information about the bills that we are debating. The Clean Energy Finance Corporation Bill 2012 establishes the Clean Energy Finance Corporation. It empowers the corporation to invest directly and indirectly in financial assets for the development of Australian based renewable energy technologies, low-emission technologies and energy efficiency projects. The significant thing about this is that it is a measure designed to support, promote and develop Australian industry and to enable us to take advantage of renewable energy technologies, something we have really failed to do, unfortunately, in the years gone by. We have to a considerable degree missed out on what has been an emerging, growing area of technological development and manufacturing jobs.

The accompanying bills to be passed with the Clean Energy Finance Corporation Bill 2012 by 1 July will provide market certainty around the changes. In April the government released the expert review panel's report on the design of the $10 billion Clean Energy Finance Corporation. The government accepted the recommendations of that report and is implementing them through this bill. Clean energy technologies face a range of obstacles in attracting financing: current global financial conditions, the complex nature of Australia's electricity markets, the cost of renewable energy and preference of investing institutions for listed assets inhibit the financing of the clean energy sector. The corporation will invest in financial assets for the development of Australian based renewable energy technologies, low-emission technologies and businesses that supply the required inputs which are critical areas to the transformation of the Australian economy. It will leverage private sector financing.

The bill requires the corporation to have at least half of its investments in renewable energy technology by 30 June 2018 and thereafter. It is expected that the corporation will apply a commercial filter when making its investment decisions, focusing on projects and technologies at the later stages of development. The filter will not be as stringent as the private sector equivalent, as the corporation has a public policy purpose and values any positive externalities that are generated. By using a commercial filter, it is expected the corporation will invest responsibly and manage risk so it is financially self-sufficient and achieves a target rate of return. The government will provide $2 billion of funding to the corporation per annum for five years, starting in 2013-14, with profits—including any capital and interest earned—available for reinvestment. The corporation will make individual investment decisions independently of the government.

The Clean Energy Finance Corporation is part of a suite of government initiatives designed to transform the Australian economy for a cleaner energy future. The government's $10 billion investment in the Clean Energy Finance Corporation will play a vital role in unlocking significant new private investment in clean energy projects and the supply chain that feeds into these projects. Australia's clean energy market is an early stage market, categorised by incomplete knowledge and limited experience of risk. This means that there are barriers inhibiting the effective allocation of capital.

The expert review chaired by Jillian Broadbent identified a number of common barriers inhibiting financing of the clean energy sector, such as availability and cost of finance. The Clean Energy Finance Corporation will make investments and encourage private sector investment in clean energy technologies, but there may still be market barriers that prevent these projects going ahead—for example, if investors are not familiar with emerging technologies. The Clean Energy Finance Corporation will have tools at its disposal to tailor investments to address market barriers. These tools include a capacity to provide funds, change the allocation of risk amongst participants and offer a concessional cost of funds. The Clean Energy Finance Corporation will act as a catalyst to private investment which is currently not available, and thereby contribute to carbon reduction and cleaner energy. It is not the intention of the Clean Energy Finance Corporation to directly compete with the private sector. Rather, it will seek to leverage more private sector investment.

The introduction of a carbon price is the key to changing the underlying economics of clean energy projects and making them more competitive. A carbon price in conjunction with the Clean Energy Finance Corporation will build on the government's investments in new renewable technologies and better and more efficient ways of using our energy resources. These efforts will create an incentive to reduce emissions, drive investment in renewable and low-emission technologies, create certainty for business investment and begin the adjustment of our economy to a cleaner energy future.

The member for Goldstein queried the purpose of the legislation and of the Clean Energy Finance Corporation. We need to say that this is a measure to boost Australian manufacturing. The carbon pricing mechanism and, in the particular, the Clean Energy Finance Corporation, will generate additional manufacturing opportunities for Australian firms. Australia could become a world leader in creating green industries, generating up to a million green collar jobs by 2030 and multibillion dollar export opportunities in green technology. Australia is well placed to lead an economic renewal based around clean industries and green jobs, but we will need to act quickly to compete with countries such as Germany and Denmark, which are already greening their workforces and dominating the international green market in solar and wind technology.

The good news is that there has been a great deal of work done to kick-start the structural change geared towards renewable energy development. For example, the company Beyond Zero Emissions has produced a report titled Zero carbon Australia stationary energy plan, which is a 10-year road map for 100 per cent renewable energy generation, with baseload energy supplied by renewable sources at a cost of $8 per household per week, a similar electricity price rise to what may be expected in Australia's business-as-usual electricity market. The plan includes concentrating solar thermal power with molten salt storage supplying 60 per cent of electricity demand, wind supplying 40 per cent, and biomass and hydroelectricity being used as contingency backup for up to two per cent of annual demand.

This comes at a time when the world is currently experiencing a boom in clean energy investment that I think is the beginning of a new industrial revolution. Last year, a record-breaking $260 billion was invested in new renewable energy projects across the globe. In fact, clean energy investment has hit new records in seven of the last eight years, and even the oil giant BP predicts that renewables will be the fastest growing energy sector every year until at least 2030. More staggeringly, the global clean energy and environment sector is now valued at $4.7 trillion, which is three times Australia's annual gross domestic product. Last year was also the first year when clean energy investment exceeded investment in fossil fuels, led by skyrocketing investments in countries like America, China, India and Brazil. These investments now underpin between 2.3 to three million jobs in clean energy industries worldwide. Globally, more renewable energy was built last year than fossil fuel energy. The Chinese solar industry is leading the way, and it is claimed that solar will be cheaper than coal within a decade.

Australia has what it takes to be leading this race: world-class renewable energy resources, a skilled workforce and a proud history of innovation. However, of that $260 billion which I mentioned was being invested last year, only $4.7 billion of it was in Australia. So we have been missing out and I think it is an excellent time for us to be investing in clean energy. Australians overwhelmingly support a renewable energy future for Australia. Close to 90 per cent support greater investment in clean energy and 80 per cent of Australians believe that clean energy investment is good for jobs.

A recently released report by 100% Renewable Energy shows the results of a poll conducted through the first half of this year of 12,000 Australians on their attitudes to solar energy. Ninety-four per cent of the respondents said they wanted to see big solar projects built in Australia and 95 per cent wanted to see governments investing in big solar projects. While respondents understand that the private sector will do the heavy lifting, they do expect governments to lead. Governments in many of the major economies of the world are moving strongly to create jobs in solar industries of the future and to safeguard their environments and energy grids with safe, clean solar power. A number of themes emerged through the comments that were made in this poll, which included the risk of Australia getting left behind, falling costs of solar, the need to move away from coal and gas, the opportunities in jobs and regional development, and the desire for political leadership. The results of this poll show that Australia is ready for its leaders, of all political parties, to embrace the huge opportunities that are out there in renewable energy such as solar power. The community is calling for it, business is ready to invest and we have the resources.

Australia is one of the sunniest countries on earth and yet our largest solar power station is a mere 1.2 megawatts. With the sun drenched landscape so much a part of Australia's identity, it makes sense for us to be using this valuable resource to supply energy for our nation. We are embracing solar panels on our rooftops—and I think that is terrific—but we have so far not grasped the opportunity of large-scale solar power to generate electricity, employment and energy stability into the future. Solar thermal power plants that store the sun's energy after the sun goes down can provide baseload power for our industries, while solar PV at utility scale is expected to be cheaper than coal or gas by the middle of this decade. In combination with other renewable technologies such as wind, solar power can make our power supply cheaper and cleaner and just as reliable as that which we enjoy now. Investment in large-scale solar will also set Australia up to benefit from stable electricity prices for decades to come in a way that coal and gas, with their exposure to volatile international energy markets, can no longer guarantee.

The high level of community support for investment in new solar technology demonstrates the importance of bodies like the Clean Energy Finance Corporation. Communities are seeking bipartisan support for this kind of investment. The Clean Energy Finance Corporation could deliver five gigawatts of solar PV and two gigawatts of solar thermal by 2020, which is the equivalent of seven large coal fired power stations. I think it comes at exactly the right time to give Australia the leg-up that we need to enter the global renewable energy race. It will overcome the barriers which have stymied our clean energy sector for too long, and unlock significant new investment and jobs in Australia. Despite the uncertain global economy, this sector is set to become one of the biggest industries of tomorrow. In conjunction with our 20 per cent renewable energy target, it will deliver diversity in our mix of energy as 'insurance to Australia securing the lowest cost of energy in a carbon constrained world', and it will create tens of thousands of jobs to underpin a strong future economy. It equips Australia with a suite of policies that can pull emerging clean energy technologies right through the innovation chain, helping turn great Australian innovation into real clean energy projects.

Australians are great innovators. We live in a country endowed with some of the best renewable energy resources of any country in the world: sun, wind, oceans and hot rocks. However, as a nation we have been stumbling along in the global race to take advantage of the global boom in renewable energy. As I mentioned before, it was a $243 billion industry in 2010, and it is expected to attract $5.7 trillion of investment globally over the next 25 years. Countries like China, South Korea, Germany and the US, frankly, have been leaving us for dead, often using technologies that were developed here. We should be winning this race. We have what it takes to lead the world into a renewable energy future. Instead we have allowed other nations with less technological innovation and fewer natural resources to get ahead. Our universities have consistently delivered world-leading innovation in renewable energy, but, when it comes time for commercialising these technologies, a pattern has emerged that sees the innovations going offshore. We can and should put a stop to this. These have been missed opportunities for our manufacturing industries and a failure to capitalise on and maximise our job creation.

The Clean Energy Finance Corporation is designed to take our best renewable energy innovation to full-scale commercial operation. In conjunction with putting a price on pollution and building on the 20 per cent renewable energy target, the corporation is a critical policy that will deliver Australians clean energy cheaper and sooner. I commend the bills to the House.

Kelly O'Dwyer (Higgins, Liberal Party) Share this | Link to this | Hansard source

Tonight, I rise to speak on the Clean Energy Finance Corporation Bill 2012 and other associated legislation: the Clean Energy Legislation Amendment Bill 2012, the Clean Energy (Customs Tariff Amendment) Bill 2012 and the Clean Energy (Excise Tariff Legislation Amendment) Bill 2012. For the most part, though, my focus tonight will be on the Clean Energy Finance Corporation Bill 2012. I think it is important to understand the genesis of this bill. This bill is very separate to the announcement made by the government to introduce the carbon tax and all of the associated legislation that goes with it. The genesis of this bill was cooked up between the Labor government and the Greens at the direction of the Greens because they wanted to invest $10 billion of taxpayer money into renewable energy projects of their own choosing. At the time Senator Milne commented on the Clean Energy Finance Corporation, or as it has colloquially become known 'the Bob Brown bank', and said:

With a legislatively guaranteed stream of funding outside the budget, no future government will be able to undermine it without changing legislation.

That is the point of the legislation that has been brought before this House. This legislation is designed to make it very difficult for any other government to undo. What does it seek to do? According to the government, it seeks to invest in financial assets for the development of Australian based renewable energy technologies, low-emission technologies and energy efficient projects. It has the power to enter into investment agreements and make investments through subsidiaries. It has a duty to ensure that, as of 1 July 2018, half the funds invested at that time for the purposes of its investment function are invested in renewable energy technology.

The legislation also sets out a special account through which it will operate. Into this account $2 billion of taxpayer money per annum will be paid for the next five years, with the first instalment due to be paid on 1 July 2013 and each subsequent year after that, totalling $10 billion. It has the purpose of making payments to the CEFC and to the Australian Renewable Energy Agency, ARENA. The CEFC, according to the government, is intended to be self-sustaining once it is mature. The funds are meant to be returned to the CEFC for its investments and will be available for re-investment. That is what the government says the objectives of the bill are, and that is what it says the bill will do. However, we know that there is a huge difference between what the government says and what the government actually does.

It is important to note that the consultation on this bill has been negligible. The consultation process has been virtually zip. When you consider that the House of Representatives Standing Committee on Economics is currently still looking at this bill—the report has not even been tabled—yet the government is debating this bill in the House. Let me just outline to you the amount of time that the House of Representatives Standing Committee on Economics has had to look at this bill. The committee was notified on Thursday evening that a meeting was to be called because a referral had been given by the government. The committee met the following Friday morning at around 11 o'clock and it was determined by the government that the bills be referred to the committee. A media release went out that Friday afternoon calling for submissions. Submissions, of course, were closed on the Monday. So, following the weekend, submissions were closed and the only people invited to present for 2½ hours to the House of Representatives Standing Committee on Economics were the Department of Climate Change and Energy Efficiency and the Treasury. There was no public consultation, nothing was heard by any market participants and no-one else was invited. It was effectively an in-camera job.

So, we have had one session of 2½ hours for a $10 billion bill. That is about $4 billion an hour. There has been no public consultation with industry or market participants and, as I said, the bill is still being considered by the House of Representatives Standing Committee on Economics, and the report will not be tabled until tomorrow. But we know, really, that this is all a sham consultation process. Who could deduce otherwise from that timetable? The only conclusion that one could draw is that the government is seeking to avoid scrutiny of this bill because it knows it will be damned by that scrutiny.

Let us take the opportunity to have a look at what little evidence the committee could glean in that 2½ hours. Of course, the committee was shut down from any further scrutiny of the bills despite the fact that there were a number of members who sought to extend the timetable. The mandatory renewable energy target is something that is a bipartisan target of 20 per cent of mandatory renewable energy in Australia. Questions were asked. With this additional funding of $10 billion, will we see additional energy targets increase? Will we actually see more renewable energy as a result of a $10 billion 'investment' of taxpayer dollars into this renewable energy? I am sad to say that, in fact, there will be no change to the mandatory renewable energy target as a result of an additional $10 billion. I would like to quote from the evidence that was provided to the committee. My colleague Steve Ciobo asked this direct question of Treasury:

So, the purpose of the Clean Energy Finance Corporation is to drive investment into renewable energy, but it is going to make zero difference to the renewable energy target. Is that correct?

Mr Waslin, who I must say had a very difficult task as a member of the Treasury in having to defend the government's policy, said:

The purpose is to overcome the financial barriers. The renewable energy target affects the pricing of renewable energy and what can be achieved, but the individual projects themselves may still have barriers which inhibit investment. The purpose of the CEFC is to address those barriers and not the target itself.

Unfortunately, the evidence was very clear that there will be no increase in the target despite the enormous expense to taxpayers of $10 billion.

Let us look at the investment mandate of the Clean Energy Finance Corporation. Who can forget the comments made by Paul Howes last week at the Press Club when he spoke about the need for the government to get back into the business of 'picking winners'? He need not have been too concerned because, of course, the Greens are well ahead of him, except they sort of mixed up the whole picking winners aspect. They want a very different investment mandate. They in fact want the mandate to be about the riskiest types of investment—not the cheapest, not the most efficient, but the riskiest. Again, unfortunately, we heard quite a bit of evidence—and we look to the explanatory memorandum itself—that the CEFC is charged with finding technologies in the market that are effectively unproven, speculative and too risky for commercial financing.

This of course means that not all of those investments will produce a commercial return. The explanatory memorandum states:

The fiscal and underlying cash balance impacts include a prudent recognition that some investments will not be recovered, and interest revenue. The fiscal balance impact also includes the concessional component of loans.

It is very clear from this that the government expects to lose money and a lot of it. When questions were asked of the Treasury about the fact that clearly there needed to be a rate of return for an investment, the Treasury were not able to define what that rate of return was. They speculated it could be the government bond rate, but they could not be certain because this is to be determined by the board. They said that no modelling had in fact been done but they had factored in that they thought that there would be 7.5 per cent a year of investments not recovered. When we consider that there is $2 billion of investment each year, we are talking about $150 million each and every year.

The Treasury said that this was a conservative estimate. When they were pressed on exactly how this was conservative—how 7½ per cent a year of the investment not being recovered, leaving aside the rate of return, was conservative—they had to take on notice how they had actually devised this figure. This is very concerning for everybody on this side of the chamber and it should be concerning to people on the other side of the chamber as well. It is something that we are exercised about, and I want to quote from some of the evidence. My colleague Mr Ciobo asked about the success rate. He said, 'You are predicting a 92.5 per cent success rate, which assumes that 7.5 per cent of the investments are not recovered.' Mr Nicol replied:

At the moment that is our best guess.

I think that is the key word there; it is a 'guess'—nothing more, nothing less. In fact, the government simply does not know.

More than this, the government says that the point of this bill is to have Australian investments in renewable energy. When you actually look at the bill, at clause 61, when they talk about Australian based investments it is very clear that the Australian based investments that are spoken about are investments that are to be determined by guidelines set out by the board itself. I asked a number of questions of the Treasury on this:

What about overseas investment? What about companies that are predominantly owned by foreign or overseas investors?

Mr Waslin from the Treasury replied:

We are talking about where the assets would be located and not the ownership.

I said:

So, so long as the assets are here, for the purpose of this section of the bill, you would say that that makes it an Australian-based investment?

He replied:

Yes.

I said:

Irrespective of the fact that the guidelines have not yet been drafted?

He replied:

That is what is behind the solely or mainly based. It is a similar approach to what the UK Green Investment Bank is also taking.

I said:

But it would be up to the board to take a different view?

And the Treasury had to conclude that in fact it is entirely up to the board.

In the time remaining I would like to point out that there are a number of regulations that would go with this bill, yet these regulations have not been sighted. They are regulations that go to the heart of this bill. It causes us great concern that we have not been able to sight these regulations. We are also very concerned about the appropriation that has been provided to the CEFC for their ongoing costs: around $57.3 million over the forward estimates. This is drastically differently to the operating costs of the Inspector-General of Taxation, at around $1.5 million. When you look closely at the legislation there is nothing to prohibit the board setting very high salaries, for instance, for the CEO. There is no limitation on that amount. Again, it is entirely at the discretion of the board.

We are told by the Treasury, by the government, that the CEFC is going to be totally self-sufficient by 2015-16, yet there is no evidence to support this. It is merely a hope. It is merely something that the government wishes to be. Again, there is no evidence to support the statements that have been made. So what do we know? We know that this is $10 billion of taxpayers' money, $10 billion that has to be borrowed, $10 billion that will have to be paid for by not only this generation of Australians but future generations. What will we get for this? It is totally unclear.

The government has avoided scrutiny at every opportunity because it knows that the bill does not stand up to scrutiny. If those on the other side thought that these investments were so wonderful, they themselves would invest their own money in these investments. The ministers on the other side would put their superannuation funds in the hands of the CEFC. But I bet you they will not, and the reason they will not is that they know what we know: that this is bad legislation. The returns will be negligible, if anything, and it is an indictment on this government that this legislation has been brought forward.

Mike Kelly (Eden-Monaro, Australian Labor Party, Parliamentary Secretary for Defence) Share this | Link to this | Hansard source

How exciting it is to be able to speak on this visionary bill, and how disappointing it is to hear what should be the bright young future of the Liberal Party lining herself up with the dinosaurs on the front bench. What a giveaway it was to hear the member for Goldstein talk about this bill and lump it in with the NBN. Nothing could explain or illustrate to you better the lack of vision, the lack of imagination, that this coalition demonstrates. It is the sort of issue we face with a party and a coalition that is unable to meet the challenges that confront this country not only in relation to climate change but in relation to the economic needs of this country in being able to diversify our economy into the future. We heard reference to the consultation and development of this project. It makes me laugh when we think back to the Howard government's $10 billion water plan on the beer coaster that did not even go through cabinet compared to the extensive development that went into this project. We also heard the member for Flinders talk about the Howard government's record in introducing a mandatory renewable energy target. The shame of the Howard years was that through that 12-year period we saw our renewable energy generation capacity decline from 10 per cent to nine per cent. That was an incredibly shameful record of lost opportunities.

This bill is not just about climate change. In fact, you do not even have to believe in climate change to support this bill, because this bill is all about tackling those economic challenges we face, the challenges that are generated by the mining boom and the need to have an economy where we are investing in infrastructure, skills and innovation. This bill really addresses the innovation aspect of that trifecta. It also addresses the needs we will have in energy security and the needs we will have to improve the health of our population. We have the health minister here with us tonight. There are significant benefits to be had from cleaning up the air in our major cities and from getting to renewable energy. Remember, this is the move from non-renewable energy—in other words energy that will expire—to renewable energy.

In every development, every technological advancement and market improvement in human history there is always a period where price competitiveness is an issue in the introduction of new technologies. The first time you went out and bought a plasma TV they cost $12,000. They are now pushed out the door for less than $1,000. What we intend to do with measures like these is get that impetus, the strategic weight behind the shift to renewable energy. And then, as the market share increases, the volume increases and the technology improves so the price comes down. In effect, what we are doing for Australians through measures like these is delivering them a future of cheaper energy in the long-term, as renewable energy sources will inevitably be. It is the coalition that would deny them that future security and cheaper power.

It is important we get involved in innovation, as I mentioned. That is the challenge we face. We can see the impacts on our economy of the mining boom. I look to the example of Israel. I have been to visit Israel and looked at the way it has addressed innovation with similar constraints to Australia of not being able to compete with cheap labour from sources such as Asia. Innovation was the way it drove an economy that is leading the world in technological advance. This is a country that, I might point out, is 7,000 square kilometres smaller than my own electorate of Eden-Monaro yet has a venture capital pool of $16 billion. Certainly this has been driven by government policy creating a program very similar to this that stimulated co-investment from the private sector into innovation.

We heard the member for Higgins talk about the risk component of this project. It is precisely the fact that the culture of venture capital and risk-taking in Israel has delivered the economic benefits achieved. There is a need in this country to generate a culture of taking risk in innovation and in start-ups. This Clean Energy Finance Corporation Bill will help deliver that. What am I talking about? I have an example in my own backyard of Spark Solar, the company of the wonderful young scientist Michelle McCann, who had done lots of research into more efficient solar cells. Spark Solar had proposals to develop a company in Queanbeyan which would have eventually been looking to export into our region. For the want of $2 million as a final piece of investment in that company, the whole project fell over. We cannot afford to see those sorts of projects fall over. We are seeing over a billion dollars worth of investment in my region in renewable energy projects but it is into these value added, high-tech companies that we also need to diversify. This is critical. We must get behind those entrepreneurs who we have seen bleed overseas in the past.

I am also concerned that this is an aspect of our energy security. When I was in Defence and had the Middle East desk I tracked the sources of funding coming into our region to fund radical madrassas and terrorist movements as coming from some unhealthy sources of petrodollars. We know that our country is currently 80 per cent self-sufficient in fuel supplies but within 15 to 20 years that figure will flop over. We will become 80 per cent dependent on foreign supplies, which means we will be at the mercy of OPEC and conglomerates and cartels such as that, which will add to our balance of payments deficit and fuel the sources of income to some of those unhealthy influences in our region. So it is important for us to get behind transitions as quickly as possible from fossil fuels.

There is a wonderful company near my region in the Shoalhaven called Algae Tec, which is developing brilliant technology for biodiesel fuels, and this very exciting. Projects like that will have a significant boost from these sorts of finance corporation measures. We know that these measures are intended to overcome the financial barriers to commercialising and deploying cleaner energy technologies. To move us through this process we know will take us to a 40 per cent generation figure by 2050. We are on track to achieve our 20 per cent target by 2020. These measures will get us over some of those hurdles we have experienced in investment and the timidity we have seen in investment in these sorts of industries and technologies in the past in this country.

But there are lots of measures in this bill that are to be admired for their elegance. For example, what we see with the requirement to apply a commercial filter is the combination of private sector skills and disciplines married to public policy guidance. With the funds that will be generated and that will be deployed through the appropriations, we will eventually see a self-sustaining finance mechanism. A special account will be created to manage surplus funds and to limit the corporations' need to undertake a cash management function. There will also be a mechanism whereby the board will be governed by an investment mandate from government. This will be where the public policy guidance will emerge even though there will be a high degree of independence. The sorts of directions that will appear in that mandate will deal with the issues of risk and return, eligibility criteria, investments in renewable energy technologies, low-emission technologies and energy efficiency projects, the allocation of investment, limits on concessional investments and types of financial instruments in which the corporation may invest in broad operational matters. And, very importantly, we intend to apply the Australian Industry Participation Plan framework to the corporation through this investment mandate with the objective of ensuring that Australian industry is afforded full opportunity to participate in these projects. And so this investment mandate will be in the form of a legislative instrument.

How is this being received by the business world? We know that a Deloitte study of over 40 senior executives from Australian banks, super funds, venture capital firms and major investors found that they overwhelmingly support this mechanism. Certainly, we have seen comments from the Clean Energy Council, which stated through the chief executive, Kane Thornton, that this will help bridge that gap between early research and development and the commercial rollout of clean energy technologies. The Australian Solar Energy Society said that the CEFC is set to help unlock substantial investment in community-scale, commercial-scale and large-scale solar energy. In fact, they called on the federal opposition to back the CEFC. They said that the CEFC is effectively helping to meet some of the goals that would normally be part of the philosophy of the Liberal Party—a coalition alignment—in relation to tackling climate change through commercial mechanisms and commercial filters. But, of course, we have seen the abandonment of those principles by the coalition and we have seen them so reluctant to adopt measures which actually promote business and investment through all of the propositions that we have put.

But certainly the corporation, through loans, loan guarantees and equity investment support, will begin operation, based in Sydney, in the period from about 2013-14. Of course, there is the potential through the $10 billion that this fund will have at its disposal to leverage something upwards of perhaps $100 billion in private investment through the co-investment strategies and requirements of the scheme.

I would draw the attention of members to an excellent article in the Sydney Morning Herald by the economist Simon O'Connor, who pointed to other mechanisms like these: the UK Green Investment Bank, the German development agency and the China Development Bank's $30 billion clean energy investments. We have been falling behind in this space, and the analysis that he put together is very instructive. Whereas the rest of the world is embracing this method of accelerating renewable energy investment at a time of intense global spending pressures we have been falling behind. He said:

Renewables are one of the few global industries that registered continued growth throughout the GFC. Clean energy investment is up 500 per cent since 2004.

Couple this with longer term energy forecasts and the necessity becomes very apparent. He continued:

Investing now in diverse sources is critical for the holy trinity of power: energy security, insurance against price shocks and lower energy prices.

He also stated:

Most energy analysts believe it is only a matter of time before our cheap fossil fuels inflate to international prices, all because of that very successful LNG and coal export program we've got going.

He points out:

Solar costs dropped by 50 per cent in 2011 alone.

So we are seeing that clean energy can indeed be cheaper, as I highlighted earlier with how we transition from one form of technology to the other. He also pointed out that another reason is the investment case. He stated:

Australians have more than $1 trillion invested in super funds, the majority of which is being battered by overexposure to global and domestic equity markets.

So:

… part of the solution relies on a more diverse asset allocation in pension fund portfolios.

He stated:

Indeed, when the global asset consultant Mercer investigated the overexposure of pension funds to climate risk, it came to the conclusion that 40 per cent of portfolios should be reallocated to climate-sensitive assets—such as clean energy.

The Clean Energy Finance Corporation, like its global cousins, responds to these challenges by broadening the energy infrastructure assets accessible to institutional investors. The corporation will help package these clean energy assets into something that a super fund, or other large investors, can finally take a stake in.

Super funds in Australia have shown some desire already to go down this road:

Industry Funds Management owns Pacific Hydro on behalf of the industry super funds, VicSuper seeded the Cleantech Australia Fund and REST super is a cornerstone investor in a major wind farm development in Western Australia.

This, as Simon points out, is a far better mechanism than a so-called direct action policy that would require bureaucrats to pick winners. He states:

… the CEFC is a commercially driven co-investment vehicle, run by independent, financially experienced staff, chaired at this point by the impeccably credentialled Jillian Broadbent—

as he describes her. He describes this as:

… the winning strategy for mums and dads with their money in super and the investors who oversee it.

I would also like to point out, while we are at it, that in relation to the health benefits motor vehicle emissions, for example, are the main cause of outdoor pollution in Australia, accounting for about 75 per cent of that. We know that all of these particulates and pollution from the current source of non-renewable energy cause upper respiratory irritation, chronic respiratory and heart disease, lung cancer, acute respiratory infections in children and chronic bronchitis in adults, aggravating pre-existing heart and lung diseases or asthmatic attacks. In addition, short- and long-term exposures have been linked with premature mortality and reduced life expectancy.

What we can benefit from in this measure is an energy-secure and healthy future, and something that will meet the energy needs of future generations of Australians well into the future. It is this sort of creative solution to stimulate innovation and the diversified economy that this nation must have and which is long overdue. It will provide us with a potent sword to complement the shield of other measures we have introduced to slay our carbon emissions dragon. It will help us to provide the energy security, prosperity and rewarding jobs that our children have the right to expect. And it is within the gift of this generation of Australians to deliver. I commend the bill to the House.

Paul Fletcher (Bradfield, Liberal Party) Share this | Link to this | Hansard source

I am pleased to rise to speak on the Clean Energy Legislation Amendment Bill 2012, the Clean Energy Finance Corporation Bill 2012 and the related bills. The Rudd-Gillard government has had a lot of bad ideas. It has had a lot of ill-thought-through ideas. It has had a lot of politically motivated ideas. It has had a lot of ideas which have been very hastily put together to meet short-term political objectives without thinking through carefully whether they make good long-term economic or policy sense. The Clean Energy Finance Corporation ranks right up there with some of the very worst ideas the Rudd-Gillard government has brought forward in its deeply undistinguished nearly five-year tenure. The essence of the policy package that this House is considering this evening is that the Commonwealth government should take $10 billion of taxpayers' money, together with some running costs, and put that money into projects that the private sector would not touch. Supposedly this is going to be a commercially successful venture, yet this investment fund is constrained to invest in projects that the private sector would not touch. It is extraordinarily difficult to understand how anybody could imagine that this is going to be anything other than a spectacular financial disaster.

In the brief time available to me, I want to make three points. The first is that the rationale for this measure—the reason the House is considering it—has nothing to do with policy; it is pure politics. It is because of a promise that a desperate Prime Minister Gillard made to the Greens. The second point I want to make is that, to fund this promise, the Gillard government is spending $10 billion that it does not have. All of this is borrowed money, and they have resorted to dodgy accounting to try to hide that fact. The third point I want to make is that this is going to be a dud investment for the Australian taxpayer. Any taxpayer who thinks that we are likely to get back all or even some of the $10 billion is, I fear, going to be facing a very disappointing outcome indeed.

Let me turn to the first proposition. The reason that the House is debating the Clean Energy Finance Corporation proposal this evening is that the Gillard government was desperate to secure the political support of the Greens to cling onto government and, in turn, committed to introduce a carbon tax despite having gone to the 2010 election promising there would be 'no carbon tax under the government I lead'—the famous words of Prime Minister Gillard. In addition, the Gillard government was forced to do something that the Greens insisted on as a political price for supporting the package: the Gillard government was forced to agree to tip $10 billion of taxpayers' money into this ill-considered Clean Energy Finance Corporation. We first heard of it in July 2011 after the package negotiated between the government, the Greens and the Independents was finally announced.

Let me remind the House of the euphoric, giddy words of Greens Senator Milne, who was the co-deputy chair of the Multi-Party Climate Change Committee. Charged with the euphoria of victory, she said on 10 July 2011:

The Greens welcome the leap forward towards powering Australia with 100% renewable energy secured as part of the agreement to put a price on pollution announced today with the government and the independent MPs.

The Australian community is crying out for renewable energy and I am delighted that we have been able to deliver Australia's biggest ever public investment in renewable energy …

Those were the words of Greens Senator Christine Milne in July 2011 as she ecstatically claimed victory in securing this $10 billion commitment of borrowed taxpayers' money to go into this ill-conceived venture. It is noteworthy that key policy elements of what is coming before the House this evening are elements that were specifically insisted upon by the Greens. Again I go to the statement issued by Senator Milne:

Securing a guarantee of 50% of the Clean Energy Finance Corporation fund for renewable energy … is the biggest single investment in renewable energy Australia has ever made.

In other words, a key design feature of the Clean Energy Finance Corporation—an insistence that 50 per cent of the money go into renewable energy as opposed to other forms of green energy—is something that was specifically required by the Greens party, and the Labor Party and Prime Minister Gillard had no choice but to accede to that. That is the sorry history of the grubby political deal which underpins the $10 billion taxpayers' cheque that this people's House is being asked to write this evening—because that is what we are being asked to do. We are being asked to write a cheque for $10 billion of taxpayers' money with very little comfort and very little reason to believe that we are ever going to see that money again.

I need hardly remind the House that no part of this policy was taken to the last election. The Australian people were never given the opportunity to decide whether they wanted to put $10 billion of their money at risk investing in ventures which the private sector had declined to invest in. That option was never given to them, but the Labor government, in cahoots with the Greens, has decided on their behalf that apparently that is a good idea.

That brings me to the second point I wanted to make this evening. It is curious that on the one hand the government thinks this is a good idea but on the other hand it is desperate to find a way to disguise the true accounting and financial impact of this measure. To achieve the disguising of the true financial impact of this measure, the Treasurer and the Minister for Finance and Deregulation have resorted to an accounting trick which they have resorted to several times already in the life of the Rudd-Gillard government. That accounting trick is to pretend that the money which is being spent is an equity investment in a vehicle which is going to generate a commercial return. That is the accounting trick which has been used for the National Broadband Network company, which is going to see some $20 billion, $30 billion or $40 billion—it could be $50 billion or more—of taxpayers' money squandered on an ill-conceived venture. That is the same accounting trick which this government is now using in relation to the Clean Energy Finance Corporation, which is again going to squander billions of dollars of taxpayers' money.

The consequence of the accounting trick—as I am sure you would be aware, Mr Deputy Speaker Symon—is that, by treating the money as an equity investment, it is not included in what is called the underlying cash balance. The underlying cash balance is the number which is colloquially referred to as the budget bottom line. The Treasurer proudly produced a budget bottom line this year that was, for the year 2012-13, a promised surplus of a bare $1.5 billion—a derisory amount, it might be pointed out, in the context of total Commonwealth expenditure of $364 billion. But he proudly claimed that he was delivering a surplus. The point I make to you, Mr Deputy Speaker—and I am sure that, to you, being the aficionado of government accounting standards that you are, it is not a point I need to underline—is that that number is the underlying cash balance, and the $2 billion a year which is appropriated by the bill before the House this evening into the Clean Energy Finance Corporation does not appear in the underlying cash balance. If those moneys were included then it would make the forward estimates look $10 billion worse than they actually look in the numbers the Treasurer presented to this House just a few weeks ago.

Let me turn to the third point I want to make. I predict that this investment of $10 billion of taxpayers' money is going to turn out very, very badly. I predict that taxpayers are not going to see a good return on the $10 billion which this government has presumed to invest on their behalf in a range of speculative and unproven technologies—technologies so speculative and unproven that they are ones that the private sector has declined to invest in.

Let us be clear here, because there were some points made earlier by the member for Eden-Monaro which seemed designed to give a misleading impression. The coalition has no objection to a venture capital industry. The coalition has no objection to people putting money at risk in innovation, green energy or any other area of new technology. We say good luck to people who do that, and, if you make money out of it, we congratulate you. But what we also say is: that is not a proper function of governments, to put taxpayers' money at risk doing it. That is something which private business people are free to do if they want to put at risk their capital or their shareholders' capital. But the idea that taxpayers' money, collected painstakingly from millions of Australians, many of them of modest means, should be put at risk in speculative ventures where there is very little confidence that the money will ever come back is the height of irresponsibility. And for this government to be doing that in pursuit of a political objective is disgraceful.

Mr Deputy Speaker, you would have noticed, when you read the expert report prepared by Jillian Broadbent and her two eminent colleagues, that there was some very careful wording. I am looking at page 9. After describing the objective that the expert panel recommends for the CEFC, the experts go on to say:

The CEFC will be challenged in achieving this objective as there is a tension between funding the clean energy sector, applying a commercial filter, and maintaining the financial self-sufficiency of the corporation.

That is the understatement of the century. That is code for saying, 'It is extremely unlikely this organisation is ever going to make a buck.'

When officials of the Treasury department appeared before the House Standing Committee on Economics yesterday, I had the opportunity to ask them if they thought this was going to turn out to be a good investment for taxpayers. I took that opportunity to ask the question, but they declined to answer. They said it was a policy decision. And I can understand why an official facing that question would duck it, because anybody who has had any experience in this area and who has seen the sorry track record of governments marching in to invest money in areas where private sector investors have trodden more warily would know that it almost invariably ends in tears.

When we asked some further detailed questions yesterday of Treasury officials about why it was that the government is expected to be able to make money out of these kinds of investments when the private sector has not been able to, the answer that I got from Mr Waslin of the Treasury was as follows:

As I said, the government is prepared to provide funds at a target rate of return which is less than the private sector's but it does also recognise the positive externalities.

Let us put aside 'positive externalities', which is a nice bureaucratic way of saying, 'The fairies at the bottom of the garden—if we hope very, very hard, and close our eyes and hum a bit, then maybe we'll get a nice positive financial return.' Let us focus on what this particular official was really saying to the committee. What he was really saying was, 'The only reason that the government might be able to do this is because the government can live with a lower rate of return than the private sector.'

Let us just understand that point because, if you look through the expert committee report, it refers to a financial target of achieving a return equal to the government bond rate. In other words, the grand financial scheme here is: the government can borrow money at the government bond rate and therefore it can accept a commercial return which is only equal to the government bond rate and no higher. Given that the government bond rate is, by definition, lower than the cost of finance which the private sector has to pay, then, if you took that logic to its extreme, government would carry out every activity in our economy because it has a lower cost of financing. That is essentially what is being proposed in the economic logic of the Clean Energy Finance Corporation: because the government does not need such a high rate of return then it is okay for it to take a risk on investing in risky and speculative technologies in green energy where the private sector has chosen not to take that risk.

There are examples around the world of governments losing a huge amount of taxpayers' money in doing this kind of thing. If I had more time I could speak about Solyndra, a US company which received a US$535 million loan guarantee from the Obama administration in 2009; the money was all lost. I do not have time.

I will conclude by saying this. This is a really bad idea. It is going to lose a bucket of taxpayers' money. And we should reject it.

Laura Smyth (La Trobe, Australian Labor Party) Share this | Link to this | Hansard source

I would like to thank the member for Bradfield for his very positive and optimistic contribution to this evening's debate. That is the kind of positivity and optimism you might expect from Thomas Hardy or from Dickens—something of that nature—though not really unexpected from those opposite. It is interesting to me that in summary the member for Bradfield's contribution to this evening's debate is all about the inelegance and the inappropriateness of government intervention into a marketplace. It is curious therefore that his side of politics is in fact opposing one of the most significant market mechanisms that this country has seen, through the introduction of a carbon price mechanism. It is extraordinary that his side of politics is this evening so vehemently objecting to intervention in the market through the Clean Energy Finance Corporation by government and yet seeks to impose a $1,300 impost on each household to fund what their side of politics has called a Direct Action Plan, which has been described as a tree in every lounge room. It is a most extraordinary proposition to put forward and then come into this place this evening and oppose the proposition to support the development of renewables in this country through the establishment of an appropriately thought-through mechanism, developed in consultation with experts and as part of an overall clean energy package. It is extraordinary that the opposition come in here this evening, having opposed household assistance, having opposed things like the Carbon Farming Initiative—which indeed will help some to the National Party's constituents, some of their farmers. They oppose that and they manage to oppose household measures and tax cuts. They have presented us with a crude so-called Direct Action Plan to address one of the most significant problems facing not only our country but our globe. It is amateurish that they come in here and present us with these thoroughly inadequate responses to significant policy problems across the globe.

I mentioned optimism earlier on, and it is disappointing once again to come into this place and have the opposition merely say 'no' to a well thought-through, well crafted policy proposal by this government. It is not simply a policy proposal of this government. I was reminded of that this week when I met some of the young people who came in to see me from the 100% Renewable Campaign, which is a community campaign working with over 100 local groups right around Australia, some of which are in my own electorate of La Trobe. They are groups that have been out polling community members right around the country; they have polled around 8,000 people face-to-face and around 4,000 people online, they tell me, about their views on the solar industry and for government investment in the renewables sector as a whole. They tell me that those results show that 94 per cent of people they surveyed support building large scale solar, for instance, in Australia and that 95 per cent support the government's new proposal for the Clean Energy Finance Corporation. It is compelling to me that there are people who have by their own resources and by their own means—some of them very limited means, I would expect—come to Canberra to speak to members of parliament about their vision for clean energy in this country. The member for Bradfield and I am sure many other opposition members throughout the course of this debate and the broader debate within our community have asked: 'Well, what we do we get back for this investment that is being made in the Clean Energy Finance Corporation, which in turn will support renewables?' What we get back is the opportunity to establish new industries, the opportunity to establish new jobs for Australians in a country and a globe which is going through economic transition. We get the opportunity to support new industries for Australians. It is not surprising that this is the next step in the government's clean energy package of measures, because our commitment to a clean energy future is absolutely apparent and has been apparent for some time. Whether it is through the carbon price, the Carbon Farming Initiative—that I mentioned as being so disappointingly opposed by people who purport to support farmers in this country and who purport to support people who could well derive an income stream by means of the Carbon Farming Initiative—or whether it is through the establishment of renewables targets or whether it is through the establishment of the Clean Energy Finance Corporation this evening, it is simply part of the sequence of events that this government is going through to build a new future for our country, one which is not reliant on old energy and which is not reliant on carbon polluting technologies.

This evening's bill, which contemplates the establishment of a Clean Energy Finance Corporation, is important because it ensures that new renewables technologies get the financial support that they need to become larger operations and to ensure that we have increasing numbers of employees engaged in those new industries. We know that clean energy technologies face a range of obstacles in attracting financing: current global financial conditions, the cost of renewable energy, the complex nature of Australia's electricity markets and the preference of some investing institutions for listed assets all contribute to the inhibiting of the financing of the clean energy sector at present. It is appropriate that we establish a mechanism to counteract that.

The Clean Energy Finance Corporation will make individual decisions about investment which are independent of government. They will be referential-backed to an investment mandate which provides a mechanism for the government to articulate its broad expectations of how that corporation might invest and how it might go about its work. In April this year we released the expert review panel's report on the design of the Clean Energy Finance Corporation. The government accepted the recommendations of that report and so it is implementing them through this bill. It has taken appropriate advice in a timely way in accordance with the range of measures which we have implemented to respond to the clean energy needs of our country and is implementing this measure through this bill.

The Clean Energy Finance Corporation will make investments for the development of Australian-based renewable energy technologies—low emission technologies, energy efficiency projects and businesses that supply the required inputs. I might say as someone who not so long ago was in commercial practice and acting in relation to clean energy opportunities that other countries' businesses had taken on, it was disappointing for me to see that the same opportunities were not being taken up by Australian companies. It is a great source of pride to me this evening to be participating in a debate that will try to support Australian-based renewables businesses. The bill before us requires the Clean Energy Finance Corporation to have at least half of the corporation's investments in renewable energy technologies by June 2018. The government will provide around $2 billion of funding to the corporation per annum for five years, starting in 2013-14, with profits being available for reinvestment. But why have a Clean Energy Finance Corporation? The investment of $10 billion in the corporation will mean that we can unlock new and very substantial private investment in clean energy projects and the supply chain that feeds into those projects. The Clean Energy Finance Corporation will enable the leveraging of private sector financing for renewable energy, low-emissions and energy efficiency technologies—investments which are critical to the transformation of the Australian economy. It will mean that the Clean Energy Finance Corporation can make investments and encourage private sector investment in clean energy technologies. It is ultimately the key to changing the economics of clean energy projects and making them more competitive in our country. It is necessary so that we can overcome potential market barriers that currently prevent those projects from going ahead—for instance, where investors are not appropriately informed about or familiar with emerging technologies.

The Clean Energy Finance Corporation will have a number of means available to it to tailor investments to address current and potential market barriers, including the capacity to provide funds, change the allocation of risk amongst participants, and offer a concessional cost of funds. Ultimately it will act as a catalyst to enable private investment which is not currently available and thereby enable a contribution to be made to carbon emissions reduction and cleaner energy.

So this is a unique opportunity this evening and it is part of the broader package of measures being put in place by this government to respond to the needs of our community to develop industry opportunities, to develop employment opportunities in new technologies industries, and ultimately to respond to the challenge of climate change which affects Australia and which affects the globe. I am keenly aware of the impacts of climate change very close to home on things like biodiversity in a very sensitive part of the world—the Dandenong Ranges. I regularly have conservation groups—organisations such as Emerald for Sustainability and other groups which support the promotion of biodiversity and maintaining biodiversity in the Dandenong Ranges. They regularly come to me and remark on how positive they feel that action is now meaningfully being taken by Australia to respond to climate change—that action is not being taken in a piecemeal way through a so-called Direct Action Plan but is being taken in a way which supports industry, which supports those who are landowners and agriculturalists, which supports households while we make the transition, and which ultimately comes back to supporting our environment and protecting that environment for future generations.

This government is strongly committed to reducing Australia's carbon pollution because we know that, if Australia takes no action by 2020, our carbon pollution could be, for instance, 20 per cent higher than in 2000. The Australian government is investing more than $5 billion in developing and commercialising clean energy technologies because we know that they will be crucial to Australia's efforts to reduce its carbon pollution emissions.

We have set a Renewable Energy Target of 20 per cent by 2020, and this means that by that stage one fifth of Australia's electricity will come from renewable sources such as wind, solar and geothermal power. It is for all those reasons that this important measure being considered this evening—the establishment of the Clean Energy Finance Corporation—is necessary. It is for this reason that we are taking steps to not only provide incentives for high-polluting business to alter its practices so that it becomes lower polluting through the carbon price mechanism. It is not only through this mechanism that we seek to change behaviours. It is not only through that but through the Carbon Farming Initiative that we seek to offer opportunities to capture carbon emissions and to offset emissions. And, finally, it is through this measure that we enable a market mechanism to be assisted by the intervention of the Clean Energy Finance Corporation to provide business opportunities, to provide employment opportunities, which go to support a properly functioning clean energy economy and our clean energy future.

It is for all of these reasons that this government has acted in a systematic, timely and well thought out way to develop a package of measures which enable our country to most efficiently make the transition to a clean energy future. There is a great deal of work yet to be done and we have engaged some of the best advice through those expert advisers who have provided their review on the operation of the Clean Energy Finance Corporation. It is through scientific advice and economic advice that we have formulated a range of policies—the carbon price, the Carbon Farming Initiative and the Clean Energy Finance Corporation—to deliver a package of reforms which provide us with a comprehensive means to respond to a clean energy future.

It is disappointing that those opposite have come here tonight once again simply to stymie debate on these issues. It is disappointing in the context of so many young people in my electorate and right around the country who have made their voices clearly known to me not simply through this week but through the course of my term as an MP and far beyond that period about the kind of future they want to see, about the clean energy economy that they want to see, about the opportunities that they want to see for our future. I am not going to squander that opportunity. Those of us on this side are not going to squander it. We are going to take the opportunity to change Australia for the better and we are doing it tonight through the Clean Energy Finance Corporation Bill 2012.

Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

I was interested to hear the last speaker mention the stymieing of debate, when you consider that we have a $10 billion fund for consideration in front of us that was actually only allowed two hours with the economics committee. If you want to talk about stymieing debate, that is certainly where we need to start.

Tonight we are here to debate the Labor Party's bill to deliver its latest $10 billion slush fund. Of course, that is not what the government is describing this bill as, but then deceiving the Australian community has become business as usual for the Gillard government. We have to look at what this government says and then compare it to what it actually does. We see that yet again with this bill before the House. The Clean Energy Finance Corporation Bill establishes another bureaucracy whose goal is to waste borrowed money that ultimately the taxpayer will be liable for. How many more times is this going to happen in the term of this government? There is a litany of failed wasteful green schemes and failed wasteful green bureaucracy after green bureaucracy. The great tragedy when you look at this fund is that the government does not actually know what to spend the money on, beyond such broad and nebulous directions as 'the corporation is a mechanism to help mobilise investment in renewable energy, low-emissions and energy-efficiency projects and technologies in Australia' and 'the corporation will finance Australia's clean energy sector using financial products and structures to address the barriers that are currently inhibiting investment'.

Yet Australia already have products and structures that make low emissions and renewable energy attractive options, don't we? We have a bipartisan 20 per cent renewable energy target, which requires all energy suppliers to source one-fifth of their power from renewable sources by the year 2020. Failure to do so will attract penalties of hundreds of millions of dollars, much of which would have to come from state energy utilities. The existing production of around 15,000 gigawatt hours of renewable energy produced nationally is expected to have to increase by an extra 45,000 gigawatt hours over the next eight years, a total fourfold increase. Every unit of renewable energy power that suppliers fall short will cost them money. A penalty of $65 per megawatt hour would equate to $65,000 per gigawatt hour and $65 million per terawatt hour. At this price, if Australia only managed to double instead of quadruple its renewable energy production, our electricity suppliers would be facing annual fines of $1.95 billion. Now, that is an incentive. It is also a coincidence, given that $2 billion is the expected government contribution to the Clean Energy Fund annually as it collects its capital base. Otherwise, I presume, this cost will simply have to be added on to the cost paid by consumers—our Australian families and businesses.

Surely the renewable energy target is a major structure designed to increase low-emission energy production. It appears, however, that some observers think Australia will struggle to quadruple its renewable energy production in the required time, despite the obvious financial incentive. Getting three-quarters of the way to the target will still generate a billion dollars a year in penalties, which is, in effect, the government's second hidden carbon tax. This will be one more cost we can assume will be passed on to Australian energy consumers—to every house, every business and every family. So there already exists a structure to quadruple renewable energy production, yet according to the Gillard government this structure will be either inadequate or incompetent.

On top of the costs of the renewable energy target I have already mentioned, the carbon tax itself is supposed to be another structure the government designed to drive up the price of fossil fuel energy or, by default, subsidise the competitiveness of renewables. With a $23-a-tonne CO2 equivalent across the entire Australian economy, our nation has the most expensive carbon tax in the world. Australia's electricity generators produce nearly 200 million tonnes of CO2equivalent, which is, annually, over a third of our total emissions. At a cost of $23 a tonne, the impost they will have to pass on to consumers and industry is $4.6 billion, rising every year. Of course, free permits reduce the overall cost to some generators, but I note that no assistance is being offered to the Western Australian generators in my electorate, so many will pay the full cost.

Why do these two major pieces of Labor policy not create a sufficient environment for investment in renewable technologies? After all, they come with a billion-dollar revenue-raising capacity. Is the carbon tax a piece of environmental legislation, or is it social welfare and wealth redistribution coming to us stealthily like a wolf in sheep's clothing? I remind members of the explanatory memorandum for the clean energy future bill last year. It said:

A broad-based carbon price is the most environmentally effective and cheapest way to reduce pollution. A carbon price puts a price tag on carbon pollution. Under the mechanism, around 500 of the country's biggest polluters will be required to pay for each tonne of pollution they release into the atmosphere. This will have two effects.

It creates a powerful incentive for all businesses to cut their pollution by investing in clean technology or finding more efficient ways of operating.

A price on carbon will also create economic incentives to reduce pollution in the cheapest possible ways, rather than relying on more costly approaches such as government regulation and—

wait for it—

direct subsidies.

This is what the government said in their own clean energy future bill last year, that that would provide the mechanism so that the government did not have to rely on costly approaches such as direct subsidies. The explanatory memorandum to that legislation went on to say:

These incentives will flow through the economy. The carbon price will make lower-polluting technologies, especially clean energy technologies, more competitive and will boost investment in these technologies. In this way, introducing a price on carbon will trigger the transformation of the economy towards a clean energy future.

Well, what has happened? Why isn't this sufficient? These words should really be viewed through the usual screen of Labor Party distortion. What we do see, again, is the government saying one thing and doing another. That is not what they said in that clean energy futures bill and I hope those words will continue to be examined in the cross-examination of this bill before us now. Either the government misled the Australian people through the clean energy future bill or it is misleading the Australian people through this bill. It has to be one or the other. The government stated that the carbon tax itself would drive renewable energy technologies. So is the bill before the House today, the Clean Energy Finance Corporation Bill 2012, an acknowledgment by the government that the carbon tax will actually fail to deliver renewable technology in its own right—so it is not going to do what the government said it would do? Is this an admission of failure, or, should I say, just the latest admission of failure and wasted borrowed funds and bloated bureaucracy yet again? Or is it instead not related to another government failure but an attempt to develop a separate Labor-Greens slush fund?

The bill of course establishes the Clean Energy Finance Corporation, whose job it will be to oversee the expenditure and direct the outcomes the money will purchase. I wonder whether it will be more successful and more efficient than Labor's Fair Work Australia, that took four years to deliver a single report. Will there be better administrators than those who mismanaged Labor's disastrous pink batts program? I am particularly interested in this line in the explanatory memorandum:

The Corporation will apply capital through a commercial filter to facilitate increased flows of finance into the clean energy sector thus preparing and positioning the Australian economy and industry for a cleaner energy future.

What exactly will this commercial filter look like?

Darren Chester (Gippsland, National Party, Shadow Parliamentary Secretary for Roads and Regional Transport) Share this | Link to this | Hansard source

The green loans program.

Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

The green loans program. Is it the same commercial filter through which the government gazed when it pretended to see world action on pricing carbon—even though the world has basically walked away from such moves? Is it the same commercial filter that the government used when it told high-energy-using trade-exposed industries that their carbon tax would have no impact—even though we see job losses, cancelled projects and closures on a daily basis? We really need to know what commercial filter this corporation will apply.

There are already serious concerns that the CEFC may in fact have a distortionary impact on the market and not stimulate tangible, sustainable results for progress in renewable energy projects. It may well undercut finance and investment in existing projects that have had to secure commercial financing—they have had to have a commercial case for large-scale renewable energy projects, and I have no doubt that the $10 billion will not be successfully invested. Irrespective of this, the renewable energy generated will still be 20 per cent—20 per cent before; 20 per cent after—so where is the justification?

I am absolutely appalled at the projected $750 million of taxpayers' money as losses attached to this bill. This is in the government's own papers. The government is admitting upfront that it plans to lose taxpayers' dollars through the Clean Energy Finance Corporation Bill. I find that just appalling. Clearly, $750 million is chickenfeed to what the actual waste will be—$10 billion to pick Labor-Greens winners—and we will simply see questionable initiatives funded to support Labor and Greens ideologies. It will be without any question a Labor left-wing slush fund, aided and abetted by a board that will be appointed by the government and one that must consult with Labor ministers, a direct hands-on process. This is $10 billion being borrowed that Australian taxpayers will ultimately have to pay back. It is not in the government's budget. It is not part of the Labor government's $300 billion increase in the nation's debt ceiling.

I have actually seen, as other members would have seen, some of the you-beaut schemes that will be pitching for these funds. I have seen some in newspapers and I have heard of some being hawked around the halls of this House. There are all sorts of opportunists rubbing their hands with glee. They know this is a gullible government. They have been down this road before. We have seen billions and billions of borrowed taxpayers' dollars wasted by this government. The opportunists know that the government cannot deliver programs without waste and mismanagement and they cannot wait to get their hands on these taxpayer funds. But it comes at a cost to Australian taxpayers. This government is infamous for coming up with the wrong answers to the questions of the day facing this nation, and this is yet another example of Labor getting it wrong.

Melissa Parke (Fremantle, Australian Labor Party) Share this | Link to this | Hansard source

I am very pleased to support the Clean Energy Finance Corporation Bill 2012 and related bills and to welcome the era of new technology development that they surely herald. I welcome this instalment in the government's carefully designed and far-reaching program for addressing carbon pollution, for addressing our reliance on hydrocarbons, and for setting up Australia as a leader when it comes to renewable energy and related technologies. This is a focused, forward-looking reformist Labor government, and we are getting things done, notwithstanding the vicissitudes of a minority parliament and a hostile coalition opposition, and we have just heard an example of that from the member for Forrest.

The policies and decisions of this Labor government, taken hand in hand with the resilience and creativity of Australian individuals and businesses, have made Australia a leader in economic management, and it is from that position of strength that we are leading this country through big-picture reforms in the areas of renewable energy and energy efficiency, in the areas of health and disability support, and in the areas of marine protection and transport infrastructure and reform. The clean energy legislation is a big part of that broad and deep reform effort, and it is a credit to the minister and the parliamentary secretary, to their staff, and the staff in the Department of Climate Change and Energy Efficiency that we stand on the brink of a new and promising trend of technological innovation in Australia.

Every day it seems there are events and challenges, both here in Australia and overseas, that can make it difficult to be optimistic about the world and our place in it. Terrible things happen and wicked problems persist. Economic crises are prompted by short-sightedness, poor regulation and greed. Economic successes are still too often characterised by inequality, selfishness and waste. Maybe that is an unnecessarily dark view, but it is one that can be hard to resist. And it is partly for that reason that we should recognise when we can the good things that we are capable of. In saying that, I strongly believe that the global effort to address the problems we have made for ourselves in the form of carbon pollution and hydrocarbon reliance will draw out some of the best human qualities. Like many people, I find it a bit sad that adversity is sometimes required to provoke the best in us, but I guess the best in us is worth having in any circumstances. The creation of the Clean Energy Finance Corporation is a significant development in our history, the point at which a great flourishing of new low-carbon or no-carbon energy sources and other energy efficiency measures will be developed as the mainstay of Australia's electricity needs in the decades to come.

Australia is far from alone in this effort, and indeed I have spoken before in this place to highlight the massive expansion of renewable energy investment and capacity that is occurring across the globe. As part of that global effort, this legislation is something that should make us all feel more positive and more optimistic about the direction in which we are headed as a nation. As a key component of the clean energy future package of reforms, these bills fit within a worldwide policy effort that gives me renewed hope in the idea of human progress and in the idea that we can learn from our mistakes and even outgrow the historical limitation of governing without enough regard to intergenerational needs or our shared international wellbeing.

The Clean Energy Finance Corporation, CEFC, is the part of the clean energy future package that will create an Australian economy that is more responsive to the needs of our burgeoning clean energy and energy efficiency industry. The government's $10 billion investment will play a supercharged enabling role in kick-starting new initiatives and in opening new private investment opportunities for low-carbon and no-carbon renewable energy projects. What is more, the CEFC will have the broader benefits of underwriting the improved design and construction of clean energy technology and the indirect benefit of creating lower cost technology. With the Australian clean energy market still in its early development, major obstacles exist in the currently limited and constrained allocation of capital for such initiatives. A number of these barriers were identified in the expert review chaired by Jillian Broadbent, and the structure and operation of the CEFC respond to the recommendations of that review.

The CEFC will function to stimulate private sector investment and financing for clean energy technologies. It will use a range of mechanisms to overcome the kinds of barriers identified by the expert review. For example, it will have the ability to provide direct funds, offer concessional cost funds, lengthen the available tenure of private sector loans, and favourably alter the allocation of risk amongst lending participants. By taking the lead in clean energy technology investments, the CEFC will act as a catalyst for the industry and for private market funding of new entrants. The corporation is not a grants program and the intention is not to compete with the private sector but, rather, to foster private sector energy growth in the clean energy market and associated industries by acting to overcome those existing private lending obstacles that are not really based on investment viability per se yet are real obstacles nonetheless in the current tight capital lending environment.

The board of the CEFC will be responsible for decision making and investments, and its operations are structured to avoid risks by being both transparent in its processes and of course fully accountable in relation to all individual investment decisions. The dividends from the CEFC earnings will be paid to the Australian Renewable Energy Agency. The funding provided to the CEFC will be a special appropriation of $2 billion per annum for five years from 1 July 2013. In addition, the corporation will receive operational and start-up funding through the budget of around $60 million over three years. The intention is that the CEFC will become financially self-sufficient, using its earnings to fund its operational expenses without further supplementary funding.

Appropriate capital finance support to underwrite the development of the emerging renewable energy sector is critical. Without such assistance, the huge potential of Australian inventors, innovators and entrepreneurs will be lost or, at best, it will go elsewhere. The importance of support in the form of capital finance is even greater now than it would normally be because capital markets are tight and constrained.

On that point, people need to remember what it is we are seeking to foster here. As Michael Ottaviano, the CEO of Carnegie Wave Energy in my electorate, has pointed out, the existing energy generation technologies and infrastructure that we all rely upon were not only developed with government support but wholly owned and run by government through almost all of the time in which electricity has been provided as a basic service to households and industry.

It is also salient to again emphasise that, where the Clean Energy Finance Corporation provides funding support, it will look to do so in a way that opens up avenues of private investment. This is the right and proper enabling role of government: first, to identify the country's long-term and strategic future needs; second, to recognise that these go above and beyond a much tighter horizon and profit frame in which business operates; and, third, to weigh both the wider costs of market inaction and the wider benefits of carefully rated risk and innovation.

I was very taken with a summary of the renewable energy development challenge that confronts all governments in an article by James Surowiecki in the 10 October 2011 edition of the New Yorker. In that piece he wrote:

… there are few industries where it makes a lot of sense for the government to complement the market by subsidising research and development. Renewable energy is one of them. That's because the energy market is not like most other markets. Indeed, the economics of alternative energy are such that private investors, left to their own devices, are bound to under-invest in it, since the considerable social benefits—cleaner air, fewer greenhouse emissions—accrue to everyone, not just to direct customers. That means that the economic rate of return is significantly less than the social rate of return. Energy markets are also dominated by entrenched, regulated companies, and that reduces the incentive for investment. Despite the immense size of the energy market, as of 2005 spending on energy R&D accounted for just 2 per cent of spending on R&D in the U.S. This creates an opportunity for the government to add value by investing smartly, just as it can add value by spending money on education or infrastructure, other areas where the social returns are greater than the economic ones.

That view is very much a part of how we have approached the task of setting Australia on the path to a cleaner and more sustainable energy future, with all the economic, environmental and social benefits this will deliver.

It is the same approach that the Labor government has taken with great success in first launching the incredible boom that we have seen in household solar PV systems, then gradually tapering our support as the industry's growing strength and the well-established private demand have made that higher level support unnecessary.

I am extremely pleased to support these bills and I am proud to be part of a Labor government that has fully applied itself to the challenge of reform, with all its difficulties but also most importantly with all its long-term rewards. I believe Australia will have a clean energy future. It is absolutely essential that we do and it begins with the work of this government in partnership with all the many and varied Australian innovators, inventors and entrepreneurs that we are seeking to support.

Jamie Briggs (Mayo, Liberal Party, Chairman of the Scrutiny of Government Waste Committee) Share this | Link to this | Hansard source

I rise to very strongly oppose the Clean Energy Finance Corporation Bill 2012 and the associated measures. I do so because I think the member for Fremantle, in fairness to her, outlined just then a very stark difference between the sides of the House. The Labor-Greens alliance, the coalition of Labor and Greens, believe very much in market intervention. They believe very strongly in taxpayers providing funding to what would not normally be commercially viable businesses.

Ms Plibersek interjecting—

The Minister for Health would be a big supporter of that. She does not know if she is a Green or a Labor Party member, but I tell you: at the next election she will have the Greens right on her door. I think the second highest primary vote around the country for the Greens at the last election was in the Minister for Health's electorate. Labor are now doing deals with the Greens to fund Christine Milne's pet project. It has gone from being the Bob Brown bank to the Senator Milne bank with the change in arrangements for the Greens. But what has not changed is that the Labor Party and the Greens are in coalition and this is the very worst of their policy positions.

As I said at the beginning of my remarks: in fairness to the member for Fremantle, she is very honest about what she believes the role of government is in society. I appreciate that in this place. There are not a lot on that side who are now honest about what they think the role of government is in society, but she is very honest about what she thinks is the role of government in society. It is that governments should pick winners and that governments should take taxpayers' money and make decisions that the market would not otherwise make. That is in effect what she has just said.

We heard the member for Fremantle say what a great job the government had done to build up the solar panel industry. Of course, they also tried with the pink batts industry with their assistance in that area. That did not work out so well. When they spent $1 billion trying to build up the pink batts industry, which, again, was all to the purpose of creating a clean energy future, they wasted $2 billion on the way through because it did not work—and this will not work either. This is $10 billion, however, and that is the most concerning part about it. In the last couple of days during estimates hearings it has already been admitted that over the forward estimates this agency is expected to lose some $300 million of taxpayers' money, which is on budget. Of course, this $10 billion is off budget very deliberately. It is another one of the off-budget schemes that the government are trying to pursue, like the National Broadband Network. They are trying to hide the fiscal loss to the Commonwealth by putting it off budget.

We already know from estimates hearings that the witnesses have at least been honest enough to say that they expect well over seven per cent of the money they are investing to fail—$300 million of Australian taxpayers' money on businesses that will not succeed. We should think about that. They are spending Australian taxpayers' hard-earned money on pet projects of the Australian Greens, Senator Christine Milne and the member for Fremantle. These guys are making these decisions because it suits their ideological pursuit, but it does not suit working families—remember them?—who are working hard every day to try to put away money for the Greens and their coalition partner, the Labor Party, to go and pursue their own ideological needs and desires. That is the worst aspect of this.

I think one of the most insidious parts of the climate change package that this government has brought before the parliament is this bill and this $10 billion. We have already seen how much waste is created by the Australian Labor Party. These are projects which the commercial sector will not fund. There are already very successful renewable energy companies in the marketplace that this money will undercut. One of the great ironies of this Clean Energy Finance Corporation is that the money it will invest will undercut the money of entrepreneurs who are already out there in the marketplace trying to do exactly what the Labor Party and the Greens will tell you they seek to do—create alternative energies. This bill will create a situation which will undercut the work and efforts of those companies.

We know that this bill has been designed by the former leader of the Greens, Senator Bob Brown, and his replacement, Senator Christine Milne, who was a Co-chair of the Multi-Party Climate Change Committee. I remind the House: this was a committee that was formed after the election because at the election the Labor Party's climate change policy was to have 150 Australians get together to tell them what their climate change policy should be, along with cash for clunkers. That was the climate change policy of the Labor Party at the last federal election. After the election, the Prime Minister, of course, did a deal with Senator Brown and Senator Milne and created this climate change committee, out of which emerged the so-called 'Bob Brown bank'.

As Senator Milne made very clear in her comments about the corporation, it was designed such that:

With a legislatively guaranteed stream of funding outside the budget, no future government will be able to undermine it without changing legislation.

It is a very deliberate means of getting Australian taxpayers' money and putting it into the areas that the Greens and the Labor Party favour. They will seek to provide government funding to commercial enterprises that the market has decided are not worthy of funding. We know how wise the Labor Party are with investing in private enterprise. Those of us who live in South Australia and Victoria know how well the Labor Party ran banks in the late 1980s and early 1990s. It happened in Western Australia as well. They turned South Australia from being one of the strongest states in a fiscal sense to being, now, the weakest state in a fiscal sense, excluding Tasmania, because of the damage that was done by their behaviour in trying to act like a bunch of bankers in the late 1980s and early 1990s. They do not run things well. Governments do not run things well. Governments do not make investment decisions which are in the best interests of Australian taxpayers. And this bill will not lead to a change in this regard. It will lead to billions upon billions of dollars being piled into non-commercial prospects. It will lead to massive waste. It will lead to pink batts writ large. It will lead to Australian taxpayers wondering yet again why it is they go to work and pay their taxes. It should not just be for Senator Milne and the Labor Party's frolics in spending Australian taxpayers' money. This is a very bad bill.

Debate interrupted.