Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I rise to speak today in relation to the Clean Energy Finance Corporation Bill 2012, 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. Once again the government has sought to mislead the Australian people. I speak on behalf of the people of my electorate of Wright, whom I represent, because I aim to make every effort to ensure that they are made aware of the inherent deception that is the perpetual action of this Gillard government.

The carbon tax was legislated in 2010 in a package of 13 bills—a $23 a tonne tax, rising at 2.5 per cent per year in real terms to be replaced by an emission trading scheme from July 2015. With reference to the trading price, the floor price will come in at $15 and that will take us through to the year 2018. Treasury's own modelling tells us that by the year 2020 the carbon price will be at $37. I bring to the House's attention that I believe that the global price for carbon today is around $4.50. However, may I remind you that the Clean Energy Finance Corporation Bill was not part of this package and has been introduced as a stand-alone piece of legislation. The bill establishes the board of the Clean Energy Finance Corporation, giving it a statutory responsibility for decision making and management of the corporation's investments.

As a parliament we have a duty of care to appropriate funds diligently. The vertical integration of funds—how they will travel through this organisation—will mean that the government will go to the market and raise money from the bond market. That, in turn, will be given to the CEFC. From there it will go on and fund projects. The government tell us that the returns from those investments will then be reinvested back into the CEFC.

I want to bring the parliament's attention to the potential make-up of the CEFC, the board and the directors, and draw an analogy. Because the finance corporation is an off-the-government-books investment, not that dissimilar to the NBN, it is not beyond the realms of possibility that the remuneration packages that are potentially available to the directors of this organisation could be similar to the NBN. For those of you who may not be aware of what those packages are, the No. 1 bloke in the NBN is on a salary package of about $2 million a year, which I think is outrageous. There are eight—

Bernie Ripoll (Oxley, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

They should be paid the same as politicians.

Malcolm Turnbull (Wentworth, Liberal Party, Shadow Minister for Communications and Broadband) Share this | Link to this | Hansard source

You've persuaded Bernie already.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I would be a starter too, if I could get the gig! There are another eight non-executives on an average of $818,000. When we start looking at remuneration packages of $2 million and an average of $818,000, I take real offence at what we pay the office of Prime Minister. Irrespective of whether we believe she is doing a good job, it makes a mockery of that process when we have an organisation running a budget of $10 million as opposed to the economy of the nation.

I draw to the parliament's attention a situation that happened in Queensland, which also troubles me, which we could draw an analogy from to this organisation. About five months before the recent state election the Queensland racing board took it upon themselves to renew their contracts for five years. They wrote into the terms of the contract that in the event that they were disbanded as a board they would be given a golden handshake and the five-year term would be fully remunerated.

I have concerns that when we are going to the market looking for potential directors or people to head up this CEFC, the income coming into that organisation will be over a five-year period with lots of $2 billion per year. So you will get $2 billion in the first year and $2 billion in the second, through to the fifth year—a total of $10 billion. I would be absolutely horrified if we were signing up directors with the intent that they would do the full five years on potential salary packages of $2 million, or at the minimum $818,000 if we use the comparison of the NBN remuneration package.

We are on the public record as a coalition stating that we will rescind the carbon tax . So this organisation will then be disbanded. The revenue streams that will come in in the first year are $2 billion. I would encourage the government, when they are going to the market for these players, not to embarrass themselves and not embarrass the directors by locking them into five-year contracts, because we will shut this show down. And I do not want to be putting my hand into the coffers of hard-taxpaying men and women of Australia to pay out a director's fee of $2 million per year over five years—$10 million—for one year's work.

That is something that may have been overlooked in consideration. How could that have been overlooked? Maybe it was overlooked because we were given 2½ hours consideration at the Economics Committee, when witnesses were called to give evidence. I just make the point that there was not enough time to complete the due diligence that this process deserved.

During the inquiry we were told overwhelmingly that there was extensive consultation. I put it to this House that in the extensive consultation that was supposedly undertaken by expert panels they forgot to ask one group of people whether they wanted the carbon tax. That group was the Australian people. The Australian people were not asked if they wanted to sign up to the carbon tax.

Go back to a couple of days before the last election—it is the Achilles' heel of this government—when the Prime Minister stood in front of the camera, looked down the barrel and said, 'There will be no carbon tax under a government I lead.' Why was that statement made? We all watched the polls. We all know how the polling was going. The polling was heading on a downward trajectory. It was a very close election. That single comment turned the election phase around. Do you know why? It was because the people of Australia trusted this Prime Minister. History has now shown that you cannot trust this Prime Minister.

So, with reference to the remuneration for directors of the new CEFC, I send a very blunt message to the government and to those people who will be sourcing the directors: do not sign up anyone on five-year contracts, because we have made it perfectly clear that when in government we will be dismantling this. The bill gives the Clean Energy Finance Corporation the power to invest in projects for the development of Australian based renewable energy technologies, low-emissions technologies and energy efficiency projects; the power to enter into investment agreements itself and make investments through subsidiaries; and a duty to ensure that, as of 1 July 2018, half of the funds invested at that time for the purposes of its investment function are invested in renewable energy technologies. On the back of that comment, what this organisation will potentially be funding is sub-economic projects. Those are projects that the commercial market has not found to have a suitable risk rating to invest shareholder, bank or merchant funds in. The risk ratings on these are just too high. I understand that the whole concept of this body of funds is to try to attract those higher-risk organisations—but with that comes a risk factor.

When we had the opportunity to question Treasury and the Climate Change Authority on the risk factor, they were rather oblivious. Whilst they had some provision for risk, I think, coming from a commercial background and having seen the number of businesses that have exited this market since 2007, it is timely that as an opposition we put under the microscope what the return on the investment will be.

The bill also establishes the Clean Energy Finance Corporation Special Account and appropriates funds which total $10 billion over five years, with the first instalment of $2 billion due to be paid on 1 July 2013. The account has the purpose of making payments to the Clean Energy Finance Corporation and to the Australian Renewable Energy Agency. The Clean Energy Finance Corporation is intended to be self-sustaining once it matures and therefore any funds returned to the Clean Energy Finance Corporation from its investments will be available for reinvestment. If money is being borrowed from the bond market at, say, three to four per cent, and the government then hands that on to the CEFC, who then invest in the projects, I would suggest that R&D will not give an enormous return on investment. Due to the vertical integration and how this is being set up, I do not see a lot of return on investment coming out of that market. I may be proven wrong.

Bernie Ripoll (Oxley, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

History may have already done that.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

Go your hardest. What we have been told with reference to this is that there will be a return on investment. My point here in the House is that that will be limited. The government's own bill already envisages a loss to this taxpayer through this investment due to operating costs and write-downs—or, what we would call, failed projects—as set out in the fiscal impacts. With reference to return on investment, I think they are looking to write off forecasted amounts of up to $600 million. In the electorate of Wright, where we were devastated with the recent floods, I could do a lot with $600 million. That amount would take a lot of the pressure off the Toowoomba Range crossing. It would go a long way towards rebuilding the communities of Lockyer Valley, Murphy's Creek, Grantham and surrounding communities. It would help in Mt Sylvia, where the telecommunications network was destroyed, just to get back to where we were. So $600 million seems a big gamble, a big punt.

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 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 and now, after the $10 billion included in this bill is spent, there will still only be a 20 per cent renewable energy target. We believe that, if we had worked cooperatively and co-invested with the market, with those who were already at commercial stage, we could have met our objectives far more successfully than through pursuing high-risk, low-return programs.

This bill is economically irresponsible and unlikely to achieve its stated aims. I hope for the government's sake that it does reach its aims—I genuinely do. It is an enormous amount of money. But I suggest, coming from the commercial background that I do, that not many of the ducks are lining up on this project. I say that with all sincerity. Not only is the carbon tax a bad piece of policy; it is the product of an unprecedented deceit and it is an impost on the Australian people. This is money that comes from the teachers, carpenters, farmers and nurses from my electorate of Wright—people who work each and every day to pay their taxes. Their money will be wasted on this.

I want to bring to the attention of the House comments from Twiggy Forrest in his recent address at the National Press Club. He likened the government's handling of the carbon tax to a couple of blokes buying a Melbourne Cup racehorse that had the potential to make them millions and millions of dollars and then, rather than racing the horse for the second time to get their dividend, celebrating after the first race by eating the horse. Those words came from Twiggy. Yes, he has a vested interest in the mining resources sector, but it was an interesting analogy for the government's handling of funds.

The government are going to talk about how successful they are and how successful this tax is going to be. But let me remind you, Madam Deputy Speaker, that it was the coalition that 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; and it was the coalition which created, developed and implemented the solar hot water rebate—successfully. We have proven ourselves when it comes to handling the commercial and financial decisions of government. The majority of us on this side come from business backgrounds. We come from places where balance sheets are a basic factor in making decisions on a daily basis. When we make a wrong decision, it hurts us in the hip pocket. So we are a lot more diligent when it comes to making decisions on behalf of the nation and spending other people's money. I would suggest that the other side of politics, the Labor government, do not have the same skill set.

In closing, I draw on the words of the previous leader of the Liberal Party, who said one of the problems with the Australian Labor Party is that they have a very shallow gene pool.

Bert Van Manen (Forde, Liberal Party) Share this | Link to this | Hansard source

I rise this afternoon to speak on the bills related to the Clean Energy Finance Corporation—another wonderful boondoggle from this government which will see $10 billion of Australian taxpayers' funds put at risk. I would like to refer to a book titled The False Promise of Green Energy and to paraphrase a little bit from it. The authors make the point that the proponents of green energy would have us believe that if we spend enough money to build windmills, add solar panels to the desert and stuff insulation into buildings there will be myriad benefits for very little risk. The end result is that billions of dollars are borrowed or, in this case, appropriated via the world's most expensive carbon tax from ordinary Australians. They have this confidence that the savings in energy, the environment and health costs will actually be achieved, but given this government's track record I have very serious concerns as to whether that will be the case.

According to the Clean Energy Finance Corporation's website, the objective of the CEFC is 'to overcome capital market barriers that hinder the financing, commercialisation and deployment of renewable energy, energy efficiency or low emissions technologies'. This is not the job of government. The job of government is to get out of the marketplace and let the marketplace sort the wheat from the chaff. This set of bills gives the CEFC the power to invest in financial assets for the development of Australian based, renewable energy technologies. These are projects that by their very nature, and according to what the CEFC website says, are uncommercial in nature. Why would we be putting at risk the hard-earned money of Australian taxpayers—mums and dads, small businesses, corporates—by putting it into projects that have a high or very high risk of failure? The risk is high enough such that our commercial lenders and funders and even private equity investors do not want to touch it.

As the member for Wright pointed out in his contribution to this debate, we should be looking instead to provide support to the people that are already there, that have a proven commercial project and are going to add value to that project and to our economy. Part of the Clean Energy Finance Corporation Bill sets out the parameters for the CEFC special account, which will receive $2 billion per annum in funds for the next five years, with the first instalment due to be paid on 1 July 2013. It has the purpose of receiving the payments that will ultimately be invested into these projects.

I think it is worthwhile to have a look at those who have a track record in this area, and that was the previous coalition government, which committed approximately $20 billion to a comprehensive range of measures to restore and protect our natural environment and invested $3.5 billion in policy actions to address climate change. Those actions included: the implementation of the world's first mandatory renewable energy target, which has stimulated $3.5 billion worth of investment in renewable energy technologies since 2001; the establishment of a $4,000 rebate to help families install solar panels in their homes and then the doubling of that rebate to $8,000, before it was scrapped by the Labor government; the provision of $126 million to establish a national climate change adaptation centre; and the provision of $10 billion for the National Plan for Water Security. We place a great deal of emphasis on a strong and effective policy in dealing with environmental degradation and carbon emissions.

The coalition are committed to a climate change strategy based on our direct action plan to reduce emissions and to improve the environment. The direct action plan would cost an average of $800 million a year for the first four years. This compares with more than $1 billion a year that was set aside for the pink batts program over the two years of that failed program, so direct action will actually cost less than the pink batts scheme. To facilitate direct action, an emissions reduction fund would be established to support emissions reduction activities by business and industry, with a goal of 140 million tonnes of abatement each year by 2020, equating to the five per cent target which is shared by all in this House.

It is interesting to note that under the government's proposed carbon tax, emissions are still going to increase and that in order to offset that increase we have to purchase carbon permits from offshore. As a country that is already a net importer of capital, why would we be looking to purchase carbon permits offshore which rob our future generations of wealth? We would be receiving income from export revenues and then sending money offshore again to buy carbon credits. It makes absolutely no economic sense whatsoever.

The coalition's proposed emissions reduction fund will ensure that every dollar of expenditure goes towards actually reducing CO2 emissions. Direct action will not add any additional costs to households. There will be no new taxes. There will be no pressure on—

Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

Is that a magic pudding over there?

Bert Van Manen (Forde, Liberal Party) Share this | Link to this | Hansard source

Yours is the magic pudding. As I said, there will be no new taxes as a consequence of the direct action policy. However, under this Labor government we face a new tax, effectively the world's biggest carbon tax and the most expensive one. Taxpayers will also end up paying for a suite of new bureaucracies, one of which is the Clean Energy Finance Corporation. This is because for every dollar of carbon tax revenue collected, only 55c is being returned in compensation. The $10 billion Clean Energy Finance Corporation has been exposed as 'inherently wasteful', achieving 'precisely zero' in terms of real CO2 savings under a carbon tax. This conclusion has come from Centre for Independent Research Studies Research Fellow Dr Oliver Marc Hartwich, who released the report, A waste of energy: Why the Clean Energy Finance Corporation is redundant.Dr Hartwich said:

The physical effect of energy subsidies is precisely zero in an environment where the total emissions are pre-determined by a trading scheme. Not a single gram of carbon dioxide is saved by pumping money into renewables.

Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

So it's not a tax, then—it's a trading scheme now?

Bert Van Manen (Forde, Liberal Party) Share this | Link to this | Hansard source

No, you are introducing a carbon tax. What we are saying is this $10 billion that you are putting in is going to have no benefit. That is what we are saying. I appreciate the interjections from those opposite, but, as usual, they do not contribute much to the debate.

As we have seen from this government's track record, we do not expect that the $10 billion will be successfully invested and, even if it was, which as I said is highly unlikely, there would be no new renewable energy generated as the target will still be 20 per cent.

In total, through Senate estimates and the government's own documents, we know the Clean Energy Regulator will cost $256 million over the four-year forward estimates, with around 330 staff expected to be appointed. That is on top of the staff and costs associated with the $10 billion Clean Energy Finance Corporation, the $3.2 billion Australian Renewable Energy Agency and the $25 million Climate Change Authority.

The CEFC is also not charged with investing in the lowest cost technologies to produce the cheapest emissions reduction. Its responsibility is to find the technologies which the market considers to be unproven, too speculative or too risky for commercial financing. This will mean that not all investments will produce a commercial return; the CEFC sets itself up for failure before it even begins.

It will not be the first time we have witnessed failures of this nature. For example, the government's $700 million Solar Flagships Program in Moree and the Queensland Solar Dawn projects struggled to gain industry support. The Bligh government presided over more than $100 million of losses in the ZeroGen project, despite clear warnings from both the opposition and experts. Former Queensland Premier Beattie even said that the shadow minister for energy and resources was 'on drugs' for his warning that ZeroGen would fail. But as we all know, the shadow minister was in fact correct. The CEFC also has many of the hallmarks of the Victorian Economic Development Corporation, which left Victoria in a disastrous state only two decades ago.

Programs like these tell a similar story in the United States. The failures of the $700 million Solyndra project, as well as those of Beacon Power and Ener1, occurred under a similar program to the CEFC. These companies were recently joined by the collapse of Solar Trust of America, which had a $2.1 billion loan guarantee from the US energy department. I recently read that President Obama spent $90 billion of his stimulus package on green energy projects, yet at the end of the day only some 16,100 people landed jobs in the so-called new green industry. That is a cost of some $5.6 million a job.

Direct action is what is needed in my electorate of Forde. A carbon tax and a Clean Energy Finance Corporation will do nothing to resolve local issues with respect to the water quality in the Logan and Albert rivers and other environmental issues. I grew up near the Logan River at Waterford and we spent plenty of time swimming and fishing in the river. These are not activities that I would undertake or recommend today, given the recent water quality reports. There is only one way to solve the issues with the water quality in our rivers and waterways and that is by protecting vital areas of biodiversity for future generations. This is a practical, sustainable, long-term measure that can be implemented from the ground up. That is what our Direct Action Plan is designed to do. There is not a single dollar of carbon tax money allocated to practical, on-the-ground environmental projects.

Ms Owens interjecting—

I know the member for Parramatta finds this funny. That is a sad indictment on where this government is at. Under a coalition government we have demonstrated that we can deliver practical, on-the-ground solutions for environmental projects. One of those was our successful Green Army scheme. We will look to reintroduce the Green Army to tackle environmental issues, such as the Logan and Albert rivers in addition to planting trees around the nation to improve local environments.

I mentioned during the debate on the clean energy bills that it is the height of ignorance to believe that we as a society can control global climate change via a tax on carbon dioxide emissions. It is just as ignorant to believe that the CEFC will produce one watt more of renewable energy by 2020 as a consequence of this $10 billion being spent. The CEFC also says it will not provide grants. It is intended to be commercially oriented and to make a positive return on its investments. Given we are investing $10 billion of Australian taxpayers' money, I would certainly hope that it is focused on achieving positive returns on its investments and that they are significant, given the uncommercial nature of those supposed investments.

As this bill presents itself as an extension of the carbon tax, we will oppose its implementation. An economy-wide, wealth-destroying carbon tax, along with its suite of bureaucracies that provides no practical, on-the-ground environmental outcomes, is not the solution for the future of this nation.

Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

I welcome the opportunity to speak on the Clean Energy Finance Corporation Bill 2012 and cognate bills because this legislation before the House tonight epitomises why Australians have lost faith in this government. Since its election to government at the end of 2007 the federal Labor government has presided over one program debacle after another as they have recklessly mismanaged billions upon billions of taxpayers' dollars. We have seen billions wasted and lives lost over the Home Insulation Program. We have seen billions wasted on school halls as infrastructure was priced at up to three times the commercial rate and it was thrust on to schools whether it met their needs or not. We have seen the government commit $50 billion to the National Broadband Network without a cost-benefit analysis, only after their first attempt at a $4.7 billion broadband plan failed to secure a tenderer. Indeed there are a number of similarities between the content of these bills and the legislation relating to the National Broadband Network, but I will return to those matters later in my contribution. But the bottom line is that this legislation has all the hallmarks of what is wrong and dysfunctional with this out-of-touch government.

One would have thought after all of these funding debacles the government would have taken a step back and questioned the way they draft policies and the way they implement programs. But not this government. If you believe the BER program was pink batts on steroids, and if you believe the National Broadband Network is the BER on steroids, then I am sad to say that the Clean Energy Finance Corporation bills are the NBN on steroids when it comes to losing money. The reality is that by tabling these clean energy bills the government has shown it is intent on arrogantly pursuing poor public policy that will leave the long-suffering Australian taxpayer with a multi-billion-dollar debt.

It is also clear that the government is willing to trash democracy and not give the Australian people a chance to vote on a major public policy issue that Labor did not take to the election. The Prime Minister told the Australian people, 'There will be no carbon tax under a government I lead'. Yet on 1 July the world's biggest carbon tax will be introduced and a $10 billion free-for-all will be created without the Australian people having the ability to cast their judgment on it through an election.

It is extremely amazing that the alarm bells are not ringing loud within the government, based on their atrocious record of financial recklessness and mismanagement. It is also negligent for any of the Independents who sit on the crossbenches to embrace the merits of these bills when the legislation has been drafted in a way that repeats all the mistakes that this government has made over the past 4½ years. Under this legislation the Clean Energy Finance Corporation will be established with the power to invest in renewable technologies, low emission technologies and energy efficient projects. It will have the power to enter into investment agreements itself or make investments through subsidiaries. And how much funding is to be set aside for the Clean Energy Finance Corporation? Two billion dollars. Yes, $2 billion will be set aside every year for five years. That is a total of $10 billion. While the government spouts that the Clean Energy Finance Corporation will have to deliver a return on this $10 billion investment, the reality is quite different. In fact, Treasury have officially confirmed to a parliamentary committee that they expect to lose up 7½ per cent of their capital each year. That equates to $150 million per year or up to $750 million in loans and investments over five years being written off, literally thrown out the window. It is beyond belief that this government—in agreement with the Independents and the Greens—could try to push through legislation where the Treasury believes up to $750 million of taxpayers' money could be literally written off. Imagine what this $750 million in waste and mismanagement could be spent on. It could be invested in infrastructure. It could upgrade the Pacific Highway. It could improve health services. It could be used to assist people with disabilities.

There is plenty of evidence, both in Australia and abroad, that government funding for large-scale renewable energy projects is no guarantee of success. For example, in December 2009 the government announced with much fanfare the Solar Flagships Program. In June 2011 the Prime Minister and the Minister for Resources and Energy announced the Moree Solar Farm and Solar Dawn projects, which would receive a total of $770 million in funding for solar flagships. The Moree Solar Farm was to receive $306 million to build a 150 megawatt photovoltaic power plant near Moree. The Solar Dawn consortium received $464 million for a planned 250 megawatt solar thermal gas hybrid power plant near Chinchilla. And what happened to these two projects? Well, it is not a good look. Earlier this year the Moree Solar Farm advised the government that it had failed to secure a power purchase agreement with an electricity retailer—a necessary step for gaining a source of revenue. This forced the energy minister to re-open bidding for the $306 million in government funds. Today the project remains in limbo. The other so-called flagship project—Solar Dawn—although the sun seems to have set before we could have a 'solar dawn'—also struggled to make the numbers add up. The project has received a six-month extension to try to secure industry support and justify the investment.

This highlights two key points. Firstly, it is extremely difficult for renewable energy projects to secure a commercial return. Secondly, because of the high degree of risk associated with these projects, the government is placing $10 billion of taxpayers' money at great risk. But this should come as no surprise. It seems that every time the government tries to subsidise clean energy or carbon emission reduction technology the taxpayer gets burnt, and in a big way. Take the collapse of ZeroGen in Queensland, which was meant to deliver clean coal power. After an investment of $106 million from the Queensland government and $46 million from the Australian government, ZeroGen collapsed in a heap and taxpayers' money went up in smoke. It went up in CO2 probably.

Michael McCormack (Riverina, National Party) Share this | Link to this | Hansard source

A lot of hot air.

Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

Yes, a lot of hot air, Member for Riverina. But the failure of renewable energy projects is not unique to Australia. In the United States we have seen the $700 million Solyndra project and the Beacon Power and Enerl projects collapse, despite receiving funding from a US program very similar to the clean energy finance corporation concept we are debating here in this House this evening. Then we saw the collapse of the Solar Trust of America, which had a $2.1 billion guarantee from the US energy department. I am sure the US taxpayers are looking forward to paying that back over the next years—as if they have not got enough debt. These overseas failures plus the collapse of ZeroGen and the experiences with the solar farm and Solar Dawn should have sent, you would think, a message to the Gillard government. But so beholden are they to the Greens, so beholden are they to the Independents, that they are keen to push on and play Russian roulette with $10 billion of taxpayers' money.

There are concerns about the impact of this huge amount of money on the existing renewable energy marketplace. Current investment in renewable energy is being driven by a bipartisan commitment to a 20 per cent renewable energy target. It is this target which is driving investment in renewable energy at the moment. Many of these investments have secured finance on a commercial basis with little or no government financial assistance. The fear is that the establishment of the Clean Energy Finance Corporation and the creation of a $10 billion funding slush bucket will distort the market and undermine existing renewable energy projects. Technologies which are not commercially viable without a substantial government handout will all of sudden be competing with projects which are currently receiving investment using existing technologies. So the government will not only be rolling the dice on speculative new renewable energy projects but could in fact be discriminating against the viability of current projects. The end result will be a lose-lose for all involved, including major renewable energy projects.

I am also concerned at the way the government have appropriated the $10 billion in funding for the Clean Energy Finance Corporation. Because of the massive debt that this government have racked up in the past four years, they decided to treat the $10 billion in funding as an 'equity investment' in the government's financial statements. By calling it an 'equity investment' the government have been able to remove the funding from the budget bottom line. Given the government's track record, it is indeed a leap of faith to call these projects an 'equity investment'. In an accounting sense, we know that equity is defined as asset minus liabilities, but we all know that based on past performance these projects are likely to be big on liabilities and small on assets. This essentially means they can claim to be delivering a small surplus when really they are spending taxpayers' money like a drunken sailor and that, if you include projects like the NBN and like this one, they will have a huge deficit indeed.

What they are doing here mirrors what the government have done with the National Broadband Network. They are providing funding off-budget so that they can distort a bit of a fiddle, they can distort the financial figures and they can make it look like we have a surplus. It is so small it is not even really a Claytons surplus; it is a mirage.

Natasha Griggs (Solomon, Country Liberal Party) Share this | Link to this | Hansard source

A figment of their imagination.

Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

A figment of their imagination; an illusion—that is correct. Everyone in the House knows that this legislation is only being debated because of a deal between the Prime Minister, the Greens and the Independents. The $10 billion is nothing more than a pay-off to the Greens for their one vote in the House—$10 billion for one vote; that is a very expensive vote indeed. The fact is that I am surprised that the Independents would ignore the wishes of their electorates, ignore common sense and vote with the government on this farce. It is indeed very regrettable.

What is also extremely disappointing is the cold hard reality that this $10 billion in funding will do absolutely nothing for the environment and reducing carbon emissions. As my colleague the member for Flinders has consistently noted, the $10 billion fund will create no new renewable energy. Prior to the creation of the fund the target was 20 per cent. Now that the fund has been created the target is still 20 per cent. There will be no additional renewable energy because of this expenditure. So all that this taxpayers' money will do is sideline existing renewable technologies, which are currently more expensive technologies, but the renewable energy pie will not grow.

Questions over the environmental benefits of such a huge government spend have also been raised by the Centre for Independent Research Studies. Research fellow of the centre Dr Oliver Marc Hartwich has released a report titled A waste of energy: why the clean energy finance corporation is redundant. He is a very wise man. Dr Hartwich notes in his report:

The physical effect of energy subsidies is precisely zero in an environment where the total emissions are pre-determined by a trading scheme. Not a single gram of carbon dioxide is saved by pumping money into renewables.

We all know that under the carbon tax the government's own figures forecast that emissions will rise. We all know that while we are introducing the planet's biggest carbon tax some of our biggest trading partners are either walking away from carbon pricing or embarking on a major increase in their use of fossil fuels. It is absolute folly for Australia to be risking $10 billion of government money on a Greens slush fund when there is no evidence that it will cool the planet, change the climate or deliver any meaningful environmental outcome. The only thing we do know is that this government has no mandate to appropriate these funds and the Greens will use this as platform in the lead-up to the next election.

What a disgrace it is that the government can use creative accounting to waste so much money and leave such a massive legacy of debt for future generations. The next federal election will be not only a referendum on the carbon tax but also an opportunity for Australians to decide on what they believe should be the priorities for the next government. Australians can decide whether they wish for $10 billion of their hard-earned money to be spent on a speculative pie-in-the-sky renewable technology program which is likely to lead to massive capital losses or whether they want to return to sensible economic management.

This government should be condemned for introducing this legislation and it should be ashamed for placing so much taxpayers' money at risk. It is not only undemocratic; it uses questionable accounting techniques and it gambles tens of billions of dollars on speculative projects. That is why the coalition opposes this legislation and it is why the Independents should vote against this legislation. That is why they should move away from their support of the government and support good old common sense, which is that you do not waste $10 billion and you do not invest money when you know you are going to lose it. It is about time the government came to its senses and abandoned this crazy plan.

Alex Hawke (Mitchell, Liberal Party) Share this | Link to this | Hansard source

It is a pleasure to follow the member for Cowper and that passionate rendition of why this bill, the Clean Energy Finance Corporation Bill 2012, will be such a failure for Australia. He is passionate about it because he understands that $10 billion is an expense that Australia simply cannot afford at the moment. When the government is doing everything it possibly can to produce a mythical $1.5 billion surplus, including the removal of $5 billion out of the Defence budget, it is incredible in the extreme that we are in this House today debating a bill off-budget to appropriate $10 billion to hand out to people on projects that may not be viable.

Nothing could underscore that point more than the member for Parramatta scurrying into this chamber before question time in an urgent rush to outline her committee's inquiry into a bill for $10 billion. I think it is very important this House highlights that that committee inquiry for $10 billion of Commonwealth money took just two hours of that committee's time. The member for Moncrieff absolutely demolished this committee inquiry, this so-called sham inquiry, that took two hours to investigate $10 billion of expenditure by the Commonwealth, and he made some excellent points about that. Questions have to be asked about what is going on with the Clean Energy Finance Corporation Bill and the associated bills before us here tonight.

It is the case that the government speakers we have heard on this bill were not persuasive in any way, shape or form. Their arguments do not make sense. They do not make economic sense and they do not make environmental sense. When you listen to the government, they say, 'We have got a carbon tax coming in, we have got a carbon price and we have got all these things happening but, all of a sudden, we also need to add money into the renewable sector because it is not viable.' Why then are we introducing a carbon price on electricity if not to make investment in renewable energy more attractive? That is one of the stated purposes for having a carbon tax in the first place—which you see if you look at all of the gobbledygook in the explanatory memorandum to this bill. I will quote from the explanatory memorandum. Under 'General outline and financial impact' it says:

Australia is a late starter in the transformation to clean technology due to its access to low cost fossil fuels.

What a terrible thing. It goes on:

This transformation will require substantial capital which the private sector alone may not be able to provide. Current global financial conditions, the complex nature of Australia’s electricity markets, the cost of renewable energy, and the preference of investing institutions for listed assets inhibit the financing of the clean energy sector.

A normal person would want to know what that meant. What that means essentially is this is a hideously expensive form of power that nobody in their right mind would invest in and that the government has to subsidise because nobody will look at this as an option in the real world of the private sector. That is the danger that this government is exposing taxpayers to—$10 billion of exposure risk—without any concern or regard for a return or any of this so-called commercial filter the government speakers have spoken about.

In estimates the Treasury has been very clear that 7.5 per cent of a loss has already been factored in. That is just a lazy $750 million—and there is another billion dollars we could have kept in Defence and kept our soldiers in the field in a stronger way. If this government honestly wants to put to this parliament that the loss rate out of this $10 billion will be 7.5 per cent then I would take that—because there is no doubt, when you read the provisions of this bill, about the lack of scrutiny, the lack of oversight and the lack of commercial know-how or nous into how this money will be administered. The actual proposition itself is that you can go around and hand out to these enterprises that are already identified as not viable or not worthy of financing money from the taxpayer and somehow they will become viable.

I think what you understand from all of that is that the Commonwealth does not intend to make a return from this bill. We are actually writing off $10 billion of Commonwealth money today. I am a little old fashioned but $10 billion to me is still a lot of money. I remember when $1 million was a lot of money. It still is today but now we throw around billions like it is going out of fashion. Ten billion dollars, to all those hardworking taxpayers in western Sydney, in my electorate, is too much money for us to be giving away for what is essentially a government commitment to a minor party.

I want to address that because I think it is important in the context of this legislation to understand why the government would hand out $10 billion off budget to a Clean Energy Finance Corporation when all the evidence from around the world tells us that these government corporations handing out cash, without expectations of return—or even when they try and pretend they are going to get a commercial return—do not work. There are so many good examples around the world. Names that come to mind are SpectraWatt from the US, Evergreen Solar, Solyndra and Beacon Power. They have all had huge losses and were completely unviable in their operations in the US. All of the taxpayers' money was totally wasted. The reason we are debating these bill and this legislation is because the government has made an off-budget commitment to the Greens.

We heard earlier today in this chamber, when the member for Melbourne was here, that there is a shortage of government speakers who want to speak on this bill when it is a $10 billion enterprise. I think the evidence here is quite damning. Whenever the government passes a bill of this nature and they have a much vaunted initiative of the Gillard government or the Rudd government, what we see is a procession of Labor speakers saying, 'This will benefit my electorate'; 'This group is going to benefit'; 'The planet is going to be saved'; 'The environment will be better off'; 'All of these companies will be able to make renewable energy so much cheaper and easier for all of us.' But, on this $10 billion expenditure, we have hardly had a government member speak in this chamber. It is their initiative. The shame they feel for this measure is apparent.

But there was one member here willing to defend this project, and that was the member for Melbourne. He came here in he and angrily asserted why this was good idea. I think that is a very telling and revealing situation. The member for Melbourne was passionately saying that this massive state-owned corporation that will be splashing around $10 billion of taxpayers' money to green corporations and green entities that are unviable and unprofitable is a worthy thing and a fantastic thing—but you cannot find a government speaker here today to come and do the same. We know why—it is because they know it is a dog. They know that this money will never be recovered by the Commonwealth. Indeed, we are looking down the barrel here, if we do not form a government, of a massive liability to the taxpayer.

When you continue through the provisions of this bill, you can see the fundamental flaws of this approach to policy and one reason that we must oppose this firmly as a parliament and as a coalition and one reason that we must always, when these things come up, have a very strong examination of why governments should not be behaving in this fashion. That is because, in my view, when a government appropriates or borrows money and then seeks to turn it into commercial money, it cannot function in the same way as the market or the private sector in assessing the risk accurately and taking the risk, because there is no risk to anybody—any person that is putting up the capital. Who is taking the risk in relation to the Clean Energy Finance Corporation? It is the taxpayer. It is 20 million taxpayers. It is the people out there that earn the money. They cannot make a decision about how this money is to be risked or taken.

When you look at the exact provisions here, of course the government does all of the things that it would usually do in relation to setting up a corporation. This corporation is exempt from the Income Tax Assessment Act, for example, so it will not pay any tax. What other corporation could enjoy that? When you look at all of the things that government does using its negation power—that is, by a negative, saying, 'It won't have to pay tax and it won't have to do anything, but we'll give it $10 billion, and here's hoping that something good will come out of this'—and when you go through the provisions of this bill further, there are lots of specifications about procedure, about functions and about what you would regard as a set of financial parameters. But, of course, there are no real explanations of how this will benefit the environment or the economy.

In fact, all through the explanatory memorandum and the provisions, you see that this will make power more expensive. This will actually deliberately make electricity generation more expensive in Australia today—so it becomes a double whammy. You read things like this particular part on page 11 of the section 'General outline and financial impact':

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. This treatment reflects budget accounting standards and is consistent with the treatment of similar investments.

You just get the sense from this that what they are doing with this Clean Energy Finance Corporation is totally Orwellian and they know it. That is why they are not here in this chamber to defend it. There is no way that the government can behave as a corporation, and it is not the role of government to behave as a corporation. Government is for governing and doing the things that we ask it to use the right to use force to do, and that is not to behave like a commercial entity or corporation. Every time a government has attempted to behave like a corporation or a commercial entity, it has failed miserably, whether it be administering banks or running other kinds of commercial enterprises. It cannot be subject to the same rules of commercial operation, and indeed it is specifically exempted from the Income Tax Assessment Act and other acts that deal with commercial operations.

Instead of creating the settings or understanding that a government is there to create the environment for other commercial sectors and the private sector to flourish, and instead of saying, 'Yes, we could actually encourage renewable energy by relieving them from the Income Tax Assessment Act, for example'—which is a random example that they use for their own corporation but is not good enough for other corporations—'or relieving them from other provisions so as to allow them to be able to compete and do their business more effectively,' the government say, 'No, we're going to borrow or appropriate $10 billion of taxpayers' money and give it to people that are already assessed as not viable by the banks and other investors.' This is a highly, highly risky proposition—one that gives me grave concern. When you look around what all of the members of this place have had to say—I listened carefully to many of those in the debate—even the member for Longman, at the tender age of 22, understands that the government cannot operate this way. He remembers and has learnt that government cannot do this, and every time it has attempted to do this it ends in misery.

I guess this is a pitch from me to every Labor member of this place. We understand that you had to offer the Greens something to stay in government. We understand this was a $10 billion offer to the member for Melbourne and the Greens to keep your shabby government in power. But think about what will happen to this $10 billion of taxpayers' money down the track. Think about all of those people that you come in here and talk about every day. You say, 'We're handing money to families and other people. They need it. They're under pressure. Electricity prices are rising.' Think about what will happen to all of those people who have to pay off this debt for years and years to come—because there is no doubt that debt is going to be the only outcome of this bill.

When you look at some of the arguments that have come forward from the very few Labor members that have come into this place to speak, they say, 'Well, Britain is doing this. We should go ahead and do it. Britain is the model for this.' You look at their claim that the US is doing this. As I raised before, there are very many examples of failure in the renewable energy sector, including solar—the member for Cowper just outlined some—that explain exactly why it is an extremely risky proposition for us to be doing this as a government and with taxpayers' money.

The argument that this is somehow promoting clean energy over dirty energy is a complete and utter misnomer, demolished by the member for Dawson, who explained about the cost in materials, carbon emissions and time that comes with building these renewable energy projects. It is completely Orwellian to describe this as clean and that as dirty. We know that all human activity produces a change to the environment, and all human activity of production, whether it be renewable or fossil fuel based energy generation, produces emissions. We know that these particular wind turbines and other measures, which are often talked about in this House, are complete models of inefficiency in that regard. But there is not any suggestion or any real contention from the government that this will produce an environmental benefit. So, at the end of the day, we are going to be expending $10 billion of hard-earned production and taxpayers' money in a quest for clean energy that is really not going to produce any environmental benefit at the end of all of that.

So, again, why are we doing it? We know why we are doing it, but there comes a time in parliamentary systems and in the parliamentary world when you need to take a stand on a government putting $10 billion off the budget, basically to keep itself in office, to hand out to projects that are completely unviable, without any real thought for recovering the money. That really ought not to be allowed in our democratic system. We should have very tight rules and requirements, as we do on the budget, and scrutiny of government and parliamentary processes that prevent that from occurring.

The government say that they are venturing into the commercial world and are going to apply a commercial filter to this $10 billion, without paying any tax and without doing the things that they are supposed to be doing—

Ewen Jones (Herbert, Liberal Party) Share this | Link to this | Hansard source

Payroll tax.

Alex Hawke (Mitchell, Liberal Party) Share this | Link to this | Hansard source

and without any of the different things, as is being pointed out to me here by the member for Herbert. I just believe this should not be allowed in this parliament. When you look at what the government have argued and the lack of willingness to come in here and put their case, I think we all know what is going on. This is actually a very serious issue. I know that with $37 billion NBNs and other things going around this is only in the top 10 of Labor waste expenditure disasters, but $10 billion is $10 billion, and I am going to stand here on behalf of my constituents and the people of Australia and definitely say no to this government going into any sort of commercial venture.

Dan Tehan (Wannon, Liberal Party) Share this | Link to this | Hansard source

I rise to support the previous speaker. This $10 billion bill is one of the grossest wastes of off-budget taxpayers' money that you could ever see. This is the sort of bill where those opposite, after they have voted for it, will need to go and have a shower, because they know that this bill smells. They know that this bill is dirty. They know that this bill is basically a bribe. It is our great negotiator, the Prime Minister's, way of making sure that by any means she continues to keep that faint grip she has on office. But it really goes to the heart of what is wrong with this government. It is all about staying in power and it is not about the long-term interests of the country.

The previous speaker mentioned that the only person who has really come into this place and, with glee, welcomed this bill is the member for Melbourne. We have not seen those opposite from the Labor Party able in all good conscience to bring themselves to come in here and support this bill wholeheartedly—and there is very good reason for that. It is a shabby, shabby piece of legislation. The speed with which it is being rushed through the House demonstrates the embarrassment with which this government holds this piece of legislation. I was called last Friday to see whether I was able to be a temporary member of the House Standing Committee on Economics to examine this bill, the Clean Energy Finance Corporation Bill 2012. When I asked why the haste, they said, 'There's two hours for the House economics committee set aside on Monday to examine this bill and the committee must report by Wednesday.' We have had to rush the report out today so that the bill could be voted on. Let us just consider that: there were two hours for the economics committee to review this piece of legislation. We spent the first hour, roughly, dealing with $5 billion in the bill and the second hour looking at the other $5 billion in the bill.

It is sort of funny—and you have to step outside this place occasionally because $10 billion can sort of start rolling off the tongue a little—but then you look at the way this government spends money. That $10 billion will be added to our net debt position, which will be $144 billion by the end of the year. Today we saw the government shut down debate on us trying to bring attention in this place to the fact that the government wants to increase its credit card borrowing from $250 billion to $300 billion. While all this is going on, here we are, having a bill rushed through which will, off budget, commit the Australian taxpayer to $10 billion worth of government expenditure.

It is worth looking at the mechanism to delivering this $10 billion. The government has set up an investment arm to do this with, the Clean Energy Finance Corporation. During the hearing that we had on Monday, I asked the Treasury officials whether they remembered an organisation in Victoria called the VEDC, which was an investment arm of the Victorian government that helped send the then Cain-Kirner government broke. Sadly, the Treasury officials could not bring it to mind. They could not come to terms with the fact that there have been previous examples of such investment arms being set up which have lost taxpayers—in this case, Victorian taxpayers—large amounts of money. I remember the VEDC because one of the investment projects that they had was for Lake Eildon. They invested in a catamaran houseboat which was going to do wonders for tourism in the region. That half-built catamaran sat on the shores of Lake Eildon for about five years as a constant reminder of what happens when government starts to take the crazy decision that it will pick industry winners, which is exactly what this bill does.

I suppose if we are to say anything good about this bill it is that there is a tiny bit of honesty in it. It recognises that 7½ per cent, to start with, of the money invested will be lost. If there is any honesty in this bill at all, it is that the government has recognised that this Greens inspired piece of legislation will automatically lose 7½ per cent of the $10 billion investment. It might sound crazy, but at least there is a shred of honesty in it.

Natasha Griggs (Solomon, Country Liberal Party) Share this | Link to this | Hansard source

It's unusual!

Dan Tehan (Wannon, Liberal Party) Share this | Link to this | Hansard source

It is very unusual. It is interesting to ask, once you delve into these things, how they came about this figure of 7½ per cent. This was a question that was asked during the economics committee hearing. It was asked, 'There must have been some potential investment disasters that government has already been involved in which have made you come up with this figure. What is the basis of your decision that there will automatically be a 7½ per cent loss? Surely, there must be a Solar Flagships program or something else that has led to the 7½ per cent figure.' But they could not come up with anything. So it seems that they have plucked this figure out of thin air, which should be extremely worrying for the Australian taxpayer. They know it is going to make a loss.

An opposition member: $750 million bucks!

Yes, $750 million straight up, it is pointed out to me. And yet, when they were asked how they came to this figure, they did not know. There was no evidence based approach to coming up with this figure for the loss. One might think that this would worry this government. I got the feeling it did embarrass the Treasury officials who were there trying desperately to give some sort of credence to what was going on. You would think that the government would be embarrassed by this, but I must admit that those members of the government who sat on the House economics committee blindly sat there, shrugged their shoulders and went, 'Well, if $750 million is the price we have to pay, that's what we have to pay.' It is a real shame.

Not only that, there was a follow-up question to this which asked, 'Given that there is no substance to this 7½ per cent figure, what happens if it loses more money than that?' Everyone just shrugged their shoulders. No-one knew. As a matter of fact, it seems to be wholly reliant on the board to make sure it does not. The information on how the board and its staff is going to be governed was very interesting as well. The board's salaries are going to be along the lines of those paid to members of the Future Fund board—we are talking of a chair on maybe a $2 million salary. Who will decide the salary of the staff? Will it be the Remuneration Tribunal? No. The board is going to decide what the staff salaries will be.

An opposition member: Like the NBN.

Yes. In this situation is the board really going to care what rigour is put into this? I do not think so. Seven and a half per cent, 9½ per cent, 15 per cent—if those are the losses, I think the board is just going to be sitting there saying, 'Oh well, it's all right—we're not losing from this.' It is the taxpayer who is ultimately losing.

This committee hearing was a real eye-opener and it was even more of an eye-opener when the representatives from the Department of Climate Change and Energy Efficiency were asked: 'But isn't the 20 per cent of renewable energy required by 2020 already delivering investment into renewable energy anyway? Isn't this bipartisan commitment actually delivering this? Do we need the additional $10 billion if our Renewable Energy Target, and the renewable energy credits which are delivering that target, are already doing this job?' There was no answer to that—no answer to the effect that this $10 billion is not needed because we already have a bipartisan mechanism to deliver this anyway.

What we have is $10 billion being spent as a bribe to keep the Greens happy. I would have thought there were better ways to keep the Greens happy than giving them $10 billion, but it seems that is what this government is prepared to do to cling to power. It is an unnecessary $10 billion because, as we heard in the evidence, the Renewable Energy Target—20 per cent of our energy from renewable sources by 2020—is going to deliver this anyway. That is very important because it also means that those companies which have already invested privately in renewable energy technology—in wind, solar and wave—will now see their competitors come in, using this $10 billion fund as a leg-up, and gain a commercial advantage over those players who are already in the marketplace.

I must ask the government, how can this be fair? How can it be fair that existing players in the renewable energy space will now face competition from late entrants who can use this $10 billion fund? What the government is doing is saying to those companies who have made investment decisions based on private enterprise with a little bit of assistance under the Renewable Energy Target: 'We don't care about those investment decisions you have made. We are going to support new entrants into the market which could potentially blow the investment decisions you have taken out of the water.' This bill hammers home another example of sovereign risk and shows that this government does not care. We see time after time that the government does not understand this.

I am in my first term in this place—

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

And you're doing a great job!

Dan Tehan (Wannon, Liberal Party) Share this | Link to this | Hansard source

Thank you, the member for North Sydney. I have seen some incredibly interesting things in my time—it has only been a brief 18 or 19 months—but I must say sitting in that House economics committee for two hours on Monday was the most disturbing thing I have seen yet. It is alarming that this government is prepared to give away $10 billion, off-budget, of taxpayers' money without any consideration of the opportunities on which it could be spent. I hope all the members opposite know, as they vote for this piece of legislation, that it is the silver offered to the Greens to make sure they continue to support this government. I hope they go and have a long hot bath or a shower because they will need to; this bill smells. It smells to the Australian taxpayer and it smells of what it is about—keeping this Prime Minister in power.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

I join with my colleagues in speaking on the Clean Energy Finance Corporation package of bills. These, of course, are part of the government's carbon tax package. They are about extending the reach of the carbon tax by creating a $10 billion fund to undertake investment in renewable energy technologies and energy-efficiency projects. The coalition has pledged, in opposition, to oppose the carbon tax and we will repeal it if we are elected into government. This also applies to this package of four bills. The carbon tax itself takes Australia out on a limb and will create additional financial stress for families and do nothing to reduce carbon emissions. It is bad policy. The CEFC is yet another example of poor policy, which demonstrates the inability of the government to be trusted to spend taxpayers' money wisely.

To oppose this legislation is not to oppose the science of climate change. That is the classic spin that the government applies to everything. Based on the evidence available I believe our climate is changing, and I believe on the evidence available that human behaviour does contribute to climate change. I believe on the evidence available that reducing carbon dioxide emissions will slow down the pace at which the climate is changing. I have held these views consistently for more than 10 years.

The coalition is committed to the same carbon reduction goals as the government. We are committed to reducing Australia's greenhouse gas emissions by five per cent below 2000 levels by the end of 2020. To be clear: that is a bipartisan commitment. Where we differ from the government is the mechanism used to achieve these goals. We do not believe this is solved by increasing taxes and increasing government debt. We certainly do not believe that a $10 billion slush fund is the solution to economic and environmental sustainability. It is economically irresponsible, fiscally irresponsible and environmentally suspect.

This set of bills empowers the government's CEFC with a very broad mandate to invest in risky renewable energy projects. Other than the requirement that at least half the funds be invested in renewable energy technologies by July 2018 and solely or mainly Australia based, the CEFC is given a very wide remit to spend taxpayers' money. The Minister for Climate Change and Energy Efficiency has assured Australians that the CEFC is a commercial venture and that the administration 'will apply a commercial filter when making its investment decisions'. However, this is entirely contradicted by the explanatory memorandum for the bill, which admits that this filter 'will not be as stringent as the private sector equivalent ' and 'may accept a lower financial return'.

The CEFC will be permitted to offer loans at concessional rates. Even worse, concessions can take the form of 'availability, tenor' or, it goes on to say, 'by absorbing additional risk'. Yesterday in the inquiry of the House of Representatives Standing Committee on Economics into this bill it was revealed that the government has already factored in a 7½ per cent loss on capital in unsuccessful projects each year, with Treasury officials describing that 7½ per cent estimate as 'conservative'. Yet somehow these investments are still expected to generate a return close to the government bond rate of four per cent—after all, this is being funded by borrowed money. The reality is that these investments will be highly risky, highly speculative and may not live up to the standards that would normally apply for commercial financing. If these investments were commercially viable, an organisation's first port of call would be a bank or private sector investor, not the CEFC. Even the government admits that 'some investments will not be recovered'. In fact, given the speculative nature of the renewable energy market, it is conceivable that no investments will be recovered. It is uncertain if these new technologies will ever produce a commercial return or a product that will help to create a renewable energy source. Given the risks posed by these investments and the fact that commercial markets would not provide finance to many of the speculative investments, it is hard to believe that such projects could conceivably be termed 'commercial investments'. If these projects were commercial investments, they would not require subsidised support from the government. As such, the government should call the CEFC exactly what it is: a giant, $10 billion slush fund. The Australian people deserve to know exactly how their taxes are spent.

And when it comes to examining the accounting treatment of this giant government slush fund, you would expect that this expense would show up in the government's underlying cash position. But not under Labor. Despite the highly risky nature of the investments undertaken by the entity, the CEFC is blessed with having been given the green light to be accounted for in the same way as that other great commercial entity, the National Broadband Network: they are being treated off-budget. The coalition has long been concerned about the accounting treatment of the CEFC and, indeed, the NBN; and, if there is a change of government, I can promise everyone that I will get to the bottom of exactly why they have been treated in such a way and who advised it.

Back in October 2011, along with the shadow minister for finance, I wrote on behalf of the coalition to the Australian Statistician and the Auditor-General, questioning how the $10 billion CEFC would be accounted for and whether they had made any recommendations as to the accounting treatment of the $10 billion fund. The coalition always suspected that the government was trying to push the majority of the CEFC off-budget. Nine months later, these concerns are realised. In reality we should have just looked at the government's record of treating politically sensitive material like the $50 billion NBN off-budget to justify our concerns.

The government is trying to hide the full cost of the CEFC because responsible economic management is something quite foreign to this government. Treating this program as off-budget means that the vast majority of the spending will not hit the budget bottom line. Only two items will hit the underlying cash balance. The establishment and operating cost of $57 million over three years will be expensed, as will what can only be described as a small provision to recognise that some investments will not be recovered. That is a 7½ per cent loss on capital on unsuccessful projects. Operating costs are nearly $20 million a year. Bear in mind that the Inspector-General of Taxation has an estimated cost of $2.634 million for 10 employees to cover the entire taxation system as an inspector-general, yet this is going to cost around $20 million a year to run. The government acknowledges that some loans will be granted to renewable energy projects at concessional rates. Senate estimates this morning confirmed that this would be the difference between the expected market return of 14 per cent and the government borrowing rate of an average of 5.3 per cent. The impact of this concessional component, along with the operating expenses and the 7½ per cent provision for losses on capital for unsuccessful projects, means that the fiscal balance will be hit with an additional $1.3 billion over the forward estimates. Only this government would provide money for investments that the private sector would not touch with a barge pole and then turn around and call them 'commercial'. What an absolute, damned affront it is to call them 'commercial' investments! Only this government would budget for potential investment losses, charge concessional rates of interest and call the investments 'commercial', and then turn around and deem them 'equity investments' in order to avoid having the expenses hit the budget's bottom line. It smacks of Tricontinental and some of the other things I saw from Labor in the eighties, such as Beneficial Finance and all of their partners.

What is worse, this expenditure is being made at a time when a budget surplus is looking less likely by the day and when the debt burden continues to grow. All in, taxpayers will be borrowing more than $10 billion in headline investment to fund the CEFC, which will only serve to add to the legacy of this government's debt. We do not have the capacity to repay this debt by asset sales—there is no Telstra, there is no Qantas and there is no Commonwealth Bank to sell in order to address the debt burden. These entities, the CEFC and the NBN, are not going to be worth crackers, because they are barely commercial. On the basis of any common understanding of the meaning of the word 'commercial', they would be considered uncommercial. This will be the legacy of Labor, and it will hang around their necks for as long as I am in this place.

Apart from pointing out the lack of credibility on the accounting treatment of the CEFC, it is important to point out that this legislation allows for the use of derivatives in order to, amongst other things, 'indirectly achieve exposure to financial assets'. After all the rhetoric of the Labor Party and its war on capitalism as initiated by the previous Prime Minister's arguments about the impact of derivatives trading during the course of the global financial crisis, they are now so opposed to derivatives trading that they are setting up a $10 billion fund that can engage in derivatives trading! Of course the coalition has major concerns about the application of this legislation and about the risks to which such financial products could expose the government and taxpayers.

Will the investments be effective? There are serious concerns. The CEFC may have distorting impacts on the market—and of course it will. When someone is in there with subsidised loans, of course it is going to have an impact. It is widely commented by renewable energy participants that the introduction of the government's CEFC will have an adverse impact on existing renewable energy projects. Of course it will, because this 800-pound gorilla, subsidised by taxpayers to make losses, is coming into the marketplace. Of course it will undermine any commercial ventures that are out there—and that, of course, will lower the tide for everyone. Also, it is widely accepted that the newcomers to the sector will be affected if they are not to get access to the fund. You are lucky if you are hand-picked by the CEFC, because you will have the benefit of a direct subsidy. But what happens if you cannot get it? What happens if you do not like the terms? There is that 800-pound gorilla in the marketplace which is going to undermine the market itself, and when the failure occurs taxpayers will pick up the tab because otherwise they will lose their money or equity investments.

The CEFC is not charged with investing in the lowest cost technologies to produce the cheapest emissions reductions; its remit is to fund the technologies which the market considers to be unproven or too speculative or too risky for commercial financing. Although the CEFC will be established as an entity separate from the government, it is clear that its functions will carry out government policy. Its functions seem analogous to and to overlap with other government programs such as the Clean Technology Innovation Program, the Renewable Energy Venture Capital Fund and the Emerging Renewables Program. All these programs appear to be similar in nature to and to fit within the broad investment mandate of the CEFC, yet they are fully accounted for in the budget and nowhere near the sheer scale of the $10 billion energy slush fund.

The government has a terrible record with energy projects. Its $700 million Solar Flagships program in Moree and the Solar Dawn projects in Queensland struggled to gain industry support. Along with the Bligh government, this government presided over more than $100 million in losses from the ZeroGen project despite clear warnings from the opposition and a number of industry experts. In fact, in response to the member for Groom's warning that ZeroGen would fail, the Queensland Premier said that he was 'on drugs'. Whatever drugs they may have been—and I can assure you that he was not on drugs; there was absolute clarity in his observation—he was proven right. Programs of this nature have similarly experienced massive failure and controversy in the United States. The failure of the $700 million Cylindra project as well the failures of as Beacon Power and Enel occurred under similar programs. There is also the recent collapse of Solar Trust of America, which had a $2.1 billion loan guarantee from the US government.

Finally, I put on record my concerns about the comments made by Jillian Broadbent from the CEFC. Ms Broadbent wrote to me on Wednesday, 11 April at 11.44 am asking to meet with me in Canberra at a time of her suggestion, 17 April. Andrew Robb responded on behalf the coalition on 16 April. At that time I was overseas meeting with the Chancellor of the Exchequer and officials in Europe, and, when we did not meet the timetable set by Ms Broadbent, she went on ABC radio on 17 April saying that the coalition, 'haven't been very interested in speaking to me, despite my preparedness to do so', She did this even though, as I understand it, she had already met with Malcolm Turnbull, she had already received a response from Mr Robb, she had met Mr Hunt and I was unavailable at that moment. If that is the way they are going to play the game, then there is all the more reason for us to get rid of this bad idea.

Ewen Jones (Herbert, Liberal Party) Share this | Link to this | Hansard source

It is always a pleasure to follow the member for North Sydney. His contribution basically wrapped it all up. But I rise today to speak on the Clean Energy Finance Bill 2012 and the suite of bills.

These bills seek to establish the Clean Energy Finance Corporation—the CEFC—giving this corporation the ability to invest in financial assets to develop Australian based renewable energy technologies, low-emission technologies and energy efficient projects, and the power to enter into investment agreements and to make investments through subsidiaries. It has a duty to make sure that half of the funds invested by 1 July 2018 are invested in renewable energy technologies.

These bills will also create the Clean Energy Finance Corporation special account, which will give $10 billion over five years to the CEFC. It is this government's intention that the CEFC will be self-sustaining once it has reached maturity and any returns to the fund would then be reinvested! We laughed and we laughed and we laughed! In reality this bill simply creates a $10 billion slush fund used to bribe the Greens over to the government side. It was the 25 pieces of silver they had to pay.

In stark contrast to the idea of a self-sustaining fund the bill forecasts a financial loss as a result of operating costs and failed investments. Treasury officials will tell you that the loss is around 7½ per cent. What they do not tell you is that that loss of 7½ per cent is $750 million, which they are prepared to walk away from on day one. Add to that the government's borrowing rate of 5.3 per cent on $10 billion and that is $530 million a year. So, straight up, at the beginning of the year, you drop one billion dollars every year. So away you go!

The coalition has long supported the renewable energy industry and the pursuit of making renewable energy an affordable and reliable source of power. The renewable energy target of 20 per cent has bipartisan support in this House, but this bill runs the serious risk of distorting the renewable energy market and spending $10 billion of borrowed money to not produce any results.

We already have our 20 per cent target for renewable energy by 2020. This target is driving investment in renewable energy. Regardless of how much this government spends on a renewable energy slush fund the target will still be 20 per cent. So we will still end up with 20 per cent renewable energy. Any renewable energy investment from this fund will simply replace other private sector investment in renewables. That means $10 billion will be spent on achieving nothing.

I hate to harp on the point, but this government has not had the greatest track record in running anything so far, let alone a $10 billion slush fund. Mind you, no-one gives money away like this government, with no hope of a productive return. This could be the hook on which this government hangs its hat: 'We are the best at giving money away with no consequences. We are No. 1!' Now, that will cause pride when you guys are sitting on the verandas under your blankets in the old pollie home!

These bills also seek to provide for the CEFC to hand-pick investments based on comprehensive criteria. The result is that, contrary to the thinly veiled appearance of independence, the minister and this government has a high degree of control over who does and who does not get money from this fund. Couple that with no economic or financial basis for decision making, what could go wrong?

There is a serious concern that these bills will distort the marketplace for renewable energy. We already have many companies around the country successfully running businesses in the renewable energy sector. They have found their market, created a good business plan, and are turning a profit. Now they have to compete with technologies and ventures that should be less competitive but will be given a hand-up by a selection panel. Instead of the market investing in efficient technology and well-structured businesses, the government will be investing in businesses that could not convince anyone else to spend the money on them. If you force cash into any market you will distort that market. In effect, you will place greater pressure on the existing businesses by doing this. I just do not see why this government cannot see that. You are running a real risk of shutting down an industry.

The CEFC has not been required to consider low-cost technology when hand-picking projects. Not only is this money giving an unfair leg-up to the fortunate few, it will be supporting the projects that the market has deemed too risky to finance itself. Even the explanatory memorandum acknowledges, in identifying the fiscal impact for this bill, that some investments will not be recovered. That is code for taxpayer loss on top of borrowed money. This is destined to be yet another expensive failure where the end result will be that the taxpayer will cop it in the neck to the tune of $10 billion and those businesses which have forged a market and products with hard work, will have to deal with the stink and taint this set of bills will no doubt leave behind. You really are running the risk of destroying an industry.

Time after time we have seen that it does not work when government's try and hand-pick renewable energy projects. We had the Solar Flagships program in Moree and the Queensland Solar Dawn project that the member for North Sydney was speaking about earlier. I remember reading about it in the paper and seeing Peter Beattie on TV telling the member for Groom that he was on drugs if he thought this would fail. Yet, there we were, a little way down the line. Peter Beattie, to this stage, has not rung the member for Groom and apologised. The Queensland Solar Dawn project, struggles to gain industry support despite $700 million from the government. Of course, I am talking about ZeroGen there.

When will we stop pretending that we can force the market? These bills are yet another Labor commitment funded by debt—$10 billion, and then we start to pay the interest. We have seen this Treasurer boasting about a budget that contains a surplus. Meanwhile they are using accounting systems to push through lavish and reckless projects without having to put them on the budget and present them to the Australian people.

I have an idea. Why don't we take the defence spend off budget? That way you would have a $25 billion surplus! It would be easy! We could just take it all off budget and increase the debt. We could raise the debt level to $3 trillion and be done with it; run it all off budget. We could bring forward money out of the debt level to create that surplus so that everyone can feel warm and fuzzy. But it does not produce the right picture.

You guys—this government—are leaving it up to the next generation to pay for a policy that is designed to fail, knowing full well that it will be spent on projects that nobody in the private sector trusted and on many that are bound to fail. Just like the NBN, this is a huge expense that this government do not want to be held accountable for at budget time. There are huge salaries at the NBN, and in this organisation, being paid out to people and we have no control over who they are.

If this government genuinely had a commitment to renewable energy it had many chances to get on board, even in North Queensland. The CopperString project was aimed at bringing Mount Isa onto the National Grid. They were seeking $300 million in federal government funds to build the line to Mount Isa. If this was done, the impact on renewable energy would be huge. The North West Queensland Mineral Province is also home to one of the world's most exciting renewable energy corridors, with projects such as the Kennedy Wind Farm, with 700 turbines producing electricity at a projected $48 per kilowatt hour. The Kaiwedera Solar Project is another project which was to produce quality renewable energy.

One thing you have to remember is that, as the member for Dawson so succinctly put it, renewable energy is not clean—you still must invest in all sorts of stuff to create the equipment that makes it. A huge amount of pollution goes into making the mirrors, the turbines and the fans, and transporting them. As the member for Mitchell said, every human endeavour affects the environment.

The fact that the Kaiwedera Solar Project, which currently operate along the corridor and burn diesel for power generation, should have had this government and the Greens running to their aid. I do not blame Mount Isa and Xstrata for going on their own and building their own new power station. The messages they were receiving from both the federal and the state government were too weak and mixed for them to wait any longer. In short, the government talks a good game but it never, ever delivers. It could it be that they could not commit to infrastructure in North Queensland if it was to appear on budget. Maybe it was just not sexy enough for the Greens. Maybe it was not in the right part of the world. Maybe if it was in inner-city Melbourne and it was about turning mung beans into cafe lattes, we would be throwing some money at it.

Why doesn't this government support the MBD algae project more? Here we have a science based, high-skill project ready for commercial application which is being starved of funds by this government. It will take pollution out of any system to which it is applied and turn it into a protein source, a biodiesel, and sequester carbon. Tests at Tarong Power Station in the South Burnett have been very positive, with massive reductions in pollution—up to 40 per cent. If we integrated the MBD algae project into the design of a coal or gas fired power station, we would have cheap baseload power with zero emissions. Why isn't this government all over this project like it was 102 degrees in the shade and they were prickly heat? It beggars belief. Again, are they only interested in projects where the Greens decide what we will do? Are they only against it because it would have to be on budget? I am not a huge believer in conspiracy theories, but the more I watch this Labor-Greens government, the more I am convinced that there is another completely separate agenda here.

This legislation is not about supporting renewable energy; it is about supporting the Greens. The fact that they can on one hand claim a budget surplus and then on the other try and slip through a $10 billion off-budget slush fund, and that they can claim to be in favour of renewable energy and then sit back as the CopperString project stalls, shows the hypocrisy of this government. We all want to see a strong renewable energy future; that is what we have the renewable energy target for. But splashing around $10 billion on projects that the market has rejected is an insult to taxpayers. This legislation is about a select group of latte-drinking, Vespa-riding, black-skivvy-wearing people picking winners at our expense. It is easy to punt big if you do not have to cop the losses. I suggest we send this mob to Randwick on the weekend with their own money and see how they go. Let's see how good they are on the punt—because that is what they are doing. But they should do it with their own money.

This legislation is irresponsible, it is destined to fail and I do not support it. What this country needs is a government which will, in the first instance, do no harm. Secondly, we need a government that will get out of the way of the private sector and keep their hands out of the pockets of the people who are making a difference. We need a government which offers hope, reward, and opportunity for all, not just a select few. Think of the interest alone on this thing, the money that you are prepared to lose on this, that you are prepared to throw away. In the meantime you have 21-year-old soldiers stationed in Darwin that you are pulling a return airfare off once a year.

The government shows its hypocrisy on these issues. The fact that you are prepared to make the average person pay and you are prepared to let the Greens run this show is horrendous. This is my first term, as it is the first term of the member for Wannon, who spoke before. We all come in here thinking of Mr Smith Goes to Washington, thinking we can change the course of the debate. But when nobody is listening on the other side, when you are in the back room and you have to cut the deal, you will do whatever it takes. That is what is wrong with this place and that is what is wrong with this government. They are not prepared to make the hard decisions. They are not prepared to stop these people from doing this.

This is $10 billion. I scratched $1,000 once and thought all my luck had come at once—I never won another single cent. This is bad legislation. It should be shown up for what it is. I will fight against it all the way through. When we are in government, we will repeal the carbon tax fully, we will get rid of this slush fund and everything that goes with it, and we will find out why the advice was what it was.

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

I have great pleasure in following the member for Herbert and his impassioned speech. Speakers on this side have covered a lot of territory here this evening and expressed a great deal of reservation about this legislation, the Clean Energy Finance Corporation Bill 2012, and with very good reason. In joining this debate I want to reflect on the complete lack of trust which exists between this Prime Minister, this government and the Australian people. There is a long list of reasons—and we have already heard many of them tonight—why the coalition are not supporting this legislation, but the most compelling one of all is the issue of trust. We simply do not trust this government to be able to deliver value for money under its Clean Energy Finance Corporation. Quite simply, I could not trust this Treasurer with 10 bucks, and I certainly will not trust him with $10 billion of taxpayers' money. This does feel like deja vu all over again. As the member for Cowper remarked earlier this evening, this legislation has all the hallmarks of Labor's other financial disasters.

People listening to the broadcast of this debate at home or in their cars might be thinking: how did we get to this judgment? Are we being a little bit too harsh on the Labor Party? I just say to people listening to this tonight: let's start with the Rudd and Gillard government's track record in delivering major projects and their financial mismanagement. I want to begin with prior convictions, if you like, so I will start with the home insulation debacle. That scheme saw the tragic loss of four young people killed in the rush to implement the scheme. We had homes burnt to the ground and others severely damaged by fire. We had a legitimate industry destroyed as confidence was eroded amongst the Australian public in the whole home insulation industry and we had jobs lost. That was one of the greatest debacles in Australian political history, all at the hands of this government, shovelling money out the door in a so-called quest for clean energy.

Then we had the Green Loans Program, which is one that a lot of people have forgotten about, and the training of assessors. I am testing my memory but I think the government intended to train about 1,500 assessors. But someone forgot to tell training organisations, so 10,000 Green Loans home assessors were trained. That would not be so bad, I suppose, if it did not come at any cost to the people involved, but people actually lost their hard-earned money to undertake that training. Those poor people put up amounts of $2,000 to $3,000 each to become assessors in the false hope that there was a job at the end of it. This government completely mismanaged the program so, unfortunately, these people were training for jobs that never existed. Again, it was a complete financial disaster, but at least in this case, as far as I am aware, no-one died in the government's mismanagement of that program.

But the grand-daddy of them all is undoubtedly the government's Building the Education Revolution. This program, which amounted to about $16 billion, as I recall, was plagued with problems from the absolute start. In fact, it has got to the stage now throughout regional Australia that BER stands for 'builders early retirement'. Builders were in a position where they could inflate their prices to suit the market, they could move from the cities into regional areas, do a job and not necessarily take much care because they were never coming back to that town in their life, and the government picked up the tab. I think this program is the worst example of government mismanagement that I have ever been made aware of. Not only did it involve $16 billion, but the greatest concern of all was that the government refused to listen to local communities.

This program was not based on need, on whether the school community needed an upgrade. It was the government's version of that old sideshow alley call 'Every child wins a prize'. In this case every school got a building, regardless of whether they needed it or whether they needed the template design, because that was what they copped. The only time there was value for money out the program was when the independent schools had control of some of the money.

I will just reflect on comments made by the former head of Treasury, Dr Ken Henry, who told the ABC last week that value for money was only a second or third order concern, on that particular program, in terms of the government's stimulus package. I think that sums up this government: value for money was only a second or third order concern. But for the people who were having their hard-earned tax dollars spent in this manner, I can tell you now that value for money is the No. 1 priority they expect from us in this place. Value for money is what they want to see at every opportunity.

The member for Cowper went through a long list of renewable energy failures in his speech tonight, and I will not go through them again, but he made the point that this government has not learnt from its own bitter experiences, let alone experiences throughout the world when it comes to clean energy programs. It is simply going out to the marketplace and saying to the Australian people: 'Just trust us, we will deliver.' Unfortunately, there is a huge deficit of trust in the Australian community when it comes to this government, and it starts at the Prime Minister's office. It starts with her now infamous line when she told the Australian people: 'There will be no carbon tax under the government I lead.' Every bit of legislation to do with the clean energy future, including the legislation we are discussing tonight, comes back to that line from the Prime Minister: 'There will be no carbon tax under the government I lead.'

I have said before and I repeat now that the Prime Minister has been partly true to that line because there is no carbon tax under the government she leads. There is a carbon tax under the government that Bob Brown leads and now Christine Milne leads. It is the grubby deal with the Greens which has forced this government into this position. I do not believe members opposite are actually being true to themselves in this regard. I do not think they believe a lot of the information they are forced to propagate throughout the community. I believe it is just because they have done a deal with the Greens that they are forced into this position, because I do not believe that members of the Labor Party could be so stupid. This Clean Energy Finance Corporation is a pay-off to the Greens, at vast expense to Australian taxpayers.

In addition to the $10 billion, there is another little project we are not hearing much about at the moment, so it is good to see the Minister for Climate Change and Energy Efficiency is in the chamber. This project is called Contract for Closure—and at the mere mention of this policy the minister has left the chamber. I think this Contract for Closure links very nicely into the debate tonight because of this government's obsession with pandering to the Greens. I am not sure many Australians understand what this Contract for Closure policy is all about. What the government has promised to do is to retire 2,000 megawatts of coal fired power generation in Australia. Basically, the companies are going to be bought out by the government—by taxpayers, who are going to cough up all the money once again—so the companies have been invited to express their interest in being part of Contract for Closure. What we have seen, though, since this was announced and the expressions of interest closed is that the government has gone strangely quiet on this process because, as I understand it, the negotiations are going absolutely nowhere. You always know when the Labor Party is in a bit of strife because the dorothy dixers put up in question time by the Labor Party backbench just stop. There has not been a mention of Contract for Closure, as far as I can recall, in months, because it is a dud policy. The Minister for Resources and Energy, who is not here tonight, knows it. He can barely even say the name of the policy, he hates it so much. He knows it is a disgrace. The minister for energy is the only one I have seen, actually, who has had a little bit of credibility. He has given himself a bit of wriggle room. He has backed away from the policy a bit, because he is on the record as saying there is actually no guarantee that it will go ahead if they cannot negotiate a price that suits the government. So the minister for energy has given himself a bit of wriggle room.

The Minister for Climate Change and Energy Efficiency joins me again. Contract or Closure we are talking about, Minister, just in case you had not heard the words for awhile.

Greg Combet (Charlton, Australian Labor Party, Minister for Climate Change and Energy Efficiency) Share this | Link to this | Hansard source

I have heard of it.

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

I understand. The minister has heard of it. But no-one is talking about it, Minister—because it is a dud.

Greg Combet (Charlton, Australian Labor Party, Minister for Climate Change and Energy Efficiency) Share this | Link to this | Hansard source

It is commercial-in-confidence.

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

Oh, because it is commercial-in-confidence!

Amanda Rishworth (Kingston, Australian Labor Party) Share this | Link to this | Hansard source

Order! I will make sure the speaker continues to make his remarks through the chair.

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

Thank you, Deputy Speaker Rishworth, I accept your admonition. The Minister for Resources and Energy has backed away from it and he is not talking about it, saying unless we negotiate a deal that suits the government. But I think that really is the minister's code for, 'Oops, we've stuffed up. We didn't realise how much this would cost to pay out the owners of the power stations. We'd really like to go quiet on this one. We would like to just sneak out of this one and let no-one really notice that we ever talked about Contract for Closure.' The mere threat of Contract for Closure has been a social and economic disaster for a region like mine.

I know the minister at the table understands coal communities, but this policy of Contract for Closure has destroyed confidence in my region already, at a time when the economy is already soft. The government likes to blame that softness on other factors—and these are genuine factors: the high dollar, the European financial crisis, and high transport and wage costs. All of those are having an impact on heavy industry and on the manufacturing sector. But the question I continually put to members opposite—and I have yet to receive a decent answer to—is: Why are you making it harder? Why are you making it harder for Australian manufacturers? Why would any Australian government at a time like this do anything, anything at all, that would make it harder for Australians to compete on world markets? And I get silence like I have yet again tonight. Silence once again. Not one member opposite has got any explanation at all for why you would introduce a carbon tax and make things harder for Australian industry at this difficult time.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

Because they promised they would.

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

No, the Greens promised they would. Government ministers claim to stand up for local jobs; they do claim to stand up for blue-collar workers. Then they like to say that members on this side are overstating the impact of a carbon tax.

I would like to refer briefly, in the time, I have left to a letter I received this week from a gentleman in my electorate who actually wrote to the Minister for Resources and Energy. This is a letter from Angelo Gaudiano. I have not got time to go through the whole letter, but I did get the opportunity to table it the other day thanks to the government's goodwill. Mr Gaudiano said:

Since the formation of Energy Brix Australia in 1993 we have worked hard to survive. We have had to cut back in numbers and have sacrificed pay rises just so the company would remain viable. The company has also spent a lot of money and resources on the plant over the years to make it more reliable and efficient. The company and its employees have endured many hurdles and have turned a loss making business into a profit making business with a future.

Since the introduction of the Carbon Tax, the Company has endured financial difficulties due to low electricity prices. Due to this financial strain on the business the maintenance on the plant has been reduced which has caused a downturn in production due to breakdowns. Once the carbon tax comes into effect at the start of July the business will be unviable. It will have to shut. Over 200 workers will lose their jobs and the community will be greatly affected with families leaving the area.

…   …   …

The Prime Minister promised that no one will lose their jobs or be disadvantaged by the Carbon Tax. The Union (CFMEU) promised that no one will lose their jobs or be disadvantaged by the Carbon tax. The Union promised it would work with the Government in ensuring alternative base load power stations be constructed in the area so that it will provide jobs for the long term. So far nothing has been done. ...

…   …   …

… I worry for the future of my family and I fear for the future of the community that I live in and have invested in as I know it is going to suffer greatly in the very near future and take many years to recover from the effects that this unpopular carbon tax legislation will bring.

I am also tired talk about clean energy transition by local governments and groups. Talk does not produce jobs. We need positive action now. So please take my letter seriously, I am very frustrated and scared about my future.

Angelo is a boiler turbine operator who informs me the minister has not responded to his letter. What a surprise! What a surprise that people like Angelo simply do not trust this government! And why would they?

Today I had the opportunity also to ask questions to the Minister for Regional Australia, Regional Development and Local Government. I asked him some questions about the Regional Structural Adjustment Assistance Program. This little beauty is a $200-million program to assist communities strongly affected by carbon pricing! But, remarkably, given that the carbon tax comes into effect on 1 July—that there are going to be announcements, supposedly, on Contract for Closure, on 1 July—the minister informed me that the guidelines for this program have not been developed yet. What are we waiting for? It is less than five weeks away and the guidelines for the $200-million structural adjustment package for regional communities have not been developed yet. This Contract for Closure is a dud policy from a dud government and this Clean Energy Finance Corporation just adds to the long list of policy failures from a government that has forgotten who it is meant to represent.

The Labor Party of old used to stand up for blue-collar workers like Angelo Gaudiano. Now it stands for staying in power at all costs, and it is doing pathetic deals with the Greens, who have never created a job in regional Australia and are a direct threat to jobs in a wide range of regional industries.

I have mentioned before in the House, and I will say it again tonight: there is an absolute crisis of confidence in regional communities directly linked to the uncertainty this government has created through its reckless decision to legislate for the world's biggest carbon tax. As long as this carbon tax hangs over the heads of Australian businesses it is hard to see that confidence being restored. Until this government actually asks the Australian people for their permission to introduce a carbon tax, they will never be trusted again.

It simply staggers me that this once grand old party that claimed to represent blue-collar workers could come in here every day and still pretend that it represents the workers of this nation, when it has a policy in place to sack hundreds of blue-collar workers in power stations throughout Australia and has no plan whatsoever on the table to actually compensate those communities or provide alternative arrangements. The carbon tax will come into effect on 1 July and once this Contract for Closure policy is announced there will be more jobs lost in communities like mine. This government assures me—the minister assured me today—that the guidelines have not been prepared yet. The Australian people simply do not trust this government and its assurances, they do not trust this Prime Minister with their jobs and I would love to see her show the same passion for their jobs as she has shown in fighting to keep her own. (Time expired)

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

I rise to speak about the Clean Energy Finance Corporation Bill 2012 because this is quite an extraordinary bill. This is a bill that is delivering $10 billion of taxpayer subsidies through the Clean Energy Finance Corporation to deliver so-called viable clean energy technologies. The extraordinary thing about it though is that the bill in reality does not deliver viable clean energy technologies; it provides a taxpayer subsidy to those operators that seek to commercialise clean energy technologies. What we know, and this is a direct consequence of the House of Representatives Standing Committee on Economics inquiry into this very bill—

Debate interrupted; adjournment proposed and negatived.

I am mindful of the time of night, so I will keep my remarks fairly succinct. What we know is that it is forecast that as a direct result of the operation of the Clean Energy Finance Corporation taxpayers have a default rate of 7½ per cent of the forecast expenditure by CEFC. Seven-and-a-half per cent of the forecast expenditure equates to $150 million a year of losses. Two billion dollars has been allocated to CEFC each year over five years—that is a $10 billion investment. Of that $10 billion it is predicted that at least $750 million of taxpayers' money will be lost as a result of defaults. That is the starting point—$750 million of taxpayer losses. I would say that if you go into a deal where the government says right up front, 'We're going to lose $750 million of taxpayers' funds and that's our starting point', then it gives some indication of this government's cavalier approach to the industry. But the way they try to defend it is to say, 'Yes, but we're probably going to seek to have a bond rate return on the total pool of investments'.

We had the opportunity as part of the committee inquiry to test the basis on which the government makes its forecast. We looked at two crucial elements. The first question was: where does the 7½ per cent default target rate come from? The answer: 'We do not know; it is effectively a direction from the government'. I would love to hear the minister account for this because the 7½ per cent default rate is not based on best practice, it is not based on international benchmarks and it is not based on prior experience. It is only based on a direction from the government to the departments of Treasury and climate change. The second question was: on what basis is the benchmark made of a bond rate return, of three or four per cent return on the total amount of pooled funds? Where does that come from? Lo and behold, it comes from the same source. It is not based on international benchmarks, it is not based on global experience, and it is not based on any kind of analysis or modelling. Rather, it is a consequence of direction again from the executive arm of the parliament down to the departments that that will be the forecast rate. So the reality of the operation of the CEFC is that there actually could be substantially higher losses. Instead of being a starting point of $750 million of lost taxpayers' funds, it could amount to being billions of dollars of lost taxpayers' funds. Instead of the return being a three or four per cent return it could in reality be a return of negative three or four per cent, because the only people who have made this decision thus far are the minister and I guess a coterie of people around him. And that is it!

Australian taxpayers need to understand that the Australian Labor Party is committing them to a $10 billion level of expenditure for the government to pick winners when it comes to clean energy technology. That should ring alarm bells. It rings alarm bells with the opposition. It rings alarm bells with the Liberal members of the House of Representatives Standing Committee on Economics who participated in the inquiry, but it does not ring alarm bells on the opposite side because it is just business as usual. It is just standard, typical practice from a government that has become fat and lazy when it comes to dealing with taxpayers' funds. That is the concern that I and others have.

But more than that, make no mistake, the whole basis on which CEFC will operate is fundamentally flawed because, again from the evidence before the inquiry, it is clear that the sole purpose of the operation of the CEFC is to provide a taxpayer subsidy for clean tech that otherwise will not be commercially funded. They are called barriers to entry or barriers to investment. The Labor Party cannot have its cake and eat it too. You cannot say, 'Well, there is a market failure here, there is a reason why these start-ups, these commercialised entities, cannot receive private sector finance and that is because it is too risky and too pricey for these ventures to be funded. That is why we are going to suddenly come in like the cavalry with a $10 billion fund,' but then at the same time say, 'No, there's not a heightened level of risk, it's okay'. The reality is this is a risky venture right from day one, which is why the Labor Party says, 'We expect a 7½ per cent default—that is, we expect taxpayers to lose $750 million, which could actually be substantially higher'.

This is a government with a bad track record. It is a government that now thinks it knows better than the private sector when it comes to investing in clean tech. It is a government which, as the very basic starting point for CEFC, acknowledges that these institutions, companies, or whatever they might actually be, cannot secure private sector funding at the level required to make a go of it. That is the whole rationale for this $10 billion fund and that is the reason why the coalition will rip it apart, because it is bad policy, it is bad use of taxpayers' money and it is Australian taxpayers that wear the risk of this investment, not the private sector. I am very pleased to say that we do not support this jaunt. We do not support risking $10 billion of taxpayers' money and we do not support a starting point that says we are going to lose $750 million—a figure that has just materialised out of thin air and is not actually based on international benchmarks.

The final point lies with why this is actually taking place. I said I would be relatively brief, so I will finalise on this point. It is the opportunity cost associated with the operation of the CEFC. We already know the government is taking it off budget. We know the government has used tricky legislative implementation to ensure that they make it as difficult as possible for a subsequent government that would seek to repeal this particular agency. It is Australians who will have to finance this through borrowed funds. So this little jaunt down the road of being venture capitalists, which is effectively what the CEFC will be, this little jaunt at the direction of the minister at the table, the Minister for Climate Change and Energy Efficiency, will see Aussie kids for the next 20 years having even more debt to pay off to pay for this little venture capital expedition that the minister and others want to go on. They are the ones in whose apparent cause we are trying to do our little bit to clean the environment, even though the rest of the world is continuing to pollute. It is in their interests, apparently, that all this is taking place, yet they always seem to avoid the little asterisk at the end of that sentence, which is that the next generation of Australians will be paying all the debt and interest associated with this $10 billion junket.

I am pleased to stand opposed to the CEFC. It is a bad decision. The government should not be in the business of thinking that it is smarter than the private sector because, if there is one thing that we have learned time and time again, it is that governments are not. I have absolute knowledge about one thing, and that is that this government certainly is not.

Greg Combet (Charlton, Australian Labor Party, Minister for Climate Change and Energy Efficiency) Share this | Link to this | Hansard source

The House has been debating the Clean Energy Finance Corporation Bill 2012, 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. This is a very important package of legislation, and it continues to implement the Gillard government's historic reforms to build a clean energy future.

I thank all members for their contribution to the second reading debate on each of these bills and the associated legislation, although I should observe that some of the contributions really have been quite misleading and misrepresentative of the purposes of the legislation. One only has to consider the accusation of governments picking winners to recognise what nonsense has really been spoken by some of those on the other side of the House. In fact, the opposition has a policy called Direct Action, which is picking winners. What we are doing here with the Clean Energy Finance Corporation Bill is establishing a corporation, vesting it with funds that will operate independent of government according to an investment mandate and make investments on a commercial basis. To suggest otherwise just completely misrepresents the legislation.

I would also like to thank members of the House Standing Committee on Economics, particularly the chair, the member for Parramatta, for the inquiry that has been conducted into the legislation which built on the extensive consultation that the expert review panel, chaired by Jillian Broadbent, a Reserve Bank of Australia board member, undertook from October last year to March this year.

The Clean Energy Finance Corporation is a very important part of the government's clean energy future plan. It will encourage private investment and help overcome financial barriers that were clearly articulated in the review report that was chaired by Jillian Broadbent to commercialising and deploying cleaner energy technologies. The fact of the matter, as was identified in the review report, is that investment in clean energy technologies often faces a range of obstacles in attracting financing. I outlined those obstacles in my second reading speech.

The corporation will capitalise private finance into Australia's clean energy sector, renewable energy and low emissions technology using financial products and structures that address those financial barriers. They could include the provision of loans, loan guarantees or equity investments, but the corporation will operate on a commercial basis. The corporation, as I indicated earlier, will operate independently from government also, and it will focus on bringing private finance into the financing of renewable energy and low emissions technology investments. It is not expected to be the sole financier. In this way, it will build investor confidence in the clean energy sector.

It is also important to note just in summary that the Clean Energy Finance Corporation, the carbon price mechanism and the renewable energy target have all been designed to complement each other and, in order to facilitate the investments that need to be made in renewable energy, in low emissions technologies, in clean energy and in energy efficiency, to work together so that we achieve the goal of reducing our emissions, meeting our international obligations and achieving a 20 per cent renewable energy target by the year 2020 at lowest cost to the economy. These components of policy will work effectively together.

Finally, in relation to the Clean Energy Legislation Amendment Bill and the two other associated bills, it is important to note that the amendment bill will provide for something that the gaseous fuels industry has been asking for and consulting with the government for quite a period of time. It is something that came out of the inquiry into the clean energy bills last year—that is, to facilitate the opportunity for LPG, LNG and CNG to come underneath the carbon price mechanism rather than fuel excise arrangements. CNG, according to this bill and consequent upon its passage through parliament, will come under the carbon price mechanism from 1 July this year, and LPG and LNG will come under the carbon price mechanism from 1 July 2013. The amendments in the amendment bill and the associated bills principally deal with that issue.

With those remarks in summary, I commend the bills to the House.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The question is that this bill be now read a second time. Just for the information of the House, there will be a series of one-minute divisions after this, so I suggest nobody gets up and runs away.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.