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Tuesday, 29 May 2012
Page: 6065


Ms O'DWYER (Higgins) (19:58): Tonight, I rise to speak on the Clean Energy Finance Corporation Bill 2012 and other associated legislation: the Clean Energy Legislation Amendment Bill 2012, the Clean Energy (Customs Tariff Amendment) Bill 2012 and the Clean Energy (Excise Tariff Legislation Amendment) Bill 2012. For the most part, though, my focus tonight will be on the Clean Energy Finance Corporation Bill 2012. I think it is important to understand the genesis of this bill. This bill is very separate to the announcement made by the government to introduce the carbon tax and all of the associated legislation that goes with it. The genesis of this bill was cooked up between the Labor government and the Greens at the direction of the Greens because they wanted to invest $10 billion of taxpayer money into renewable energy projects of their own choosing. At the time Senator Milne commented on the Clean Energy Finance Corporation, or as it has colloquially become known 'the Bob Brown bank', and said:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

At the moment that is our best guess.

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

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

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

Mr Waslin from the Treasury replied:

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

I said:

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

He replied:

Yes.

I said:

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

He replied:

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

I said:

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

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

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

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

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