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Monday, 25 June 2012
Page: 4404

Senator HUMPHRIES (Australian Capital Territory) (18:14): I rise also to express serious concern about the Clean Energy Finance Corporation Bill 2012 and note that yet again the parliament is being presented with the opportunity to make the cardinal mistake of investing huge amounts of money in harebrained Labor Party schemes, with the evidence of previous attempts at such investments so often having come up with spectacular failures. One has to look at the evidence in this case with a sense of dread that the same kind of outcome is very likely to occur here, too.

The parliament is being asked to provide for a massive investment, $10 billion, to be available to the Clean Energy Finance Corporation over five years to invest in renewable and other clean energy options. It assumes that the independent board which has been created will have the capacity to make good decisions about what should be invested in and the capacity to avoid making decisions about what ought not to be invested in. If we were looking at investing in a process of making commercial decisions in a way that generated a lift to a sector facing difficulties in convincing conventional finance sources of its worth and its value, if it were simply a case of giving those sorts of businesses a little extra advantage within a tight market, one could sort of understand what it is that the government is doing and perhaps even lend it a measure of support. But there are features of this legislation which I think cause anybody with a prudential sense of what ought or not be done by government real concern. For example, the legislation stipulates that the Clean Energy Finance Corporation will make investment decisions independently of the government. That is a very good thing. Such bodies should operate in market-like conditions, even if they do not purely operate in an entirely market based situation. The extent to which they work to the standards of the market is important in making this a basically viable use of the taxpayers' money. But there is a proviso to the independence of the board—that is, the capacity of the minister to issue what the legislation calls an 'investment mandate' to the Clean Energy Finance Corporation. That investment mandate, it appears, will have extremely wide power to affect the commercial environment in which the corporation might operate. The explanatory memorandum to the bill says:

The investment mandate may include, but not be limited to, directions on matters of risk and return, eligibility criteria of investments in renewable energy technologies, low-emission technologies and energy efficiency projects, allocation of investment, limits on concessional investments, types of financial instruments in which the Corporation may invest and broad operational matters.

The question that springs to my mind when reading through that list of things that the minister may do to impose on the corporation is: what can the minister not do? What is left to a board should the minister decide for, say, political reasons to strictly control the types of decisions that the board might make? Would the minister be in a position to mandate particular kinds of investments which the minister might want for political reasons—for example, because a particular investment might happen to fall in certain marginal seats? What could the minister not do to push the board in the direction of such investments? Very little, I would suggest, because this legislation effectively creates a very broad power for the minister or the government of the day to take effective control over the decisions of the independent board. We know from countless previous examples that, when you get Labor governments, with political criteria in mind, interfering in the effectiveness of the marketplace and controlling decisions that ought to be made on a commercial basis, you are asking for trouble—you are begging for it.

I do not need to mention the Labor Party's spectacular failures in areas such as the State Bank of South Australia, WA Inc., and the ZeroGen project under the Bligh government in Queensland, the latter of which led to $100 million of losses for the poor taxpayers of Queensland and which could been avoided, had other principles applied to these sorts of investments. But they did not. What is the common denominator here? It is interference by Labor governments in decisions that ought not to be interfered with. At the federal level, we have had the spectacular failures of the Solar Flagships program in Moree and the Queensland Solar Dawn Project. Those investments have been enormously costly for the taxpayer, and that is not to mention other related so-called environmental investments in things like the combustible pink batts in people's roofs. The record is not a good one, yet the Senate is being invited to perpetuate this record of inappropriately structured investments in what ought to be purely commercial areas of the economy.

What the Clean Energy Finance Corporation is being tasked to do, apparently, is identify projects which have a clean energy underpinning, investment in which is in the public interest but which apparently are not likely to receive commercial backing from private sector finance. Presumably it is not the government's intention that we should be investing in things purely because it likes the idea but they have no commercial viability, so projects which are complete duds ought not to be invested in.

Senator Ronaldson: I think you're being very generous.

Senator HUMPHRIES: I may be being very generous, Senator Ronaldson, but I assume that that is not what the government is all about. We are also not talking about projects which are themselves already commercially viable and which can readily obtain finance in the private sector, bearing in mind that we now have many years of experience in solar and wind projects in this country and it is not exactly cutting-edge technology that private banks and investment houses do not understand. There is a lot of investment today in the private sector in these areas, so why do we need to provide for this government sourced finance? It is supposedly because there are some investments which are very good but which do not attract the eye of the private sector.

So we have to hope that this corporation, with $10 billion to spend—$10 billion which ultimately comes at least with the risk resting with the taxpayer, $10 billion which is going to be pushed out into the private sector—goes not for commercially viable projects and not for complete duds but for those things that fall in that sort of sliver between those two points. Do we know that there are $10 billion worth of projects of that kind, which cannot attract investment at the moment or are unlikely to be able to attract that kind of investment in the next five years? We do not know, because the government has not done the homework of looking at what the market is currently confronting and examining whether there is a gap in the marketplace that this scheme will fill. We just do not know that.

The corporation is also conspicuously not charged with investing in the lowest cost technologies in order to produce the cheapest emissions reduction. You could understand if this were not so much about an overall goal of getting more clean energy operators in the marketplace in the hope that that would create critical mass for more competition. If it were actually about producing the cheapest emission reductions we possibly could, that would make some sense, but that is not part of the brief of this corporation.

We run the risk with this that projects may be funded which could have gone to the private sector and could have got market investment, which in fact compete with projects already in the private sector or already receiving private sector finance but which, because they have come later and are now eligible for this direct subsidy provided through the Clean Energy Finance Corporation, may be competing with those earlier projects in a way which puts the latter at a commercial disadvantage. Again, I cannot see anything in the legislation that prevents that from occurring. If I have missed something, I would be very grateful if the minister would point it out. It seems to me that, unless the minister uses those very broad powers I referred to before to correct these sorts of potential problems, we will see subsidies being provided to newcomers in the marketplace which have not been enjoyed by existing players. When that occurs, we have a serious problem with breaches of the basics of good competition within our marketplace.

The explanatory memorandum to this bill notes:

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.

So concessions are being granted to some players in the marketplace. Some investments will be risky, and I suppose every private sector financier factors in a certain level of bad debt, of investments that turn out not to be such a good idea in the long term. But to what extent is this body being set up to focus on those very kinds of high-risk investments which would not be generally covered by the private sector? We do not know. Those details have not been spelt out. We—that is, the taxpayers—may find ourselves financing a lot of such investments without being in a position to know in advance how much is being financed, because, again, the government has not done the homework of testing the market or of explaining how the principles by which this corporation will operate will work.

All of this goes on against the background of a situation where Australians are facing the largest carbon tax of its kind in the world and we are seeing falling confidence in the government's ability to plot a pathway to produce a less carbon-intensive world. We know that the cost of its failure will be measured by ordinary people, ordinary families, ordinary businesses, particularly small businesses, all over the country.

In the case of the ACT, we know from the work that has already been done that Canberra will see a $641.58 increase in the cost of living caused by a number of factors, principal among which is the carbon tax. Of this, $460.87 has been attributed directly by the ACT government to the carbon tax and general rises in power prices. When I asked the minister last week to tell us how compensation would work in the ACT, despite the fact that she had figures for other states, she did not have any figures for the ACT—a rather conspicuous omission, I think. But I can tell the minister, if she is not already aware, that the ACT government has already done some work on this and has determined that, on its estimate of the compensation arrangements to be made by the federal government for the effects of the carbon tax in the ACT, some 60 per cent of ACT people will be undercompensated for the effect of the carbon tax and 22 per cent of Canberrans will receive no compensation whatsoever. That leaves a very large part of the ACT community with its standard of living being shaved by the decisions of this government, with nowhere to go but backwards. On top of that, the government imposes the reckless folly—

Sitting suspended from 18:30 to 19:30

Senator HUMPHRIES: As I was saying before the interruption, I am deeply concerned that this legislation effectively creates an enormous cheque for the federal Labor government to write—$10 billion worth of 'investment' which could be well spent, but it could also be spent spectacularly badly. In an environment where we have so much evidence of the Labor government's ability to waste money, we have to be extremely fearful that such a large amount of it is being put into the hands of a government which has shown its ability to contumeliously disregard the important constraints on spending taxpayers' dollars wisely.

It is important to acknowledge that this $10 billion is in part a payment of a debt by the Labor government to the Greens. The Greens demanded this fund be of this order. Half at least of the funds which the Clean Energy Finance Corporation is to spend should be spent on renewable energy. Irrespective of whether that is the proportion which reflects the needs of energy providers in the marketplace, whether that is where the gaps fall, whether that is a good value for money proposition for the taxpayer, we are expected to support the bill with that promise to the Greens built into the way in which this corporation will work. The fear that this may be money not well spent is very real.

I was saying before the break that the edifice of carbon pricing that this government is undertaking is one that does not inspire much confidence. We have already seen in the context of the ACT many signs of that. We have already seen major and small businesses having to make decisions which reflect not a priority to save the environment but a priority to cut back on costs, which are spiralling because of the decisions of this government. For example, a small airline operating out of the ACT, Brindabella Airlines, have had to axe their Canberra to Albury route because they see very large amounts of money being spent simply to pay the extra costs occasioned through the carbon tax to the aviation fuel that they purchase. It simply makes the enterprise unviable. They believe $10 per passenger has had to be added to the cost of running the airline and that simply does not make it viable.

My colleagues in the Legislative Assembly have discovered through freedom of information requests that one directorate of the ACT government will have to find an extra $4.9 million in this year's budget to deliver the same services that they delivered in last year's budget. Why? Because of the extra costs occasioned by the carbon tax hitting ACT government services. Health will need an extra estimated $4.2 million, rising to $5.9 million extra in 2015. The additional cost to the ACT budget has been estimated to be about $20 million.

What do we get for $20 million extra on the backs of ACT taxpayers? Absolutely nothing. This does not add to or improve any services that have been provided to the ACT community. Of course, we know already that this government is unable to point to any improvement to the level of world greenhouse emissions because what we are doing in this country is not synchronised with what is happening in other parts of the world where emissions are rising, and rising precipitously. This amounts to a very uninspiring set of plans to address climate change and a very dangerous set of conditions in which to establish a major new $10 billion government business enterprise. It all adds up to a recipe for disaster. I simply hope that the taxpayers and voters of Australia will have a chance to pass judgment at the ballot box on this very unsatisfactory situation before much longer.