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Clean Energy Finance Corporation (Abolition) Bill 2013 [No. 2]
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Urquhart, Sen Anne
Clean Energy Finance Corporation (Abolition) Bill 2013 [No. 2]
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- Start of Business
- Clean Energy Finance Corporation (Abolition) Bill 2013 [No. 2]
- Social Security Legislation Amendment (Green Army Programme) Bill 2014
- MATTERS OF PUBLIC INTEREST
- QUESTIONS WITHOUT NOTICE
- DISTINGUISHED VISITORS
QUESTIONS WITHOUT NOTICE
(Bushby, Sen David, Cormann, Sen Mathias)
Paid Parental Leave
(Cameron, Sen Doug, Cormann, Sen Mathias)
(Whish-Wilson, Sen Peter, Cormann, Sen Mathias)
(Edwards, Sen Sean, Cash, Sen Michaelia)
(Bilyk, Sen Catryna, Nash, Sen Fiona)
(McKenzie, Sen Bridget, Scullion, Sen Nigel)
(Xenophon, Sen Nick, Johnston, Sen David)
Disability Discrimination Commissioner
(Singh, Sen Lisa, Brandis, Sen George)
- STATEMENT BY THE PRESIDENT
- PERSONAL EXPLANATIONS
- PERSONAL EXPLANATIONS
- QUESTIONS WITHOUT NOTICE: TAKE NOTE OF ANSWERS
- PERSONAL EXPLANATIONS
- Greenhouse Pollution
- Mandatory Fuel Efficiency Standards
- National TAFE Day
- Christmas Island Tragedy
- Middle East
- Asylum Seekers
- MATTERS OF PUBLIC IMPORTANCE
- STATEMENT BY THE PRESIDENT
- PARLIAMENTARY REPRESENTATION
Wednesday, 18 June 2014
Senator URQUHART (Tasmania—Deputy Opposition Whip in the Senate) (10:45): I rise to speak on this debate on the Clean Energy Finance Corporation (Abolition) Bill 2013. This is the second time that I have spoken on this bill and I will not be supporting it. This time I hope that government senators and members listen to this debate and consider the benefits of the Clean Energy Finance Corporation. I hope that those opposite can put aside their ideological opposition to government co-financing and see the potential for the Clean Energy Finance Corporation.
We have a bipartisan emissions reduction target in this country. We are agreed that we must reduce Australia's emissions by at least five per cent of 2000 levels by 2020. Clearly, we are not agreed on the path to achieve that target. On this side, we want to stimulate private sector investment and use market-based mechanisms both to reward innovative businesses and to send a price signal. This argument is based on many rigorous economic assessments conducted by Australian and international professionals on how to achieve emissions reduction at the least cost for our economy. At this stage, the Australian people are unsure what those opposite believe. On one hand, there is the fierce belief in the market over government control, such as their decisions around the car industry and SPC Ardmona; yet, on climate change and the Cadbury chocolate factory in Hobart, they want to throw out the market and revert to their favourite pastime of populist politics.
The Clean Energy Finance Corporation was established to assist companies and organisations finance clean energy technology and energy efficiency measures through commercial loans, not through government grants. The Clean Energy Finance Corporation is forecast to achieve a positive return to taxpayers of $2.40 per tonne of abatement—a remarkable achievement that no-one could have predicted when the corporation was founded around a year ago; an achievement that we will no doubt be hearing a lot about today and into the future, as we grapple with the best way for government to set policies and implement programs to reduce carbon emissions.
How can we preserve jobs, preserve growth and prevent a carbon shock in future years? I participated in the Senate Environment and Communications Legislation Committee's inquiry into this bill and the suite of carbon price repeal bills late last year. It was definitely a quick inquiry. It was not fair on the witnesses or on the organisations and individuals who sought to make submissions and it was not fair on the Australian people that it was done so quickly. The new coalition government referred the suite of repeal bills to the committee to examine the costs of pricing carbon on households and businesses. The opposition referred the bills on the basis of examining how they fitted with Australia's long-term climate change obligations. Put simply, we start from and continue to see this problem through very different lenses. On one side, the new coalition government see climate change in terms of purely the here and now, while on our side we see the problem in terms of the medium- to long-term. As important as any 2020 target is the need to have in place a pricing mechanism for emissions reduction beyond 2020, with targets for reductions at 2030 and 2050. We want to ensure the transition is a smooth one, but we acknowledge we have to start somewhere.
The former Labor government put in place a suite of measures to address climate change, including the establishment of Low Carbon Australia and subsequently the Clean Energy Finance Corporation. The value of the Clean Energy Finance Corporation extends beyond carbon pricing. The current clean energy legislation has put in place a clear path for Australia to transition to a low carbon economy. Fundamental to that passage is government's role in fostering the development and the rollout of clean energy in Australia. Labor established the Clean Energy Finance Corporation to facilitate finance for renewable and clean energy technology investments.
I note the depths of the submission that the CEFC provided to the Senate inquiry, as well as the comprehensive further updates the parliament and the people of Australia have received over the course of this year. I thank the staff at the CEFC for their efforts in providing this detailed information. I encourage all members and senators to read their great work. The submission covered the role of the corporation; the policy rationale for introducing the corporation and its expected use-by-date; the impact of abolition, including the cost to the taxpayer; and some comprehensive case studies of how the corporation is investing taxpayer dollars to reduce emissions and to turn a profit.
The CEFC has been able to coordinate finance for emissions reduction that benefits business, provides returns to private sector investors and achieves a profit to government. The CEFC has funded projects that will generate or support over 500 megawatts of clean electricity. These investments are across a broad range of technologies, including wind, solar, energy efficiency and low-emissions technologies. Importantly, the CEFC's investments will deliver an estimated annual carbon abatement of 3.88 million tonnes. The CEFC has demonstrated it actually has the capacity to make investments that would account for 50 per cent of the five per cent emissions reduction target.
The CEFC invests in projects that are demonstrating the benefits of proven technologies in the Australian market. Its team of financial experts, all with significant experience with major banks and financial institutions, conducts comprehensive risk assessments and financial evaluations of projects. This allows the CEFC to demonstrate to the private sector its confidence in a project. As the CEFC staff members are drawn from the private sector, they utilise their networks and contacts to build confidence in clean energy projects.
The CEFC's investments assist in building Australia's clean energy supply chain capability, funding projects in regional and rural Australia and supporting 21st century jobs in our local communities. Many industries are benefiting from the CEFC financing, including agribusiness, property, manufacturing, utilities and local government. I commend Dr Jillian Broadbent, the chair, and Mr Oliver Yates, the CEO, together with their team, for the quality of the work they are doing every day to help financiers appreciate the benefits to their business of investing in clean energy and in energy efficient technology. Last year's hearing in particular was a difficult forum where, despite the best explanations from the CEFC officials, some Liberal and National senators just could not comprehend the purpose of the CEFC.
The officials had to spend most of the hearing explaining that private investors need the co-ordinator to come to the table with some skin in the game, that chief financial officers would not turn up if the CEFC was not a co-investor in a project and that the CEFC is much more than just a $10 billion government bank. The Liberal and National senators have been unable to see past their free-market blinkers and appreciate the role the CEFC plays in facilitating investment in renewable energy that would otherwise be missed by normal commercial banks. The CEFC does not engage in risky loans; it is helping to develop a relatively new clean energy investment sector.
Turning to evidence provided by the business and investor community, I note the summary from Mr Fabian from the Investor Group on Climate Change on the need for the CEFC:
Investors do not turn up for a chat; they turn up when there is a deal to be done. If we know that the counterparty can make the investment more attractive, then we are interested. We are not just going to come along for a bit of a chat about what might occur or what investment might take place.
Mr Yates highlighted the importance of financing in the corporation's role:
We need the ability to deploy cash so we are a real participant in the market, so that we can participate equally and on level terms with the private sector, so that we can actually facilitate transactions.
So where does this leave us? The CEFC cannot operate without providing finance. It cannot leverage the private sector funds. The projects it has financed so far—$2.2 billion worth of investment—will see over four million tonnes of abatement achieved, at a profit to the taxpayer. This seems to be a good program. The market does not provide the service required by all sides to achieve the bipartisan emissions reduction target. A government corporation utilises innovative financing to provide such a service and to return a profit to the government. Surely the new coalition government would seriously consider keeping this corporation as part of its direct action policy? Unfortunately, as is occurring all too often with this new government, ideology is getting in the way of good policy. Meanwhile, the emissions reduction fund will, as far as we are aware, consume billions from the budget, billing general government revenue for abatement, taking money from education, from health and from programs for families. The Prime Minister has made it clear that the Emissions Reduction Fund will not receive the additional funds we all know it will need to meet the five per cent reduction. It is clear that coalition senators have been unable to see past their free-market blinkers and appreciate the role that the CEFC plays in facilitating investment in renewable energy that would otherwise be missed by normal commercial banks.
As I mentioned earlier, the CEFC provided some quality case studies to the inquiry. I will read one for the Leader of the Government in the Senate, as I imagine he has firsthand knowledge of this building. The CEFC has invested in a lighting upgrade for the Civic Centre in Kingston, Tasmania, which has cut the building's lighting energy costs by 75 per cent. The Kingborough Council replaced the building's fluorescent lighting system with more energy-efficient LED tube lighting, to make energy savings of more than $11,000 a year. The council covered the $45,000 up-front cost with finance from Low Carbon Australia, now the CEFC. The 20-year life expectancy of LED lighting, compared with four years for the old fluorescents, means that the council is also saving on its maintenance costs. I congratulate the member for Franklin, Julie Collins, on her work assisting the council with this loan. I urge the Leader of the Government in the Senate to venture up the road to the council chambers and flick the light on.
There have been a range of comments made by those opposite to deride the work of the Clean Energy Finance Corporation. Once again, the detailed submission of the corporation brought these to the attention of the committee, and I would like to share these with the Senate. On 'crowding out of private sector investment', the CEFC has actually done the opposite and encouraged investment where links were not being made. Dr Broadbent said to the hearing:
I think we have got evidence that there has certainly been crowding in rather than crowding out, because new financial institutions have come to participate in the market, being encouraged by a government owned entity's participation.
Crowding in is a fascinating concept—where there is a market failure and government intervention and investment is supporting and encouraging private sector investment rather than discouraging it.
I turn to the Emissions Reduction Fund. Would this crowd out or crowd in investment? Would it encourage investment or is it simply doling out grants? Almost every investment by the corporation has included co-financiers encompassing many of Australia's major financial commercial entities. Would these entities, the big banks, investment funds et cetera, be interested in supporting a government grants program? Indeed, would they even be asked? The supposed party of the market appears to be doing its best to exclude the market from this vital area of investment and policy into the future. As I outlined earlier, the CEFC has received proposals from over 170 proponents seeking finance of $15 billion to roll out clean energy technology and create jobs in Australia. It is clear that demand for the CEFC from the market remains high. The question is: why abolish it, is it about risk?
Claims have been made that the CEFC invests taxpayer's money in 'high-risk' ventures. Treasurer Hockey claimed in his second reading speech last year that the CEFC was investing in high-risk ventures. I am sure the Treasurer is actually aware of the Australian government's own direction to the corporation, which clearly states that the CEFC must invest across the spectrum of clean energy technologies. It must in aggregate have an acceptable but not excessive level of risk relative to the sector. They are not allowed to venture into the high risk arena, so they have not. Its portfolio is mostly in relatively low-risk, loan-based transactions and as at the end of last year none of Low Carbon Australia's loans were in default after three years of operation.
In addition, to protect taxpayers into the future the CEFC has rigorous procedures in place. If senators have a quick look at the experience of CEFC staff and board members it is clear this is a team of experienced people who have operated credit and risk areas in traditional banks. The CEFC knows finance and they know risk. Further, not all projects make it to financing, with numerous checks by staff and the board ensuring only the best investments are made. This is probably a significant reason why the CEFC is set to yield around seven per cent and abate emissions at a profit to government of $2.40 per tonne abated. It is a sophisticated institution, and it is embarrassing that the current Treasurer, Mr Hockey, has not bothered to move beyond the rhetoric—particularly when he is all too happy to dole out cash to the second-biggest food manufacturer in the world. Sure the tourism centre at Cadbury will create a few jobs. But if taxpayer resources are so precious, as our Treasurer claims, then surely they should be spent on co-financing clean energy projects before being used to reward lobbyists.
The embarrassment does not stop with the Treasurer. Soon after the election, in seeking to beat his chest and show that he could be an anti-environment minister for the environment, Mr Hunt said that the CEFC was a 'giant green hedge fund' and demanded that the institution stop issuing finance. But I would take on board the advice of the CEFC and Mr Fabian from the Investor Group on Climate Change on the role and purpose of the corporation. Firstly, the CEFC claims that it is not in any way acting like a hedge fund; of its $536 million of investments, there are no dollars invested in hedging, there are no dollars invested in derivatives and there are no dollars invested in guarantees. Mr Fabian noted at the hearing that the business model of the CEFC is not an investment banking business model. It is not there to maximise the returns for the broker. It is this distinction—that a finance corporation can exist to seek to grow a market rather than simply grow profits—that appears to be the real issue for those opposite.
A further slight on the CEFC perpetrated by those opposite is that it is undercutting the market by providing concessional loans. This is despite it being established that there is insufficient private sector appetite for engaging in the types of finance provided by the CEFC, and the basic fact that many private sector providers also offer discount rates. The facts are that the CEFC has only provided discounts amounting to $14 million, or just around 2.5 per cent of the total funds that it has lent. This sort of proportion seems very low and indicates that the rate of a loan has not been an issue for the clean energy industry; it is the availability of finance that is the issue. Plainly, the CEFC cannot be accused of undercutting the market. The facts are clear.
A final attack on the CEFC that I will use my time to debate is the notion that the CEFC does not produce any clean energy. The argument goes: there is a renewable energy target of 20 per cent, so why do we need to spend $10 billion of borrowed money? Basic maths shows that 20 per cent is not 100 per cent. Also, the renewable energy target is quite narrowly defined, so cleaner energies, such as gas, quite rightly do not comply. Therefore, there is a strong potential for the CEFC to finance renewable and cleaner energy outside of the RET.
The CEFC provided examples for the inquiry of clean energy investments which are not RET-supported. Interestingly, these investments seek to lower energy costs for rural and regional users. Maybe those opposite just cannot stomach that co-financing can be used to achieve an environmental policy objective. Depending on this cabinet's mood, it is fine for other industries and for other sectors of our economy and our society, but it is wasteful spending if it is about protecting our environment and setting our economy up for a low-carbon future.
It is this sort of lack of leadership that is why they have had the quickest fall from grace of any government in living memory. Their budget stinks. Their environment policies stink. And their lack of a coherent industry policy stinks. The Australian people have had enough of their attitude of running government like they are still in opposition.
Labor will fight tooth and nail to keep the Clean Energy Finance Corporation. We know it is not a 'great green hedge fund experimenting in all sorts of unviable projects', and we need those coalition senators who appreciate that to stand up and be counted, as we saw with the deficit levy debate where two coalition senators opposed the levy. Regardless that they opposed the levy for different reasons, they spoke their mind and took a chance. Senators who understand and appreciate the benefits of the Clean Energy Finance Corporation need to come out of their offices today and be heard. They need to do so because it is one of the right policy tools for tackling climate change. The free marketeers over there must be hating the thought of that great big slush fund, the Emissions Reduction Fund, doling out cash in an inefficient, ineffective manner, wasting taxpayers' dollars that could be used to pay for fighter jets or tax cuts.
The CEFC is allowing Australia to get chief investment officers of renewable and clean energy projects and bank officials around the table talking about the deals they can do. Abolishing the CEFC comes at a cost to the taxpayer. It is reckless and irresponsible to remove this tool from our policy suite in tackling climate change. I know that it is foggy outside today, but I urge coalition senators to get their heads out of the clouds on climate change and vote no on this legislation.