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Thursday, 27 March 2014
Page: 3361

Mr BUTLER (Port Adelaide) (11:33): We now have 27 minutes available to debate the Clean Energy Finance Corporation (Abolition) Bill 2013 [No. 2]—a very important bill which was not able to be debated last time the package of changes to the clean energy system were before this House, because it was part of a cognate debate concerning 11 bills. This really does fly in the face all of this government's protestations of being an open and transparent government. After meandering through the address-in-reply debate for who knows how long, we now have 27 minutes for a full parliamentary debate on a very important piece of legislation.

This is a critically important part of the former government's clean energy package to deal with the challenge of climate change. Had we had more time to debate this important piece of legislation there would have been an opportunity, I suspect, for a number of members of this place to make some contributions about developments in climate change policy since that policy area was last debated by the House of Representatives, before Christmas. The developments have been significant: more and more scientific reports confirm the need for strong and sensible action, and there have been important developments in the relationship between the United States and China, seeking to drive global momentum for an ambitious global compact in Paris next year. All of this goes very squarely to the question of whether the Clean Energy Finance Corporation should be maintained in place.

Yesterday the Senate Standing Committee on Environment and Communications delivered a report on their inquiry into the government's alternative policy proposition, known as Direct Action, which confirmed the consensus that had emerged from the four years of the life of Direct Action—that it is a policy hopelessly inadequate to achieve even the commitment to carbon pollution reduction that Australia has signed up to and that it is based on contested methodologies, particularly soil carbon, which does have significant potential in the future but which the CSIRO again confirmed, in the context of this Senate inquiry, is still unable to deliver anywhere near the abatement that the minister and its supporters have argued for so long.

The Senate inquiry heard much evidence that confirms very serious doubts about whether Direct Action can avoid taxpayer dollars being handed over to support things that were going to happen anyway. The question of additionality has still not been addressed at all adequately by the new government, and we heard only last week from two very esteemed economists, Ross Garnaut and former Treasury secretary, Dr Ken Henry, that there is no way that this policy will come anywhere near the minimum commitment Australia has made to reduce carbon pollution at anywhere near the budget that has been allocated. Instead, it would likely involve the transfer of $4 billion to $5 billion of taxpayers' money to the large polluters every single year of the life of Direct Action policy.

There was consensus before the release of Direct Action, but there is an even stronger consensus now emerging that the best response to climate change rests on two pillars. Firstly, the pillar of an emissions trading scheme—which the government and the Greens party combined to defeat in the Senate last week—which puts in place a legal limit on carbon pollution, which reduces over time but lets business work out the cheapest and most effective way to operate within that limit. Secondly, a renewable energy target to drive the transition of our electricity sector particularly, from one that relied very heavily on methods that produced significant quantities of carbon pollution to cleaner methods and cleaner technologies. This is accepted around the world as the best approach to dealing with climate change—an emissions trading scheme and a renewable energy target. Ken Henry, in that same interview on 7.30 last week where he backed in Ross Garnaut's estimate that Direct Action will cost taxpayers $4 billion to $5 billion each and every year of its life, also said, 'Reducing Australia's carbon emissions through any mechanism other than an emissions trading scheme will necessarily be more damaging to the Australian economy.'

As I said, the renewable energy target's job is to transform Australia's electricity sector. That is the job the renewable energy target in dozens and dozens of other countries—developed and developing—has around the world. The electricity sector, power generation in particular, is the largest contributor to carbon pollution in Australia by a fair distance. About 33 per cent—so about a third—of all Australia's carbon pollution is produced by electricity generation. Another 17 per cent of Australia's carbon pollution is produced by stationary energy produced generally at manufacturing plants, so about half of Australia's carbon pollution comes from the production of energy. As everyone in this place and beyond knows, Australia has traditionally relied very heavily on fossil fuels—particularly on coal—for the generation of its power, which is why Australia has traditionally had a much higher level of carbon pollution from the electricity sector than many other nations.

The renewable energy target has been a bipartisan policy area for well over a decade. After all, it was the Howard government, to their credit, who introduced the first mandatory renewable energy target in 2001, and the architecture of that scheme—modest as it was in terms of its quantum—is still in place and was built on by the former government. The architecture involves a target that builds on existing renewable energy that existed before the introduction of the target in 2001. Renewable energy that existed as at 1997, which was largely hydro-electricity from the Snowy Mountains Scheme and also down in Tasmania, was about 15,000 gigawatt hours, or 15 terawatt hours. The target introduced by the Howard government in 2001 involved an additional 9,500 gigawatt hours being added to Australia's renewable electricity capacity by 2010. Importantly, that target was not expressed as a percentage of the overall electricity generation from year to year; it was expressed as an actual generation figure—9,500 gigawatt hours.

In 2003, the former conservative senator from the Northern Territory Grant Tambling conducted a review of the renewable energy target called the Tambling Review, which dealt with this question among many others. On the question of whether the target should be expressed as a percentage of electricity generation or as an actual generation figure, the review said:

The Review Panel considers that a fixed target is more compatible with market certainty, rather than a percentage of a fluctuating electricity market over which the industry has no control.

As people who follow this debate would know, it is obviously something that is very much in the mix as the government considers whether or not to jettison its very clear election commitments around the renewable energy target and take a position that is more in keeping with the target's opponents.

Needless to say, the MRET—the mandatory renewable energy target—of the Howard government was successful. By 2007, three years before its target date, the 9,500 additional gigawatt hours from renewable sources had been achieved. After the Labor Party came to government in 2007, we set about putting in place a system that would allow us to deliver our election commitment that at least 20 per cent of Australia's electricity generation would come from renewable sources by 2020. In 2009, the renewable energy target was expanded from 9,500 gigawatt hours, on top of the capacity that existed in 1997, to 45,000 gigawatt hours, almost quintupling the target that had been put in place by the Howard government. So 45 terawatt hours became the renewable energy target by 2020.

In 2011, for a range of reasons I will not go into here for the sake of time, that target was split into two different targets: the large-scale target—big wind farms, big solar farms and the like—which had a target of 41 terawatt hours, or 41,000 gigawatt hours; and the small-scale target of 4 terawatt hours, which is essentially driven by solar water heaters and PV solar panels being put on people's household roofs. In addition to that very significant quantum change by our government, a number of other changes were also made. Firstly, some exemptions were put in place that did not exist under the Howard scheme for emissions-intensive trade-exposed industries. About two-thirds of those exemptions go to the aluminium industry—which, as people would know, is a very significant consumer of electricity—ensuring that the renewable energy target that was put in place would transform our electricity sector in a way that would not place sectors like the aluminium sector at a competitive disadvantage.

The second change we made to the system was to introduce some support agencies, in particular the Australian Renewable Energy Agency, or ARENA, which is tasked with supporting emerging technologies like geothermal energy, hot rock technology or utility-scale solar thermal technology—which, I think all would agree, has still not got off the ground. The second agency we introduced was the Clean Energy Finance Corporation, and I will come to that in due course.

On any measure from 2001, but particularly following the acceleration put in place in 2009, Australia's renewable energy policy has been a resounding success. During our term in government, wind power generation in Australia tripled in six short years. When we came to government about 7,400 households in Australia had PV solar panels on their roofs; when we left government that figure was closer to 1.1 million—delivering cleaner energy to Australian communities and also, importantly, delivering vastly lower power bills to those households. And households in their thousands every fortnight continue to put PV solar panels on their roofs. Australia started to move into the position of a world leader in renewable technology. A country that had relied so heavily in its past on fossil fuel electricity generation started to move into that refined group of world leaders in renewable technology.

Last year I had the pleasure of participating in the launch of the largest wind farm project in the Southern Hemisphere—the Macarthur wind farm, supported by the Clean Energy Finance Corporation. Also last year Australia launched the largest PV solar farm in the Southern Hemisphere—as a clear world leader in this area. This drove very significant investment. It is estimated that about $18½ billion in investment has taken place since the Howard government introduced the MRET in 2001. About $10 billion of that has gone into the large-scale sector, and about $8 billion of investment has gone into PV solar panels and solar water heaters on the roofs of Australian households—hundreds and hundreds of thousands of Australian households. And it is forecast that if the existing policy parameters are kept in place, including agencies like the Clean Energy Finance Corporation and ARENA, then another $18.7 billion of investment will take place between now and 2020.

All this is, of course, now on hold—partly because of the decision by this government to abolish the Clean Energy Finance Corporation and the decision of this government to strip about $434 million in funding from ARENA, despite having indicated, before the election, a bipartisan support for the work of that agency and, perhaps most importantly, because of all the speculation encouraged by unnamed conservative or Liberal and National Party MPs. They have been going to the newspaper saying that the review that was put in place in place, in contravention of the provisions of the Climate Change Authority legislation, is all a precursor to killing the Renewable Energy Target—to use the phraseology of some Liberal Party MPs, who of course do not put their name to these articles in the newspapers but speak on background. All of this investment is now on hold.

Every three months Ernst & Young publishes a renewable energy country attractiveness index—a worldwide index that tracks investment in renewable or clean energy all around the world. It is a very highly regarded document that comes out every quarter and was released only a few weeks ago, in February 2014. This document demonstrates how seriously this is viewed by investors around the world. By mid-2013, because of the suite of policies I have talked about, Australia moved into fourth place on that index—fourth place around the world as an attractive place to make renewable energy investment, after the United States, China and Germany, which are universally regarded as the world leaders in clean energy or renewable energy. By November, after the election of this government, we had slipped to sixth, and by February we slipped to eighth place. In the February document—a substantial document in terms of its length—we appeared under the heading, 'What's bad about investment in renewable energy around the world'. That document, on page 5, says:

Australia also continues its fall from grace, dropping two places to eighth position. Government measures to scrap carbon pricing and clean energy funding are derailing progress towards an economically viable renewables market.

The investment I have talked about has brought thousands and thousands of jobs. We talk a lot in this place about jobs, for very good reason: they are central to our prosperity and to our opportunity in the future. It is estimated that over our term of government—six years—the number of jobs in the renewable energy sector tripled to more than 24,000 by the end of 2012. Most of those were involved in the rooftop PV solar part of the industry, but we also have seen jobs in manufacturing—for example, in manufacturing wind towers from BlueScope Steel that have been put in place in many different regional communities across Australia. And it would be no surprise to you, Mr Deputy Speaker Broadbent, that as a result of the investment uncertainty created by this government there are very significant forecasts of job losses in this sector if the speculation around this government's renewable energy policies ends up being true.

Importantly, though, the other success from the suite of renewable energy policies, of which the Clean Energy Finance Corporation policy is just one, has been that they have driven down carbon pollution from the largest source of carbon pollution in Australia, namely electricity generation. Over the last five or six years we have seen, for the first time in any of our lifetimes—for the first time since World War II—that electricity output, or electricity demand, has started to reduce. It does require some attention to work out what part of the reduction in carbon pollution is due to the fact that Australia is just generally using less electricity and what part is due to the fact that our electricity mix is becoming cleaner.

Electricity generation in Australia peaked in around 2008, and in the national electricity market—which covers the eastern states and South Australia and Tasmania—the electricity market's peaking in 2008 has reduced its output by about seven per cent in the five years since. But the carbon pollution—the emissions produced from the electricity market—have reduced by 16 per cent, and demand is down by seven per cent. That difference was even starker in the first year of the carbon price mechanism—2012-13. In that 12-month period the carbon pollution produced by the national electricity market reduced by about seven per cent. A third of that was due to a drop in demand, but fully two-thirds was due to a shift from polluting sources of electricity generation, particularly black and brown coal, to cleaner energy sources. In that 12 month period the renewable energy sector increased its share of the National Electricity Market by a full 25 per cent. In states like South Australia that shift has been even faster. In those five years carbon pollution in South Australia that is produced by electricity has reduced by 25 per cent as wind power in particular has substituted for coal powered electricity generation.

All of this makes the attacks—many of them from unnamed sources in newspapers—on the renewable energy policies of Australia, which have had been bipartisan for four previous elections, so mind-boggling. A very clear bipartisan commitment was given by the relevant parliamentary secretary, Senator Birmingham, only a week or two before the election in September 2013. They said they would not only respect the broad policy—the 20 per cent by 2020 aspiration—but that an Abbott government would also abide by the 41,000 gigawatt-hour target that is set out in the renewable energy legislation. It was a clear commitment, not just to the broad idea of a 20 per cent target, but it was a clear commitment to that quantum figure that Grant Tambling said was so important for market certainty.

We have since seen the unnamed backgrounding from Liberal Party MPs that they are going to kill the Renewable Energy Target. We have also seen, in a number of interviews with Alan Jones, the Prime Minister start to crab walk away from the commitment that was so clearly and definitively given by Senator Birmingham only a couple of weeks before the election. The Prime Minister, in a tried and true method, has started to try to create a scare campaign around power prices. The Prime Minister said to Alan Jones that the Renewable Energy Target is:

… significantly driving up power prices right now.

That just flies in the face of any of the evidence from all of the state regulatory agencies that set the allowable power prices by generators and retailers. It also flies in the face of all of the reports from the Australian Electricity Market Commission, an independent agency.

For example, in South Australia it is quite clear from the regulatory reports that the Renewable Energy Target, the large scale one, counts for about 1.4 per cent of the average power bill, and it is dropping. So it is about 40 cents per week, and it is dropping. In New South Wales it accounts for about 1.9 per cent of the average household bill, or 80 cents a week, and that is dropping as well. The point has been made that this determination by IPART in New South Wales was based on a certificate price, an LGC price, of $51 per megawatt hour. It is quite clear that those certificates are being trades for far less than $51 per megawatt hour. Generally it is around $40, and most recently—particularly because of the policy uncertainty in this area—less than $30. So even that small impost is a result of the regulatory agency overstating the price that retailers would have to pay for these Renewable Energy Certificates. In Queensland the QCA, the Queensland Competition Authority, which sets prices in that jurisdiction, has found that the large scale Renewable Energy Target accounts for about 40 cents per week, and is also dropping. This flies in the face of the Prime Minister's attempt to launch yet another scare campaign against households and their power prices.

The CEFC plays a very important role her. In the words of its mandate they help with:

… mobilising investment in renewable energy, low-emissions and energy efficiency projects and technologies.

The question is often asked of me, and I am sure of other members in this place, why it is that we need a government backed investment or financing vehicle? Why can the private banks not finance these projects, if they are worthy? I encourage members of the House—and members of the community who have a deep interest in this area—to have a look at some of the evidence on this point. Have a look at some of the evidence to the Senate inquiry, whose report was released last night.

For example, Mr Buckley, from the Institute for Energy Economics and Financial Analysis, told the committee, as stated on page 60 of the report:

… the CEFC is meant to lead the way, to pave the way for new technologies for deployment in the Australian market to show that they are financially viable. In a regulatory framework that works, that makes entire sense. The domestic institutions will learn by that process and then follow. They will probably invest in deal 3, 4, 5 or 6 and then fund 100 per cent of those thereafter. You need the CEFC to pave the way to show that this can be done economically and viably with the right policy.

Gillian Broadbent, the Chair of the CEFC, an esteemed businesswoman in the community, a former board member of the Reserve Bank of Australia, has made very similar comments to that Senate inquiry.

To date, after only starting co-investing from 1 July 2013, the portfolio of the CEFC has invested sums amounting to about $590 million—leveraging $1.8 billion in investment. So they are supporting projects financed to the tune of almost $2.5 billion. The average yield, and this is an important point, from those investments is seven per cent. So it is about 3.5 per cent more than the cost of funds to government.

Mr Craig Kelly: Madam Speaker, I seek to intervene on a point of order. I would ask the member a question. If he thinks it is such a great return, will he be investing his own money in it? If not, why would he invest taxpayers money?

The SPEAKER: I put the question to the member for Port Adelaide: is he prepared to take the intervention?

Mr BUTLER: If we had more than 26 minutes for the whole chamber to debate this bill, maybe I would. Given that this bill has been gagged for 26—

Opposition members interjecting

Mr BUTLER: No, it was debated cognately with 11 other bills. It is a very interesting question, and maybe the member and I can have a talk about it after.

From 2015 the CEFC starts returning money to the budget. The cost of abatement is actually a negative cost. It is a negative cost of about $2.40 per tonne of carbon pollution. I am sure the point will be made by members opposite that this is somehow a bizarre and unique experiment on the part of the former Australian government. Nothing could be further from the truth. For example, the United Kingdom has the Green Investment Bank that is ramping up to invest for a commercial return—in the same way that the Clean Energy Finance Corporation is doing—the equivalent of more than $A6 billion to start to drive technologies in that country. The United Kingdom has just overtaken Australia in the Ernst & Young renewable energy country attractiveness index. Germany is doing the same with over 100 billion euro being deployed from government through the commercial finance sector.

We will oppose this bill. It was a bad bill when it was first introduced and it remains a bad bill.

The SPEAKER: It being 12 o'clock, the member is interrupted in accordance with the resolution agreed to earlier today.