SENATOR BIRMINGHAM: (South Australia) (12:44): I rise to speak on the Clean Energy Finance Corporation Bill 2012. I have been listening to Senator Pratt’s comments and I listened to Senator Milne’s contribution prior to that. The chamber just received a lecture from Senator Pratt about how this bill was going to support projects that were too risky to be supported by private or commercial finance. If they are too risky to be supported by private or commercial finance, it begs the question of why should they be not too risky to support with taxpayers’ hard-earned dollars. Why is it that this government is willing to risk and gamble and be reckless with taxpayer dollars when the finance market demonstrates that the types of projects that are being discussed are too risky for anybody else to invest in?
Senator Pratt also gave a lecture railing against the coalition’s direct action policy and proclaiming the government’s deep belief in market mechanisms and market based mechanisms. I am a little confused there, because I am not sure whether Senator Pratt realised what she was talking about here in terms of the legislation before us. The Clean Energy Finance Corporation Bill is in fact something that you could describe, if you wanted to, as direct action. There is nothing about this that remotely resembles a market based mechanism, nothing that comes close to being part of a market based mechanism. It is simply $10 billion of taxpayers’ money put out there for people to spend on so-called investments that hopefully, for the taxpayer, might pay off but, as we have heard, are too risky for anybody else to invest in. So this is very clearly about direct action, this whole ‘green bank’, this CEFC proposal. The difference, however, between it and the coalition’s direct action policy is that the coalition’s policy is based on the premise that it will fund activities, via market tender, that deliver the lowest cost abatement. It is a pretty clear proposal. It is the same way that water is bought back and the same way that many tender based activities operate. In this case, it will be funded and operate by the government going out to tender to purchase X amount of abatement and funding the lowest cost abatement. There is no requirement for that, no guarantee of that, with this CEFC, this green bank-and indeed it is far more likely to be the opposite: it will not be funding lowest-cost abatement; it will be funding far more expensive abatement. So it will be risking taxpayers’ dollars and it will be funding abatement that comes at a higher cost than could otherwise be achieved. It is a failure on numerous fronts.
The CEFC comes into effect as a result of this legislation, and the bill seeks to give it powers to invest in financial assets for the development of Australian based renewable energy technologies, to invest in low-emission technologies and energy efficiency projects. It gives it the power to enter into investment agreements itself and make investments through subsidiaries. It gives it a duty to ensure that, as of 1 July 2018, half the funds invested at that time for the purposes of its investment functions are invested in renewable energy technologies. That is the mandate. It has some $10 billion of taxpayer funds going into it, at least half of it to be invested by 2018 in renewable energy technologies. This of course is part of the government’s and the Greens’ overall carbon tax package. There was nothing like this in Mr Rudd’s emissions trading scheme that was proposed in the previous parliament. This is simply a case of the government having to buy off the Greens. This is Senator Milne’s baby, and I extend my congratulations to Senator Milne. It is not every day that a member of a minor party can manage to get the government to spend $10 billion of taxpayers’ money in this kind of reckless way. So to Senator Milne and the Greens I extend my congratulations that you have managed to achieve what is obviously to your constituency something you think is beneficial. But in this place we should be looking beyond the rather narrow constituency of the Greens to be looking at what is in the Australian national interest. This clearly is not, nor is the broader carbon tax that is being considered.
The carbon tax has been described by some as being like a giant money-go-round. The government goes out there with its carbon tax, it raises about $9 billion a year and then it spins it and churns it around government and dishes most of it back out again afterwards through all types of different mechanisms and means. This happens to be one of those means. If you look at the money-go-round that is the carbon tax, this Clean Energy Finance Corporation or green bank is in many ways like the big dipper of the money-go-round, because we are taking a big gamble and a big punt with where this $10 billion will be spent and how it will be spent.
You need no further evidence of the money-go-round nature of the government’s climate change policies and carbon tax policies than the situation of the Alcoa plant just outside Geelong at present. We have seen the miraculous situation in the last couple of days where Alcoa has been granted some $40 million from the government. The government professes that this has nothing to do with the carbon tax that Alcoa will have to pay. If that is the case, it is a remarkable coincidence that it is receiving this $40 million in grants just before the carbon tax will make that same Alcoa plant pay approximately $40 million in carbon tax. It is a remarkable coincidence from the government that, unrelated to the fact that they have imposed a new $40 million cost on Alcoa’s operations, they have decided that they need to give them $40 million to keep those doors open. A simple person might suggest that Alcoa could have managed to keep its doors open in the first place were it not having to pay a $40 million carbon tax. Also, it would not have needed a $40 million grant from the government-which will no doubt come with all manner of bureaucratic conditions attached to it and which of course will be churned through the public sector, chewing up a few dollars along the way.
This bill also sets out that the Clean Energy Finance Corporation special account be created. This special account will have appropriated to it some $2 billion per annum for five years, with the first instalment due to be paid on 1 July 2013, up to the total investment of $10 billion. Now $10 billion is a remarkable sum of money, and under this legislation not just this government and this parliament but potentially future governments and future parliaments will be tied to it. Such is the contempt that those opposite have for the views of the Australian people that it is not enough for Ms Gillard to have gone to the last election promising that there would be no carbon tax under the government she leads; it is also the desire of her government, having broken that promise, to go to the next election after having locked in, under this legislation, billions of dollars of funding to come out of that carbon tax. It is a desire to tie the hands of future parliaments and future governments to maintain a type of funding which would normally be provided without direct legislation appropriating the money so far in advance.
Normally, you would expect these types of appropriations to come through in a more timely manner, where the appropriation legislation is tied to the timing of when the grant is made. But we are appropriating, in 2012, funds to be provided right the way through to 2018. But there you have the attitude of this government. Although the Australian people may choose at the next election to reject these types of policies, it is trying-no doubt because of the pressure applied by Senator Milne and the Greens-to lock people in, to lock future governments in, to this spending and to make it as hard as possible for them to back out of it. This will not deter the opposition. Where we see bad spending, we will do what is necessary to make sure that we reject that bad spending in future.
It is notable that the government’s own bill, this bill, already envisages a loss to the taxpayer from this investment-and not just through its operating costs. It certainly has significant operating costs, as there are in the entire suite of carbon tax bills. Across the board, these carbon tax bills establish numerous new bureaucracies that will see over the forward estimates period the expenditure of some $400 million plus. We already have the new Clean Energy Regulator or ‘carbon cop’ operating with more than 300 staff in place to manage the carbon tax. That is no reflection on those hardworking public servants, because I have no doubt that they are working hard. It is a reflection on the complexity of policy and the administrative incompetence of this government that it puts in place policies that see such a ballooning and burgeoning of the bureaucracy that we end up with several new entities established out of the carbon tax package, hundreds of extra public servants employed and hundreds of millions of dollars of taxpayers’ money spent purely on the administration of these policies. The Clean Energy Finance Corporation will be one of the new entities that will see millions of dollars spent on its administration as well.
But the loss does not just occur through operating costs; it also occurs as a result of the write-downs that have been set out. Write-downs are, of course, a nice way of talking about failed projects. We will no doubt see taxpayers’ money invested in failed projects as a result of this legislation. The legislation tries to give the perception of having a very independent statutory board making all of the decisions. That is the perception it tries to give, but when you dig down into the detail you find that there is an awful lot of ministerial discretion for this new green bank. The bill requires the shareholder minister to issue an investment mandate for the corporation. The bill’s explanatory memorandum stipulates:
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.
I particularly like those last four words-‘and broad operational matters’-where the bill refers to the capacity for the minister to give investment mandate descriptions to the corporation. It seems as though the relevant minister is able to give instructions to the CEFC board on just about anything they so please-just about anything they want.
So, far from it being an independent statutory board, we instead seem to have a situation where a so-called independent statutory board has been established but the minister has the most sweeping of capacities to provide criteria and stipulations to that board. Ultimately, they may be able to independently select the investments, but the criteria for that investment selection, its suitability and all of the other operational matters have the potential to be heavily influenced by the relevant minister and government of the day-almost to the point where the CEFC will be under effective government or ministerial control. This investment mandate does not take the form of a disallowable instrument; it is, instead, a written non-disallowable legislative instrument. Once this bill has passed through the parliament, under the sweeping powers of the bill ministers of the day will be able to give investment mandates sweeping direction to the CEFC, regardless of what the parliament may think. That is not appropriate; it is not appropriate for this parliament to grant a blank cheque to future ministers for the expenditure of such vast sums of public money. When it comes to blank cheques, we see yet again-as we did last week and as we will through this week-the government constantly guillotining bills. In all cases it seems to be quite unnecessary, had they managed the legislative program in a sensible way. The pending establishment of the CEFC was made clear in July last year, yet it is only now that the Senate, under serious time management, is allowed a few hours of debate on this legislation, when we are talking about the expenditure of such vast sums of public money.
In kicking off the debate, my colleague Senator Cormann highlighted some particular concerns that we have about how this $10 billion policy interacts with the bipartisan Renewable Energy Target, which seeks to achieve 20 per cent renewable energy by 2020. Of course that target is already mandated; that target is already in place. The expectation is that by 2020 Australia will have 20 per cent renewable energy. The Renewable Energy Target does far more to transform Australia’s energy supplies, far more to transform our energy market and far more to reduce greenhouse gas emissions than does the government’s carbon tax in the same period, to 2020. We do actually know that the RET is making a difference. It is not without costs, and some of those are concerns; nonetheless, it is making a difference. But we are now moving along, and this legislation will allow $10 billion to be spent in the exact same space as the RET. That means that where the commercial case for projects out there today has been built up, where people have found the money to invest and are going through the final approvals, people will suddenly find themselves competing against other projects that are going to be subsidised by government loans. Suddenly, under the RET the fair playing field which is meant to encourage development of the lowest cost renewable energies to a 20 per cent target for Australia by 2020 will be thrown out the window and instead we will have competing against those RET projects companies that have not been able to get a commercial case to stack up and that are too risky to get commercial finance. They will now, suddenly, get government finance instead to get them there. What will that mean for the RET? The 20 per cent will still be met; it is just that it will be met by businesses that have received government subsidy rather than private investment. It will mean that that 20 per cent will probably be met from less efficient energy sources rather than from the most efficient energy sources. That seems to fly in the face of all the rhetoric we hear from the government about the way these market mechanisms should work.
I have to say I am baffled by this legislation and why the government is doing this. I noted that Senator Milne’s answer earlier to the problems with the RET was that it has dramatically increased the 20 per cent target. Of course we all know that that will come with even more dramatic increases to electricity prices right around the country. At its heart, this is just a $10 billion expenditure by the government on risky projects-projects that are too risky for anyone else anywhere else to want to invest in-which means that this government once again is putting the funds of the Australian taxpayer on the line and, in doing so, risking the hard earned dollars of the Australia taxpayer, which are so hard to come by. That is why we still have such massive debt in this country.