Monday, 25 June 2012
Clean Energy Finance Corporation Bill 2012; Second Reading
Thank you, Mr Deputy President. Brevity is the soul of wit, they say. Thank you for the opportunity to speak on this particular bill, the Clean Energy Finance Corporation Bill 2012. As a former public servant and banker, the idea of having a public sector financial institution disbursing other people's money does have a certain attraction for me. However, I think it is true to say that, with the Clean Energy Finance Corporation, we have a body which is essentially going to be a $10 billion white elephant placed in the middle of a whole set of other energy and environmental policies, and I believe there is a lack of coherence between the role that this finance corporation can play and the other programs and market signals that are now being inserted into the whole climate change and environmental area.
But let me begin with a more basic point, a point from first principles, and that is about the opportunity cost of capital. It is not true to say that the capital we expend in the private sector is either low-cost, or even in a sense free, to the community as a whole. We should not be striving to reduce the value of capital, and we do that when we do not appropriately invest capital. So, when we look at investing capital with a public sector objective, we have to be conscious of the fact that, if we are not earning a commercial rate of return on that capital, we have to be confident that we are earning a return which also achieves some other social objective or some other greater social benefit. And of course the proponents of the Clean Energy Finance Corporation would argue that that benefit is that we are going to be able to either bring forward or help to establish in Australia large-scale renewable energy technologies or other energy efficiency improvements which would not otherwise either come forward or come forward as quickly.
As I said before, this corporation is being set up against the backdrop of a number of other policies which the government have announced in the environmental and climate change arena, and therefore we have to be very careful about the impact that this policy will have on the capacity of those other policies to meet their objectives. In particular, I am conscious of the fact that the government here seem to be adopting something of a belt-and-braces approach. There is already the renewable energy target of 20 per cent, which my colleague Senator Smith alluded to at some length in his speech tonight. Then there is the carbon tax itself. The whole point of the carbon tax is to drive the substitutability of low-carbon or zero-carbon sources of energy for fossil fuel sources of energy. That is the whole point of the thing. And the whole argument of the government is that, by putting a price on this, they are then leaving it to the market, they are leaving it to enterprises, to determine the least-cost method of abatement to meet that objective. If the government are so confident that the carbon price, the carbon tax, and in time the floating price, will have this objective, why are they putting this other new mechanism on top? And if they have a renewable energy target, which is a quantitative target whereby 20 per cent of energy must come from renewable energy sources, a target that goes out to 2020, a target that is already having an impact—the government are already boasting about the impact that that target has had in bringing forward renewable energy projects; consumers are seeing the impact of that in their bills already; the renewable energy target is having a major impact, along with network investment, in driving up power bills; and the carbon tax now of course is having its own impact on those bills—then the signals are already all there. So prices are already being pushed up in quite a significant way, and that will presumably have its own impact on demand, even though most of us know that the demand for power is, particularly in the short run, pretty inelastic—it is a bit like a pretty badly designed indirect tax, but we will not go back to all of that. The point is that all these mechanisms are there, all pushing in that particular direction. So we then produce $10 billion on top. Of course, the real reason for the $10 billion is that, as Senator Smith said, it is something of a pay-off to the Greens, something they had particular influence over in terms of its creation and evolution.
Interestingly enough, this Clean Energy Finance Corporation is attracting criticism not just from the usual suspects, as you might term them, from my side of politics. There are people like Oliver Marc Hartwich, of the Centre for Independent Studies, who says the corporation is a complete waste of money because it will not cut emissions by a single gram of carbon dioxide. But then there are others, like Richard Denniss of the Australia Institute—not known for being a right-wing think tank—who says that:
While the taxpayers putting up the $13 billion on the table—
he includes some other programs in that—
it is not actually going to result in an increase in the amount of renewable energy.
… we've got a 20 per cent renewable energy target for 2020. We've got a statutory mandate to generate 20 per cent of our energy from renewable energy by 2020. But, what this policy does is say, 'Well, we'll increase the amount of taxpayer-funded renewable energy, but we're not going to increase the total pool of renewable energy.'
Tristan Edis, of the Climate Spectator, says:
Let's just let them work it out themselves. Don't appoint a bunch of investment bankers to spend a lot of money on high salaries for them to then go and try and predict who's the best to deliver these projects—just set the goals and then let industry work it out amongst themselves.