Wednesday, 4 December 2013
Clean Energy Finance Corporation (Abolition) Bill 2013; Second Reading
I would like to indicate my opposition to this bill. At the outset, I want to make it clear that I support government-led action on climate change. I believe climate change is a very real threat, and we need to take action that provides real results in terms of both environmental benefits and economic stability.
I agree that the carbon tax has created a poor economic outcome without any reasonable environmental return for the economic impact involved. I also think it is very important to note that back in 2010 the then Gillard government had a reverse mandate to introduce the carbon tax. In other words, it promised the people of Australia that there would not be a carbon tax and one was introduced despite that, and I think it is very important to put that reverse mandate, if you like, in context.
I did not support the former government's legislation to introduce these measures for these reasons, but not because I do not believe we need to take action on climate change. For me, the debate on these issues is about finding the most cost-effective way to abate greenhouse gases. As such, I will be supporting the government's move to repeal the carbon tax. However, I believe it is vital that the government release draft legislation or detailed policy as soon as possible, both to demonstrate their commitment to this issue and to provide certainty for businesses and investors. I strongly encourage the government to do so. But I do not support this particular bill, and I welcome the opportunity to debate it in further detail, separate from the rest of the package of bills.
The aim of the Clean Energy Finance Corporation is to promote fiscally responsible investment in the clean energy sector. During the inquiry by the Senate Environment and Communications Legislation Committee into these bills, we heard compelling evidence from the CEFC, and in particular from its chair, Jill Broadbent. The CEFC stated that, to date, the investment of $500 million of its fund had resulted in $2.2 billion worth of projects getting off the ground. The flow-on effects, including the creation of much-needed manufacturing and construction jobs, will have an additional financial benefit.
Ms Broadbent further explained that, if the CEFC's full $10 billion funds were to be invested in line with its current strategy, the resulting emissions abatement would be more than 50 per cent of the 2020 bipartisan target. There would also be a $200 million return per annum to Australian taxpayers after the administration costs were subtracted. So it seems on the basis of that evidence from Ms Broadbent, the chair of the Clean Energy Finance Corporation, that this corporation is already making a return to taxpayers through investment.
It is also important to note that the CEFC's mandate goes beyond renewable energy. They are also investing in measures to improve the efficiency and reduce emissions from traditional energy sources, and to improve the transition to cleaner forms of energy—in a sense, that low-hanging fruit. Much more can be done in terms of energy efficiency.
I acknowledge there are concerns about the cost of the CEFC—in particular, the $10 billion investment fund. I understand where the finance minister, Senator Cormann, is coming from on this, given that that is money that the government has borrowed. But, on the basis of the evidence I have seen to date, it appears to be a case where there is a reasonable and prudent return on investment, and that these projects are subject to sufficient scrutiny.
I also acknowledge the argument from some independent economists that you would not need this fund because you can get the finance from capital markets anyway. Where I take issue with that line of argument is that sometimes it is appropriate, particularly for emerging technologies and different types of capital raising, to have some government support. Many years ago we had the Commonwealth Development Bank that provided much-needed finance to the rural sector. Tomorrow I will be introducing a bill into this place to basically provide a mechanism for rural finance, following work that I have done on this with the member for Kennedy, the Hon. Bob Katter, and I know that my colleague Senator Madigan in this place is particularly concerned about access to rural finance and failures of market mechanisms. When I was in Victoria a number of weeks ago in the town of Beaufort—thank you, Senator Madigan—it was very interesting to hear from a number of farmers who were distressed as a result of not being able to access finance, despite the fact that they had good businesses. Because of the nature of the businesses, the ebbs and flows, the lack of consistent returns in the short term, traditional finance mechanisms do not work.
I think the same sort of thing can be said in the context of the Clean Energy Finance Corporation—there are some parallels there. Ms Broadbent pointed out that the organisation has not yet reached critical mass. Abolishing the CFC now will throw out any future benefits to the budget, in essence maximising the cost without any of the returns on investment. I think we need to be cautious. This is not the time to abolish the CEFC, given that it is early days and given the potential it has shown to date. Ms Broadbent stated to the Senate committee inquiry:
… our objective is to try to build the financial market participation, and when you are building something and you stop building it, it usually does not go on building in its own right. If you kept going for a while, we would like to think that those who have co-financed and participated with us would keep going. But I do not think they will keep going at the same pace without having an advocate or a catalyst there.
So it is a question of having a suitable catalyst in this marketplace. Ms Broadbent went on to explain how the CEFC has become a key tool in encouraging investment that would not normally occur, because of the relationships it has built with finance organisations. She said:
I have been very surprised at the capacity to be effective, to get banks around the table, and I think it is because all of the people, from the board to the executive and the employees, are commercially trained people who are used to dealing with bankers, and perhaps we have a capacity to persuade them to come to the table and to be there, and I think they have a respect for our motives. The industry participants seem to trust us to be a trusted banker who will work with them to bring banks to them rather than going to their bank who wants to finance something that is a little bit small for them to get a focus.
I think those words of Ms Broadbent, the Chair of the CEFC, are very pertinent in the context of its potential benefits.
I also want to raise a particularly important issue in this context. I was shocked to discover during the committee inquiry that Treasury has not undertaken any modelling to determine whether it is more effective to spend money to reduce high-emissions activity or to spend money to increase cleaner generation activity. I do not want to upset Senator Cameron, whom I have enormous regard for, but I want to mention here the work on this of Frontier Economics with Danny Price. Ask any credible economist about this. You need to look at where you spend the money. And if you spend the money on cleaner generation activity, that has a different price effect in the marketplace that is of benefit to consumers and of benefit to the environment. I find it extraordinary that Treasury to date has not done that modelling. I think it is very important, for Senator Cormann in his role as finance minister and for the Treasurer, to get Treasury to do that modelling because it has huge implications in terms of the potential benefits to consumers and to the environment. So there is a huge gap in key information. How can the government construct an effective policy or model when its own department has no idea how it actually works?
Abolishing the CEFC, when we know it works and when we have no modelling to suggest any other form of investment would be more effective, I believe is the wrong thing to do. If there is a better, more effective way then we should do that—but, to date, there does not seem to be. I strongly believe the government should allow the CEFC to continue. If further research or modelling in the future provides us with a better alternative then we can return to this debate. But there is no reason to abolish an organisation that is actually achieving both economic outcomes and emissions reductions when, at this stage, the assumption that there is a better way is only that—an assumption. And, Mr Acting Deputy President Furner, we all know what people say about the word 'assume' and what it can make of you and me.