Monday, 25 June 2012
Clean Energy Finance Corporation Bill 2012; Second Reading
Before question time, I was speaking about this complete waste of money, this $10 billion that is going to be pumped into what is little more than a giant slush fund to appease the Green partners of this government. It is interesting to note the fact that the government gives and gives to the Greens. But where are the Greens on the government's so-called Malaysian solution? Why don't the government put that to the vote and see if their alliance partners pay back some of the largesse that they are giving them in so many other areas?
In the time available to me I would like to look at a number of issues pertaining to the carbon tax. This is a $9 billion a year tax and every Australian will pay in some way or other, most especially through their electricity and gas bills. In the first four years it will total $36 billion. It has absolutely nothing to do with the environment and everything to do with revenue raising. Despite the imposition of the carbon tax, Australia's emissions will increase from 578 million tonnes to 621 million tonnes by 2020. This is because gas and electricity are essential services for all Australians. Instead of reducing Australia's emissions, in the end firms will have to purchase 94 million tonnes of carbon permits from overseas by the year 2020.
The imposition of the carbon tax could not come at a worse possible time for manufacturers, who are struggling against a high Australian dollar. Further, their overseas competitors will not pay a carbon tax. There are six days to go until the start of the Gillard government carbon tax. Remember how in the lead-up to the last federal election—just six days before it—the Prime Minister said, 'There shall be no carbon tax under a government that I lead'? What a lie that was. Now, just six days before the carbon tax comes in, Labor is expected to announce a $40 million carbon tax bailout for Alcoa's Point Henry smelter near Geelong. The list of manufacturers in need of a carbon tax bailout goes on and on.
My own area, the Illawarra, the carbon tax capital of Australia, will be hit by a double whammy. The Illawarra, with its steel industry and coalmines, will face a double imposition. We have already started to see the exodus of jobs from the Illawarra. The result at the state election, with massive 18 per cent swings against them in the Illawarra, is something that Labor need to think about. As I stood at those polling booths, those people who were voting against the Labor Party were telling me and others one thing and one thing only: that they were absolutely disgusted with Labor for having the temerity to lie to them. They showed their anger by voting against Labor in the state election and again in the local government elections. It is little wonder that the people of the Illawarra are being paid back. Ratepayers there will pay much more because of what councils like Shellharbour Council and Wollongong Council will be forced to impose as a direct consequence of this government's carbon tax. Little wonder that the next election will be a referendum on the carbon tax.
If elected, a coalition government will have a contract with the community and a mandate to honour. Those opposite will need to take very strong heed of the vote. Many people will take that opportunity to vote against this government. People are waiting now. They want an election. As I and my colleagues go out and about and speak to people, we are finding that they want an election because they want to tell those opposite what they think about them and their stinking, toxic carbon tax. They have been lied to. They do not like it. They want the opportunity to express their point of view.
Let us have a look at what is happening around the world. No country currently imposes an economy-wide tax on greenhouse emissions or has in place an economy-wide ETS. This is an economic own goal of the worst kind. Countries like the United States, Canada, India, China and Japan have all made it clear that they are not moving towards a broad based carbon tax like Australia. It will be the most expensive carbon tax in the world. It starts at $23 a tonne, but it will be going up and up. We know the Treasury estimates: it will reach $29 per tonne in 2016, $37 per tonne in 2020 and over $350 per tonne in 2050. We know this is payback to the Greens, because we have had Bob Brown and Christine Milne say that it needs to be at least $40 a tonne to shift electricity generation from coal. They want to stamp out the coal industry. And of course Senator Hanson-Young over there has canvassed a price of $100 per tonne, so it is little wonder.
Recently we had the Prime Minister going over to Rio. There she was, dateless and desperate in Rio, with nobody agreeing with her in relation to support for a carbon tax. One could say, judging by some of the photos of her that were taken, that she was very friendless as well.
Government senators interjecting—
Would you like me to really get nasty? Would you really like me to get nasty? Anyway, one only has to look at the fact that she comprehensively was made to look like a fool and an idiot as a consequence of her behaviour on her recent overseas trip. One only has to look at the communications that came out. Only three paragraphs out of 49 pages referenced at all the issue of climate change. And not only did the final declaration out of Rio only barely mention climate policy, but no country jumped to adopt anything remotely close to Australia's carbon tax. That was despite every opportunity that other countries have had to take up this so-called great policy. The carbon tax remained quite dateless and desperate in Rio.
In my remaining time, let us not forget that those words—'There shall be no carbon tax under a government that I lead'—will haunt this Prime Minister to her political grave. And so they should, for the lie that has been perpetrated on the Australian public.
I would like to say that it is a pleasure to rise to oppose this particular legislation, the Clean Energy Finance Corporation Bill 2012, but it is actually a tragedy that this legislation has been brought into this place. The Labor Party of old—the Labor Party of Hawke and Keating—would have had nothing to do with legislation like this. The Labor Party of Hawke and Keating ran a million miles from the state governments of Victoria, led by John Cain and Joan Kirner, and South Australia, headed by Mr Bannon. But the Labor Party of today has sold its soul to the people in the corner—the Greens. This legislation represents the depths to which the Labor Party has fallen. The Labor Party of Hawke and Keating, the Labor Party of Peter Walsh, would have gone nowhere near this. But that is not the modern-day Labor Party. Its agenda and what it does in government are driven by the people in the corner in this chamber, the people formerly led by Senator Bob Brown.
It is not for nothing that this is known as the Senator Bob Brown bank. This $10 billion of borrowed money represents $10 billion of future taxes being paid by Australians who might even still be in school. This bill represents the price of the Labor Party's soul. It represents what the Labor Party will do to stay in power. It does not matter that they made an explicit promise to not do something and then introduced a carbon tax. It does not matter that this legislation and this so-called clean energy fund goes against everything they did when they were last in office. But it does illustrate the depths to which they have fallen.
The $10 billion that is being appropriated with this legislation—$2 billion a year for the next five years—is being appropriated in such a manner as to try to keep it off the budget books in a formal sense. It is being done in a way that it does not add up to Labor's record debt and deficits, with nothing less than an accounting trick. But we know that the alleged surplus is also made up of nothing less than an accounting trick by pulling billions of dollars of spending forward into this financial year, pushing it out to the subsequent financial year. They hope against all hope that if they can actually turn their back on their record of the last few years they will deliver some sort of measly surplus of less than one per cent of Commonwealth revenues in what may well turn out to be an election year.
Importantly, this money is borrowed. This legislation seeks to put this policy beyond the people. And that is exactly what the Greens have hoped for. That is exactly what the Greens have sought to do with this whole policy area, year after year after year. At the last election the overwhelming majority of people in this parliament went to the election with a promise of no carbon tax. A sole member of the House of Representatives and five senators in this place were elected on a platform of introducing a carbon tax or an emissions trading scheme. But, because of Labor's desperate desire to retain the perks of office at all costs, those others folded on the promise the Prime Minister had made through the barrel of a camera: 'There will be no carbon tax under the government I lead.' And this represents part of that.
This legislation, by seeking to appropriate over the next five years $2 billion each and every year, is yet another attempt in the ongoing attempts by Labor and the Greens to put this whole issue beyond the people. I say that this side of parliament intends to put it before the people. This side of parliament intends to go to the next election and aggressively put our case that policies like this put our economic good fortune at risk, that policies like this stand only to add costs to the Australian economy, that policies like this stand only to add to the future debts and deficits that must be paid back by all Australians.
There are many things wrong with this approach, and I want to go through a few of them now. Firstly, the whole idea that the government is in a position to finance technologies and to enter the finance markets to finance particular industries and companies has been disproven in my own lifetime. I grew up in Victoria. I finished high school in the year of 1990, when my home state was in something akin to an economic depression. People in South Australia had a similar experience. And what drove that? It was a borrowing binge by state government instrumentalities that lent money out. They thought they were making the best guess about what might turn out to be economically substantial projects, but in the end governments are not fit for the purpose of determining what happens in a commercial marketplace. Billions of dollars were lost, through Tricontinental, the State Bank of Victoria—and I remember, when the Victorian Economic Development Corporation story broke in 1989, we thought that was a disaster because it involved about $140 million of government funds being wasted. That was merely the beginning of a tidal wave of government losses that led to the effective sale and closure of the State Bank of Victoria and debts for the State Bank of South Australia being borne by taxpayers for many years.
Importantly, when debts like this are run up, to the government it is just numbers on a balance sheet. In fact, someone once described to me the whole idea that we have a fiscal cycle where we run deficits in bad times and surpluses in good times. The whole Labor and Greens idea of a budget cycle is that when Labor is in office we run deficits. When the coalition is in office we run surpluses. The whole argument about whether we should have deficits or surpluses is a critical one, but it is not just a utilitarian one; it is a moral one. It is a moral argument because when we run deficits we are imposing costs on future Australians—we are living large at their expense. Professor Niall Ferguson, who is currently giving the Reith lectures in Britain, makes this very point in his first lecture—that all around the world this financial crisis we are seeing is being driven by governments living large at the expense of people who have not yet even been born. They are definitely living large at the expense of people who are not yet taxpayers, because the bill always comes due. And approaches like this only serve to reinforce the fact that Australians know this government is headed in the wrong direction—because if we were to believe Mr Swan and if we were to believe Prime Minister Gillard that the Australian economy is so great, then we would not be running up a measly attempted accounting fiction of less than one per cent of government revenues as a surplus. It takes 70 years to pay back the debt they have run up in four years. If this economy is so strong then this budget should be so much stronger, but it is not—and we know that it is genuinely in deficit. So there are the accounting tricks, and this is one of them.
Time will prove that this body will not deliver a commercial rate of return. For that reason it should be treated on budget. We have an admission from the government that they expect a 7½ per cent rate of money not being returned to the fund. That is $750 million over five years—$750 million that could otherwise be spent on services. It could build a hospital. It could fund new regional universities. But no, this government do not want to go down that path; this government want to kowtow to their Greens allies and create this fund for patronage, this fund for preferment, in order to simply buy more time in office. This fund is for people who cannot access commercial finance. It is therefore, by definition, picking losers. If we have a commercial operating finance market, one that funds every other business in Australia but will not fund these particular businesses, then someone with a sense of the market would say: 'These businesses will not provide a commercial rate of return.' We have seen it all around the world. We have seen it in Queensland. We have seen the disaster with Solyndra. But this government will not listen. This government simply want to create this slush fund and put it beyond the call of the next election and put it beyond the people so the people cannot have a say.
What is even more frustrating about approaches like this, where the government seeks to fund non-economic industries, non-economic sectors and non-economic companies, is that they give false hope to the people working in those areas. One of the great tragedies of sustaining a protected regime in certain areas—and this is the latest one—is that to people who may enter the workforce in those areas at some point in their lives, when there is a reckoning, when these businesses and sectors do not actually provide a commercial rate of return and become unsustainable, and the government drip dries up, then those people are going to go through substantial economic adjustment themselves. We saw that in the 1980s and 1990s on a massive scale. We had hundreds of thousands of mainly middle-aged, mainly blue-collar male workers lose their careers in the name of economic reform. That was for the great betterment of this country, and it is a great testament to the way this country handled that that we did it without substantial social dislocation. I had experience of that in my own family.
But why on earth would we try and set ourselves up for failure again? We have been through this period of economic restructuring that has delivered us unprecedented, unheard of economic good fortune. Since we entered the workforce people of my age have never really experienced mass unemployment in the way our parents have. I am 39 years old. Since we got out of the 1991, 1992 and 1993 recession we have had a relatively low unemployment rate. So, for the first time in many years, we have not had a huge recession that has forced people out of the labour market. Yet no-one denies, apart from the Greens in the corner, that it is economic liberalisation that has delivered that good fortune. Why would we turn our backs on it? Why would we create a fund like this, specifically to support non-economic industries and non-economic sectors and potentially to set more workers up for those difficulties that people went through in the 1980s and 1990s? Because that is what picking losers involves—it is actually about people.
That then goes to one of the core challenges that this bill represents to all of us. This bill represents yet another step in the recreation of a culture of patronage in the Australian economy. I do not dismiss lightly the fact that the Greens have campaigned for this sort of attitude for many years, but I am amazed that the Labor Party, the party of people like Peter Walsh, has turned its back on economic liberalisation. When you set government up as a source of funds, when you set government up through regulation that can make or break industries, or through one-off grants like we have seen to car companies without criteria that are open and transparent, what you do is create a culture of patronage whereby the pathway to government and access to government support becomes even more important than genuine commercial success. That steers economic resources and capital—and, these days, scarce labour given our ageing population—away from the most efficient use, and away from where the country can do its best, and steers them towards less efficient outcomes. It steers those resources towards outcomes that do not produce the national wealth that we would all benefit from, so every Australian is directly worse off—except for the very few, of course, that benefit from this largesse; and this is largesse on an enormous scale. I was in this place when we knocked off the so-called Ruddbank. It was a bank introduced by the former Prime Minister, as part of one of the stimulus packages, in order to protect the commercial property construction industry. It involved about $4 billion of government funds, but with the potential to go up to $10 billion. This place knocked off that legislation because of the risk it was exposing taxpayers to. This bill represents a bigger version of that, and a bigger version of that invested in a much less secure environment, because this is supposed to pick the losers out of the commercial market. This is going to those very organisations that cannot access commercial finance because they cannot make a business case add up. While it provides an enormous advantage to some, it penalises every taxpayer and it will penalise future taxpayers, who will have to service the debt that this $10 billion is adding to.
One of the most bizarre aspects about this is that it does nothing to add to the government's alleged carbon reduction agenda, or that of the Greens. With this $10 billion plan we will see not one extra watt of renewable energy generated. We have the 20 per cent mandatory renewable energy target, and this will not in any way add to that. This will merely be a source of funds for people operating in that space. I say to the government: how is it fair that those who are in the marketplace at the moment servicing commercial loans, with business plans, will have to compete against people chosen by the government's nominees, who might get access to funds in a different way? The truth is that we know that borrowing money from the government is not the same as borrowing it from a bank. There will be political pressures to make sure that this particular fund does not do unpopular things just before elections. There is always the curse of patronage, which means that those with connections can potentially use them with the board. We do not know how this is going to work but we do know that the mandate is not as strict as it is for the Future Fund. How is it fair that people who now are operating in the commercial marketplace in the renewable energy industry will be up against potential competitors who have access to these funds? I put it to you, Mr Acting Deputy President, that it is not fair.
This bill represents a serious backwards step for this country, because the taxpayer again is going into the commercial finance marketplace, or, in this case, the non-commercial-finance marketplace. It is doing so purely as a political pay-off to the Greens, who demanded this slush fund of the Labor Party in order to get their carbon policy through this parliament. We are now debating it after a farcical inquiry in the House of Representatives and no inquiry in the Senate—and no inquiry by either of the economics committees of the two houses.
The fact that the Greens or the Labor Party can ram this legislation through with nothing more than a proforma inquiry in the House and, I believe, two meetings of the Senate Economics Legislation Committee, with no evidence being taken, shows what a farce this has become. It shows that this really is about re-creating a culture of patronage.
This bill is going to mean, according to the government, at least $750 million of losses to Australian taxpayers. I think it will be much greater, because the recent history of funds like this in Australia has been that they do not return the cost of capital and they expose the taxpayer to massive losses. Also, overseas we know these funds simply do not work.
This bill is nothing short of an abomination. It represents a pay-off from the Labor Party to the Greens, and it represents the re-creation of what I, and the many Australians who bear the cost of policies like this, had hoped was expunged from our country—that is, government deciding which businesses succeed and which businesses fail, and a culture of patronage. This bill should be opposed, and I stand firmly with my coalition colleagues in doing so and in making sure that bills like this are key issues in the next election so that the Australian people have a say on how their money is spent, even if it is money that has only been borrowed.
I rise to address the Clean Energy Finance Corporation Bill 2012. I would like to talk about some principles, the politics of this and, more specifically, the outcomes that these kinds of measures have had in other places around the world, and what we can look forward to here in Australia if the Greens-Labor alliance have their way in foisting this on the Australian people.
Firstly, I want to talk about principles to do with this bill. We stand here today in the Senate, the house of review. I well remember many comments, particularly from the Greens, about the fact that this place, of all parts of our form of government, should be the place that provides scrutiny of government spending to ensure that the spending is wise, appropriate, value for money and that we will not be wasting taxpayers' money. It is disgraceful that the Greens have lined up with Labor to guillotine debate on this bill.
In the House they had but two hours to debate legislation that commits the Australian taxpayer to spending $10 billion. That is $5 billion per hour. That figure is hard to get your head around. In this place we have the benefit of a committee report. As the previous speaker said, that committee inquiry was somewhat of a farce, I am sorry to say. They had three weeks to consider some 19 bills, some 1,100 pages of legislation and the over 4,500 responses that were sent to the committee, even though people had had only a week to do it. As many as 4,500 people made contributions to that committee, and yet there was less than a week to evaluate them, so many of the submissions could not be evaluated in time to be received as evidence. The coalition members on the committee did their best to go through and look at as many of them as they could.
When you consider the magnitude of this spending—$10 billion—to give a committee only three weeks to look at 19 bills and 1,100 pages of legislation is an outrageous abuse of power of an executive government and their alliance partner, particularly when you look at the make-up of the committee. There was a Labor chair and, going very much against the convention of this place, which is to have an opposition member as deputy chair, there was a Greens deputy chair and there were Independent members on the committee, nine all up from the Green, Labor and Independent alliance, and only five coalition members. It is worth noting that the Greens and Independents were all members of the Multi-Party Climate Change Committee, who are the people who had put together much of the package in the first place. So even that goes against some of the fundamental principles of review, that people who have had a hand in and have a deep interest in and commitment to the thing being reviewed should not be put in the position of reviewing it.
It is worth comparing just for a minute how this is looked at in other government departments. In the last budget, we saw the government commit some $200-plus million to enable detailed review and consideration of the future submarine program. Some three years have passed since they first announced that, and now they are putting in more time and a couple of hundred million dollars so that people can look at this with some scrutiny, because they have rightly said that billions of dollars is a lot of taxpayers' money. The estimates for that program go from around $18 billion to about $36 billion. But we are talking of at least four years and a substantial number of experts reviewing what the government will do so that they do not waste taxpayers' money. That is three years to date already. With this bill, there was three weeks for that committee inquiry, two hours debate in the House and not much more here in the Senate. That is a disgrace in terms of the principle of scrutiny that should be applied to the expenditure of taxpayers' money.
There are other principles that come into play here. Any time we commit the government to spending taxpayers' money we need to remember that it is not our money; it is taxpayers' money and there is an obligation to make sure we get value for money. So it is no surprise that the coalition committee members, in their dissenting report, were somewhat startled when they were looking at things like $57.3 million in start-up costs. Yet the Treasury officials at the inquiry could not explain how those costs were to be allocated. In government circles perhaps $57.3 million just rolls off the tongue fairly quickly, but I think most people in the Australian public would demand slightly more accountability of their government than to allocate $57.3 million with no breakdown, no disclosure and no transparency as to how those funds are going to be used in the start-up of this organisation.
It has already been highlighted that this fund will be paying for the initiatives and the ideas that have not been able to attract funding from the commercial sector. That means they are high risk. That means that the return they offer may not be as great. The estimates range from $600 million to $750 million that is expected to be written off—$750 million of taxpayers' money that is allowed for to be written off. When the Treasury officials were asked where that figure came from, what modelling underpinned that, what previous examples they had looked at in Australia or overseas, they had no answer. So with a program of this magnitude—$10 billion of taxpayers' money—Treasury officials had no answer as to where some of those kinds of assumptions, like a 7.5 per cent wastage rate, actually came from. There are no safeguards. They could not explain whether there were any stop-loss procedures in place, or when, if they had already invested a certain amount in a certain technology, they would cut it off. Where is the threshold, where is that line in the sand, to quote the Prime Minister, so that when they cross it they know it is time to stop?
In terms of return on investment, somewhat cynically this whole program is off budget, because they say it is going to make a return to government. But the Treasury officials were unable to detail whether any of the guidelines that apply to other government business enterprises would be applied to this. All of that says that there is not a lot of transparency and there has not been a lot of thought. In some ways it is no surprise that the Treasury officials were unable to give answers as to where much of this came from, because the Multi-Party Climate Change Committee, which was responsible for this, included people like the Prime Minister, the Deputy Prime Minister, Mr Swan, Mr Combet, Senator Milne, Mr Windsor, Senator Bob Brown and Mr Oakeshott—no climate scientists there, no great economic minds there in terms of something that we will be spending $10 billion of taxpayers' money on. When you look at the range of things that the committee came with up for the Clean Energy Agreement, like putting a price on carbon—something the Prime Minister said would never happen under a government she led—promoting innovations and investment in renewable energy, improving energy efficiency and creating opportunities in the land sector to cut pollution, the list of people on the committee does not exactly bring the world's widest set of skills to the things that this $10 billion is to be spent on.
Moving on to the politics, if we have broken so many principles in allowing this initiative to come forward, why? Clearly the motivating factor is politics. The motivating factor for this initiative is a pay-off by the Gillard Labor government to the Greens. The media and others have called it Bob Brown's slush fund, but the reality is that it is a pay-off to the Greens; it is the return for them supporting the Gillard government. One of the things which really leaps out and shows that is that someone like the retired Senator Brown was able to specifically exclude from consideration in this fund some of the things which he was ideologically opposed to. So carbon capture and storage and things were not included. Why? It was not because they may not be able to play a part in giving us clean energy. It was not because they may not be able to play a part in keeping energy costs down. They were excluded on the basis of ideology, which shows the very clear political lineage of this program.
You also know things are political when they tend to ignore previous programs. Treasury officials admitted during the inquiry that there had been no serious consideration of the $800 million that had been spent on the Solar Flagships or the ZeroGen programs or the failure rates that had occurred under them. They also admitted that there had not been a lot of the thought given to what they meant by 'Australian based'. Some of the discussion that led to this was: 'We need to be supporting ideas in Australia and innovation in Australia.' Yet, under questioning around section 61 of the legislation, the Treasury officials admitted that there were actually no guidelines for a situation where something occurred in Australia but it was actually owned by an overseas venture. There were no guidelines to say, 'No; this actually has to be an Australian idea or an Australian company.' So the politics has caused a lot of good principles to be undermined. The politics has driven a lot of nonsensical approaches. The important question is: what will the outcomes be for the people of Australia?
One of that premises of this program is to fund renewable energy technologies, to make clean energy cheaper than the fuels captured under the climate tax. The Department of Climate Change and Energy Efficiency has admitted that it had not done any modelling. So the department that is supposed to be supporting the committee that is to review the modelling admits that there is no modelling. If it has done no modelling and we have had very limited time both in the Senate and in the House and for the committee that is to review it to apply some scrutiny to these bills, these questions have to be asked: will they be well considered; will they be well designed; will there be unintended consequences?
It is fascinating to look at the report entitled Climate change and economic growth which was issued by the Commission on Growth and Development. This is not some climate change denier think tank that is funded by a conservative organisation. This is funded by AusAID, the Department for International Development, the Dutch Ministry of Foreign Affairs, the Hewlett Foundation, CEDA and the World Bank—so a fairly credible group. On page 8, the report states:
The marginal cost function of mitigation is very steep, especially in the short run. Dramatic immediate policies to reduce greenhouse gas emissions would be very costly. Further, by rushing into regulations in a panic, it is very likely that new programs would not be designed efficiently. The greatest threat that climate change poses to economic growth is that the world adopts a costly and inefficient mitigation policy that places a huge drag on the global economy.
What might that look like? Again, I go to an article from 11 May this year from the Financial Post. It talks about the situation in Europe. It says:
… Denmark, an early adopter … now requires its households to pay the developed world’s highest power prices—about 40¢ a kilowatt hour, or three to four times what North Americans pay … Germany, whose powerhouse economy gave green developers a blank cheque, is a close second, followed by other … nations such as Belgium, the headquarters of the EU, and distressed nations such as Spain.
The result is chaos to the economic well-being of the EU nations. Even in rock-solid Germany, up to 15% of the populace is now believed to be in “fuel poverty” …
The whole debate around climate change and green jobs and clean energy futures does not really use the term 'fuel poverty' very much. But 15 per cent of Germans are now believed to be in fuel poverty. That is defined by governments in Europe as needing to spend more than 10 per cent of the total household income on electricity and gas. Further, the article states:
Some 600,000 low-income Germans are now being cut off by their power companies annually, a number expected to increase as a … stream of global-warming projects in the pipeline wallops customers. In the U.K., which has laboured under the … politically correct climate leadership … some 12 million people are already in fuel poverty, 900,000 of them in wind-infested Scotland alone …
Fuel poverty is one of the unintended consequences of poorly designed, rapidly rolled out regulation attempting to mitigate climate change. It was forewarned in the report sponsored by AusAID and the World Bank. It is being reported on by the Financial Post, and the people in Germany, in Scotland and in other parts of Europe are living in fuel poverty. We have the warning. We have the demonstrated facts. Yet this government and their Greens alliance partners still wish to ram through this place, with insufficient consideration and scrutiny, a bill that stands to damage our economy as part of the broader carbon tax package.
It is interesting that the article in the Financial Post notes that, according to the US Energy Information Administration, power rates there will actually drop by more than 22 per cent by the end of the decade and then stay flat to 2035. Why? Because increasingly the Americans will be working from coal to natural gas, which is expected to account for 60 per cent of generating capacity in the future. Because of gas and their limitless amount of coal, Americans' power prices are actually falling, while we are seeing in Europe in response to schemes like the one before us an increasing number of people living under a new term called 'energy poverty'.
For matters of principle, for the denial of the opportunity for the Australian people to have their representatives in this place apply appropriate scrutiny, because of the crass politics behind this bill and because of the unintended consequences that come from this ideologically driven carbon tax package, of which the Clean Energy Finance Corporation Bill is a part, I will not be supporting the bill, and the Senate should oppose it.
I rise also to express serious concern about the Clean Energy Finance Corporation Bill 2012 and note that yet again the parliament is being presented with the opportunity to make the cardinal mistake of investing huge amounts of money in harebrained Labor Party schemes, with the evidence of previous attempts at such investments so often having come up with spectacular failures. One has to look at the evidence in this case with a sense of dread that the same kind of outcome is very likely to occur here, too.
The parliament is being asked to provide for a massive investment, $10 billion, to be available to the Clean Energy Finance Corporation over five years to invest in renewable and other clean energy options. It assumes that the independent board which has been created will have the capacity to make good decisions about what should be invested in and the capacity to avoid making decisions about what ought not to be invested in. If we were looking at investing in a process of making commercial decisions in a way that generated a lift to a sector facing difficulties in convincing conventional finance sources of its worth and its value, if it were simply a case of giving those sorts of businesses a little extra advantage within a tight market, one could sort of understand what it is that the government is doing and perhaps even lend it a measure of support. But there are features of this legislation which I think cause anybody with a prudential sense of what ought or not be done by government real concern. For example, the legislation stipulates that the Clean Energy Finance Corporation will make investment decisions independently of the government. That is a very good thing. Such bodies should operate in market-like conditions, even if they do not purely operate in an entirely market based situation. The extent to which they work to the standards of the market is important in making this a basically viable use of the taxpayers' money. But there is a proviso to the independence of the board—that is, the capacity of the minister to issue what the legislation calls an 'investment mandate' to the Clean Energy Finance Corporation. That investment mandate, it appears, will have extremely wide power to affect the commercial environment in which the corporation might operate. The explanatory memorandum to the bill says:
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.
The question that springs to my mind when reading through that list of things that the minister may do to impose on the corporation is: what can the minister not do? What is left to a board should the minister decide for, say, political reasons to strictly control the types of decisions that the board might make? Would the minister be in a position to mandate particular kinds of investments which the minister might want for political reasons—for example, because a particular investment might happen to fall in certain marginal seats? What could the minister not do to push the board in the direction of such investments? Very little, I would suggest, because this legislation effectively creates a very broad power for the minister or the government of the day to take effective control over the decisions of the independent board. We know from countless previous examples that, when you get Labor governments, with political criteria in mind, interfering in the effectiveness of the marketplace and controlling decisions that ought to be made on a commercial basis, you are asking for trouble—you are begging for it.
I do not need to mention the Labor Party's spectacular failures in areas such as the State Bank of South Australia, WA Inc., and the ZeroGen project under the Bligh government in Queensland, the latter of which led to $100 million of losses for the poor taxpayers of Queensland and which could been avoided, had other principles applied to these sorts of investments. But they did not. What is the common denominator here? It is interference by Labor governments in decisions that ought not to be interfered with. At the federal level, we have had the spectacular failures of the Solar Flagships program in Moree and the Queensland Solar Dawn Project. Those investments have been enormously costly for the taxpayer, and that is not to mention other related so-called environmental investments in things like the combustible pink batts in people's roofs. The record is not a good one, yet the Senate is being invited to perpetuate this record of inappropriately structured investments in what ought to be purely commercial areas of the economy.
What the Clean Energy Finance Corporation is being tasked to do, apparently, is identify projects which have a clean energy underpinning, investment in which is in the public interest but which apparently are not likely to receive commercial backing from private sector finance. Presumably it is not the government's intention that we should be investing in things purely because it likes the idea but they have no commercial viability, so projects which are complete duds ought not to be invested in.
I may be being very generous, Senator Ronaldson, but I assume that that is not what the government is all about. We are also not talking about projects which are themselves already commercially viable and which can readily obtain finance in the private sector, bearing in mind that we now have many years of experience in solar and wind projects in this country and it is not exactly cutting-edge technology that private banks and investment houses do not understand. There is a lot of investment today in the private sector in these areas, so why do we need to provide for this government sourced finance? It is supposedly because there are some investments which are very good but which do not attract the eye of the private sector.
So we have to hope that this corporation, with $10 billion to spend—$10 billion which ultimately comes at least with the risk resting with the taxpayer, $10 billion which is going to be pushed out into the private sector—goes not for commercially viable projects and not for complete duds but for those things that fall in that sort of sliver between those two points. Do we know that there are $10 billion worth of projects of that kind, which cannot attract investment at the moment or are unlikely to be able to attract that kind of investment in the next five years? We do not know, because the government has not done the homework of looking at what the market is currently confronting and examining whether there is a gap in the marketplace that this scheme will fill. We just do not know that.
The corporation is also conspicuously not charged with investing in the lowest cost technologies in order to produce the cheapest emissions reduction. You could understand if this were not so much about an overall goal of getting more clean energy operators in the marketplace in the hope that that would create critical mass for more competition. If it were actually about producing the cheapest emission reductions we possibly could, that would make some sense, but that is not part of the brief of this corporation.
We run the risk with this that projects may be funded which could have gone to the private sector and could have got market investment, which in fact compete with projects already in the private sector or already receiving private sector finance but which, because they have come later and are now eligible for this direct subsidy provided through the Clean Energy Finance Corporation, may be competing with those earlier projects in a way which puts the latter at a commercial disadvantage. Again, I cannot see anything in the legislation that prevents that from occurring. If I have missed something, I would be very grateful if the minister would point it out. It seems to me that, unless the minister uses those very broad powers I referred to before to correct these sorts of potential problems, we will see subsidies being provided to newcomers in the marketplace which have not been enjoyed by existing players. When that occurs, we have a serious problem with breaches of the basics of good competition within our marketplace.
The explanatory memorandum to this bill notes:
The fiscal and underlying cash balance impacts include a prudent recognition that some investments will not be recovered, and interest revenue. The fiscal balance impact also includes the concessional component of loans.
So concessions are being granted to some players in the marketplace. Some investments will be risky, and I suppose every private sector financier factors in a certain level of bad debt, of investments that turn out not to be such a good idea in the long term. But to what extent is this body being set up to focus on those very kinds of high-risk investments which would not be generally covered by the private sector? We do not know. Those details have not been spelt out. We—that is, the taxpayers—may find ourselves financing a lot of such investments without being in a position to know in advance how much is being financed, because, again, the government has not done the homework of testing the market or of explaining how the principles by which this corporation will operate will work.
All of this goes on against the background of a situation where Australians are facing the largest carbon tax of its kind in the world and we are seeing falling confidence in the government's ability to plot a pathway to produce a less carbon-intensive world. We know that the cost of its failure will be measured by ordinary people, ordinary families, ordinary businesses, particularly small businesses, all over the country.
In the case of the ACT, we know from the work that has already been done that Canberra will see a $641.58 increase in the cost of living caused by a number of factors, principal among which is the carbon tax. Of this, $460.87 has been attributed directly by the ACT government to the carbon tax and general rises in power prices. When I asked the minister last week to tell us how compensation would work in the ACT, despite the fact that she had figures for other states, she did not have any figures for the ACT—a rather conspicuous omission, I think. But I can tell the minister, if she is not already aware, that the ACT government has already done some work on this and has determined that, on its estimate of the compensation arrangements to be made by the federal government for the effects of the carbon tax in the ACT, some 60 per cent of ACT people will be undercompensated for the effect of the carbon tax and 22 per cent of Canberrans will receive no compensation whatsoever. That leaves a very large part of the ACT community with its standard of living being shaved by the decisions of this government, with nowhere to go but backwards. On top of that, the government imposes the reckless folly—
Sitting suspended from 18:30 to 19:30
As I was saying before the interruption, I am deeply concerned that this legislation effectively creates an enormous cheque for the federal Labor government to write—$10 billion worth of 'investment' which could be well spent, but it could also be spent spectacularly badly. In an environment where we have so much evidence of the Labor government's ability to waste money, we have to be extremely fearful that such a large amount of it is being put into the hands of a government which has shown its ability to contumeliously disregard the important constraints on spending taxpayers' dollars wisely.
It is important to acknowledge that this $10 billion is in part a payment of a debt by the Labor government to the Greens. The Greens demanded this fund be of this order. Half at least of the funds which the Clean Energy Finance Corporation is to spend should be spent on renewable energy. Irrespective of whether that is the proportion which reflects the needs of energy providers in the marketplace, whether that is where the gaps fall, whether that is a good value for money proposition for the taxpayer, we are expected to support the bill with that promise to the Greens built into the way in which this corporation will work. The fear that this may be money not well spent is very real.
I was saying before the break that the edifice of carbon pricing that this government is undertaking is one that does not inspire much confidence. We have already seen in the context of the ACT many signs of that. We have already seen major and small businesses having to make decisions which reflect not a priority to save the environment but a priority to cut back on costs, which are spiralling because of the decisions of this government. For example, a small airline operating out of the ACT, Brindabella Airlines, have had to axe their Canberra to Albury route because they see very large amounts of money being spent simply to pay the extra costs occasioned through the carbon tax to the aviation fuel that they purchase. It simply makes the enterprise unviable. They believe $10 per passenger has had to be added to the cost of running the airline and that simply does not make it viable.
My colleagues in the Legislative Assembly have discovered through freedom of information requests that one directorate of the ACT government will have to find an extra $4.9 million in this year's budget to deliver the same services that they delivered in last year's budget. Why? Because of the extra costs occasioned by the carbon tax hitting ACT government services. Health will need an extra estimated $4.2 million, rising to $5.9 million extra in 2015. The additional cost to the ACT budget has been estimated to be about $20 million.
What do we get for $20 million extra on the backs of ACT taxpayers? Absolutely nothing. This does not add to or improve any services that have been provided to the ACT community. Of course, we know already that this government is unable to point to any improvement to the level of world greenhouse emissions because what we are doing in this country is not synchronised with what is happening in other parts of the world where emissions are rising, and rising precipitously. This amounts to a very uninspiring set of plans to address climate change and a very dangerous set of conditions in which to establish a major new $10 billion government business enterprise. It all adds up to a recipe for disaster. I simply hope that the taxpayers and voters of Australia will have a chance to pass judgment at the ballot box on this very unsatisfactory situation before much longer.
At the risk of upsetting the Governor of the Reserve Bank and others, I am afraid I must share Senator Gary Humphries's view that we have here yet another Labor-generated recipe for disaster. I know that Mr Glenn Stevens urges us to see the glass as half full. In fact, in different circumstances with a different government that might be possible. But with this government it is not possible. What we have here with the Clean Energy Finance Corporation Bill 2012 is yet another attempt to legislate a fiscal disaster.
What is it with Labor governments and the need to have the federal government, or any government, get its grubby little paws involved in private enterprise, picking winners and deciding where to invest money? What is it about Labor governments? How long has the record got to go on and on, starting with WA Inc., going through John Cain in Victoria, going through the South Australian situation where, going back to the eighties, the state government was the first state government that was obliged to sell its government-owned bank? They could not do innovation; they could not pick winners; they ended up in such debt because of the way they went about it.
For example, let us look at the renewable energy area. Has anyone been to Cloncurry lately to see the Bligh and federal government solar energy project? You can still see it—it just does not work. It never did work. It is just rusting away. But yes, that was going to be the brave new world of Ms Bligh and Mr Rudd, where they would power the town of Cloncurry with solar energy. But of course they picked the wrong product to use. It was explained to me that the product they chose would never have meet their needs. You only have to look at some of the bizarre and simple little things that this government have done wrong to appreciate that you have to have an understanding of private business before you can run any sort of an investment body. This government do not have it.
Mr Acting Deputy President Furner, you may have also been present at the Aboriginal community of Lake Nash near the border with Queensland in the Northern Territory. The temperature there is 36 degrees in the middle of the day and FaHCSIA installed, at a cost of $12,000, a steel skateboard ramp, without any cover over it. It was very useful at midday for frying eggs. The local skateboarders said they could perhaps use it at night when it got cool enough, but there was no lighting. So you could use it at night in the dark without burning yourself or use it as a giant and expensive frypan. Those are the sorts of things that happen when you have a government that does not have a clue about the environment in which it is operating, whether it be the physical environment or the financial environment. It is the sort of thing that we expect from this government.
I would be interested to know what input Treasurer Swan might have with Mr Combet on the structure of the Clean Energy Finance Corporation, because we notice that it is supposed to be self-sustaining once it is mature and that the funds returned for the CEFC for its investments would be available for reinvestment. That of course is not what the budget figures tell us, but that is what they are saying. It tells us that 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. The bill sets out that the minister will set this investment mandate with those guidelines—the matters of risk and return; eligibility as to whether something is a renewable energy technology, a low-emission technology or an energy efficient project; how much of the investment is allocated where; what sorts of concessional investments there will be; what sorts of financial instruments they can invest in; and broad operational matters. What on earth does 'broad operational matters' mean? Does this mean that the minister will tell them what size paper clips to use, but they can decide for themselves what brand to buy? Is that as far as it will go with this corporation?
To have Minister Combet, and perhaps even with advice from Treasurer Swan, actually selecting investments and selecting the nature of investments to be undertaken by the Clean Energy Finance Corporation is just mind-boggling. I just cannot believe this. It is laughable to suggest that the $10 billion over five years that the government will fish out will be matched by five times that investment—$50 billion—from the private sector. That is just a bizarre wish by this government. The Treasurer and the minister spend half their lives criticising people for being financially successful—criticising Ms Rinehart, Mr Forrest, Mr Palmer, banks and anybody else who is financially successful. If you are financially successful, this government hate you, this government are out to get you and this government will try to find a way to tax you. But, at the same time, they are trying to tell us that we can trust them with $10 billion for an investment corporation and that private enterprise will be similarly attracted to their investment corporation. Yes, I would be really keen to get involved in something like that! I can look at the papers any day and see what this government think about people who have been financially successful. I would really want to do business with this government! It is just bizarre and ridiculous of this government to think that they can get into this sector and that they know what they are doing. They do not know what they are doing in this space. They never have and they never will. It is not an area for a government to pretend to know what it is doing. You would think that the past history of Labor governments at both state and federal level in this space would demonstrate that this is not the way to go about it.
Who exactly is going to use the funds developed here? They do not have to use the same criteria as private investment organisations. They can be somewhat more generous about the terms of investment. They can even be more generous, although the minister gets to tell them how, about the business case they develop. Do we have the makings of a new WA Inc. at the federal level, a new Fed Inc., with Minister Combet and Treasurer Swan doing the 'nudge nudge, wink wink' on investments that no bank or organisation in their right mind would support? But we will have a Labor government trying their best to pick winners in an area where they do not have the competence. I just do not know what the competence level would compare with. It is non-existent competence in this area.
It is even interesting to look at the results for Australia's banks, which were published today. Our banks were amongst the most profitable in the world, but their pre-tax profits were equal to 1.19 per cent of their assets in 2011. This is hardly 'wow' territory. There may be lots of zeros on the end, but a pre-tax profit of 1.19 per cent of assets is scarcely something that we should get very excited about when you look at it as a percentage. I know that this government, in their attempts to fudge the figures and play the politics of envy, would never think to use a percentage figure. They would always go for the actual profit figure, trying to suggest that someone who makes a billion dollars on $100 billion is somehow ripping off the public, ripping off the taxpayer. In fact that is not true. As the article I am looking at points out, the country whose banks did second best was Canada, the other country that was least scathed by the global financial crisis. I am sure that Labor would like to think that this was just a coincidence, but in fact it is not. You need profitable institutions to provide investment; you need profitable companies borrowing money and making decisions to use their own money, where they put their own money—their own assets—at risk to grow any sector in this economy.
The case is the same with the renewable energy sector. We also have the somewhat bizarre situation where you would have thought that, at least, if the government wanted to pick winners in this sector, they would have put a few carrots and sticks out there. But, no, they could not even manage to do that. They have left the renewable energy target at 20 per cent. There is nothing that says, 'You get your finance from the Clean Energy Finance Corporation and you can be a concessional contributor to something at a greater and higher level than the 20 per cent.' Why would I be out there using my own money and paying bank interest rates to develop a renewable energy product if I can be getting that money at concessional rates and at far less risk to me from the government to meet exactly the same targets? They are not even using the current renewable energy targets to try and drive private investment, to try and drive what is the efficient market, the efficient way of going about building a new industry in Australia.
It is very certain that we need this industry and we need it to grow, but we do not need the knowledge that, within five years, at least an extra $10 billion needs to be found to be repaid. Given that this is supposed to be self-sustaining and given that they are talking about re-investing, the odds that the debt will be only $10 billion are quite low. It is quite likely to be a lot higher. As I said before, we have this bizarre situation where, from July next year, $2 billion a year will be invested, apparently, by the government in new energy technologies—some low emissions and some new green energy technologies. Yet the bill actually envisages that there will be a loss to the taxpayer through operating costs and write-downs, which are set out in the fiscal impacts.
As other speakers have pointed out, this legislation is part of a pay-off to the Greens, who, of course, have never been quite the most robust analysts of private enterprise or of profit. When the Multi-Party Climate Change Committee developed this view, Senator Milne said:
Securing a guarantee of 50% of the Clean Energy Finance Corporation fund for renewable energy, with the opportunity to bid into the rest, is the biggest single investment in renewable energy Australia has ever made.
Yep, right, great—that is true. She said:
With a legislatively guaranteed stream of funding outside the budget, no future government will be able to undermine it without changing legislation.
Senator Milne might find that a really positive thing to be able to say. From the point of view of someone who has actually operated in the for-profit world, I find that a very disturbing and distressing thing for a Labor-Green coalition government to be able to say. Senator Milne goes on to claim:
The CEFC will be able to leverage very significant private funds on top of its own …
I would be fascinated to see where they are going to come from. She continues:
… provide loan guarantees or guaranteed tariffs or whatever other means its expert and independent board deems fit.
Apart from that little pixiesque world—which is not true—we know that Senator Milne is wrong in talking about an expert and independent board, because the legislation itself says that the minister can pretty much tell the board anything he wants about how it will operate. The investment mandate, as I said earlier, goes down to which sort of paper clips and biros you buy. There is bipartisan support for 20 per cent of Australia's electricity supply to come from renewable resources by 2020. We absolutely agree on that; we agree that that needs to happen. But 20 per cent by 2020 is the target that will drive the changes, the investment and the technology. In Australia we are not bad at commercialising innovation. We could be much better, but we are not bad at it. But the last people we need sticking their sticky little fingers and their beaks into this exercise are the federal Labor government. The outcome will be just the same as it has been on every occasion that Labor governments have gotten involved in the area.
If there are newcomers to the sector who have been lucky enough to get picked—or should I say unlucky enough; perhaps it will be the kiss of death—by the CEFC, they will have the benefit of a direct subsidy through the CEFC, which will of course mean that anybody who has been stupid enough to invest their own money and their own time right now in trying to develop and commercialise new technologies in the energy field will be discriminated against and potentially compromised by the little government favourites coming in over the top. The CEFC is not even expected to invest in the lowest cost technologies or to come up with the cheapest way of reducing carbon emissions; it is just whatever the minister happens to have in mind on the day.
In our view, the remit of the CEFC should be to look for genuine, commercially acceptable projects. It should not be markets that are unproven or too speculative or too risky for any investor to touch with a 40-foot barge pole. Yet that is pretty much where we will end up. So it will be interesting to see for how long this organisation will be able to obfuscate before we start seeing the losses that are inevitable with a Labor-Green scheme such as this.
I rise this evening to make some comments regarding the Clean Energy Finance Corporation Bill 2012. I do so as we count down to the world's biggest carbon tax here in Western Australia. For the untrained eye this might look like legislation to support the government's attempts to improve the environment by reducing carbon emissions. For the more seasoned observer this is a $10 billion payment to the Australian Greens—a payment for keeping the Gillard government in office. It has its origins in the agreement signed by Labor and the Greens as a down payment on installing Labor into government. People may recall it was that agreement, signed in September 2010, that committed the Greens to voting with Labor to ensure supply and opposing any motion of no confidence in the government from any non-Greens member.
I am not sure about global warming, but I am certainly not a sceptic when it comes to acknowledging the political warmth of Labor and the Australian Greens. It is worth just reflecting on page 4, item 6.1(a) of that infamous agreement—it is hardly the Magna Carta, but it has absolutely left an indelible stain on the political landscape of this country. I might just remind people that it was signed by none other than the Prime Minister, the Hon. Julia Gillard; the Hon. Wayne Swan; Senator Bob Brown, when he was in this place; Senator Christine Milne; and Adam Bandt, the member for Melbourne.
A motley crew, indeed.
Senator Polley interjecting—
I am grateful for the attention of the senators opposite. Let me just remind you: 6.1(a):
… Australia must tackle climate change and that reducing carbon pollution by 2020 will require a price on carbon. Therefore the Parties agree to form a well resourced Climate Change Committee which encompasses experts and representative ALP, Greens, independent and Coalition parliamentarians who are committed to tackling climate change and who acknowledge that reducing carbon pollution by 2020 will require a carbon price. The Committee will be resourced like a Cabinet Committee. The Parties will, by the end of September 2010, finalise the structure, membership and work plan of the Committee.
This document goes to all of five pages—a five-page political commitment worth $10 billion. There is a very hefty price and, dare I say it, the Greens should be congratulated on extracting such a handsome deal from a Labor government. As I said, it is not the Magna Carta but it has shamed our political landscape in this country.
If you look closely at the document it is also worth noting that it was not a one-way street when it came to political payments. The agreement also stated that Labor and the Greens are predisposed to a system of full public funding for elections. The September 2010 deal was grubby. I will not meander into my views about electoral funding of political parties, but to give a party like the Australian Greens a continuous and uninterrupted source of public moneys for their campaigns would be reprehensible.
As I said, the September 2010 deal was grubby. It was more about saving the political life of Labor and giving the Greens greater leverage over our policy direction, the direction of the government and now this parliament. So here we are this evening, with a demonstration of the political pulling power that is the Australian Greens over the Australian Labor Party and its position as the government.
The Clean Energy Finance Corporation Bill 2012 realises the government's commitment to establishing the Clean Energy Finance Corporation, a $10 billion fund dedicated to investing in clean energy and mobilising investment in renewable energy, low-emission and energy-efficient technologies, all with the aim of allegedly supporting Australia's transition to a lower carbon economy. According to the Clean Energy Finance Corporation's website, its purpose is to overcome capital market barriers that hinder the financing, commercialisation and deployment of renewable energy, energy efficiency or low emission technologies. In plain English, what that means is that we are establishing a $10 billion corporation to finance projects that even the government concedes are not commercially viable. How on earth does that make sense in the year 2012? What we have, just a few days from the imposition of the carbon tax is a typical Labor-Greens idea, the throwing away of $10 billion worth of taxpayer money to get people to spend money on things that they do not want to buy. That is what this government is doing: spending $10 billion to try and subvert the market. It is utter madness dressed up as an environmental measure.
It is worth reflecting on some facts before I continue. It was revealed during estimates that a loss of 7.5 per cent on this venture has already been factored in by Treasury. That is $750 million ripped from Australia's hardworking taxpayers; just gone; disappeared. Worse still, knowing this government's form when it comes to waste, $750 million is probably a very conservative estimate. And I will come to the very poor tale of success when it comes to this government's renewable energy programs.
The real paradox here, however, is that we have been told for almost 18 months that the reason we need a carbon tax is to make investment in renewable energy more attractive. Yet at the same time we are introducing the world's biggest carbon tax we are also setting up a $10 billion fund to attract new players in renewable energy. If the carbon tax was going to work as the government would have us believe then presumably the market would attract people to renewables as they sought to avoid paying the carbon tax. The creation of a $10 billion fund makes it pretty clear to me at least, and I am sure to others, that this government has no confidence whatsoever that its carbon tax is going to lead to the outcomes it claims. They have to set up a massive slush fund to placate the Greens and try to get the outcome another way.
Shame indeed. It is a shameful and lazy policy. As a result, the poor taxpayer cops it in the neck twice, first through having to pay the carbon tax and then again as Labor and the Greens flush $10 billion down the toilet. It is worth reminding this place that the carbon tax impost comes on top of the minerals resource rent tax, another blow to the economic hopes and prosperity of my home state of Western Australia.
The only winners from this will be those who set up fly-by-night green energy companies and grab a slice of the $10 billion pie. Existing and therefore proven players in the renewable energy market cannot access it. Only those judged as unviable by the market are eligible. The explanatory memorandum that accompanies the bill states:
This transformation will require substantial capital which the private sector alone may not be able to provide. Current global financial conditions, the complex nature of Australia's electricity markets, the cost of renewable energy, and the preference of investing institutions for listed assets inhibit the financing of the clean energy sector.
In other words, no private sector possessed of any sanity whatsoever would invest in this ridiculously expensive form of power generation so we are going to make Australian taxpayers assume that risk.
Before the Clean Energy Finance Corporation was proposed and $10 billion of taxpayer money was spent, the renewable energy target in Australia, supported by both sides of politics, was 20 per cent. The government has not altered this. It is still a 20 per cent target. The government is essentially conceding that there will not actually be a greater level of renewable energy production as a result of spending $10 billion from this fund. If it thought that there would be, presumably it would have increased the renewable energy target.
This government is forever throwing good money after bad, such as on home insulation, school halls, the National Broadband Network or bailing out car manufacturers. The problem is not that there are no worthy objectives; the problem is that this government's inability to plan things properly always leads to perverse outcomes. And so it will be with the Clean Energy Finance Corporation. There will be $10 billion worth of taxpayer money spent, and for what? No reduction in emissions, no increased production of renewable energy and higher prices for consumers as a result of the carbon tax. The Clean Energy Finance Corporation will stand as a monument to this government's folly and its determination to do anything to satisfy the Greens and cling to office.
It is worth reminding people in this place of some of the comments in the other place that are worth replicating here. In opposing this legislation, it is not that some oppose the science of climate change. That is the classic spin that others on the other side would wish to put to the community. Based on the evidence available, climate most definitely is changing and we are all united in our view that we should do our best to reduce carbon emissions. But there is no agreement that this is the mechanism on which we should put valuable taxpayer money.
It is worth using this opportunity also to remind people of what I would like to call a tale of two energy stories. Let me begin with a tale of success. First, it was the coalition that created, developed and implemented the mandatory renewable energy target. It did so successfully. It was the coalition that created, developed and implemented the then equivalent of the solar PV rebate. It did so successfully. It was the coalition that created, developed and implemented the solar hot water rebate. It did so successfully. Now let me share with you a tale of woe and sorrow, this Labor government's home insulation program, a policy failure that dare not speak its name. Need I remind you of the size of that failure: billions of dollars were wasted, including $500 million spent simply to fix roofs, and there were 70,000 repairs, removals or variations to the work done—and still we cannot possibly imagine the scale that the many, many thousands of jobs not yet inspected would amount to. The scheme resulted in 200 house fires and a link to four tragedies—tragedies that could easily have been avoided. This is the government of the Green Start program and the Green Loans program. Green Loans cost over $100 million for barely more than 1,000 loans—$100,000 per loan, on average, for loans that were literally a few thousand dollars. The Green Start program was another example—terminated, most thankfully, before it really got started.
The waste I have mentioned pales into significance when we compare it against this latest initiative. For $10 billion, how much clean energy do we get between now and 2020? Let me repeat: for $10 billion, how much clean energy do we get between now and 2020? Deafening silence—that is what it deserves. Not one unit of energy will be generated between now and 2020. This is an idea built on a lie and the outcome of a cosy political deal between Labor and the Greens. It is worth reminding people that on the Monday before the election the Prime Minister said, now infamously, 'There will be no carbon tax under a government I lead.' The price of that betrayal and of winning support now includes this $10 billion fund.
I just want to make some comments about the events of the last few days, not here in Australia but abroad. Much is said about the task of international treaty making. Much is said about sending prime ministers and leaders to global events in search of international harmony and consent. But I think many Australians will find the results of the last few days of the Rio 2012 conference compelling. Only three paragraphs of the 49 pages of the communique referenced action to address climate change. Not only did the final declaration from Rio barely mention climate policy but no country jumped to adopt anything remotely close to Australia's carbon tax. It is clear that, despite every opportunity from the international world to take up Australia's policy, the carbon tax remained desperate and dateless at Rio—I am sure there is a song in that! I think it is worth reminding people that it was this Prime Minister, the week before the election, who said, 'There will be no carbon under a government I lead.' The price of her betrayal to the Australian people is, at a minimum, $10 billion.
As we count down to 1 July, I think it is worth making a number of brief remarks about what the coalition would do in contrast to what the government would do. Much is said about the negativity of the coalition, but I think it is worth putting on record in this place exactly what an alternative government, under the strong leadership of Tony Abbott, would deliver for Australian people. It is worth stating that the coalition's policy would be based on incentives, in contrast to Labor's policy, which is based on an electricity tax. It is worth reminding people that the coalition's policy would be focused on reducing Australia's emissions and improving our local environment and worth reminding people that it would not include a carbon tax. Money would be spent at home on Australian green projects and not abroad on foreign carbon credits. Under a coalition, higher emitters would have an incentive to take action to reduce their emissions rather than pay a tax that is simply passed through to customers. It is also worth reminding everyone that the coalition supports local action through protecting urban green corridors and planting almost 20 million more trees. That would involve a green army that would improve our local environments and support community projects. Most importantly, particularly for the many families in my home state of Western Australia, the coalition's plan would take pressure off the cost of living and protect Australian jobs by keeping businesses internationally competitive.
There is much to be said for the performance of the government. There is much to be said for reducing carbon emissions in our country. But certainly we on this side of the house are in vigorous agreement that the government's $10 billion plan is far from the most reasonable solution, and I think we can expect very little, if any, success.
In making these final comments on this bill, I think it is important to reinforce my view that the Clean Energy Finance Corporation is a slush fund destined to fail. Even if it does succeed, we will see not one watt of additional renewable energy between now and 2020. With its design, its concept and its structure, even in the best case scenario this government is asking this parliament to spend $10 billion and get not one additional watt of renewable energy between now and 2020. It would be a very, very sad con on the Australian people if the government, in unison with the Greens, were allowed to get away with it. In conclusion, might I just remind us where we all started. We started on 1 September 2010 with a political deal between the Australian Greens and the Labor government, and now Australian taxpayers are paying a very, very hefty price indeed for that sort of cosy political arrangement.
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.