Senate debates

Tuesday, 3 December 2013


Clean Energy Finance Corporation (Abolition) Bill 2013; Second Reading

12:46 pm

Photo of Louise PrattLouise Pratt (WA, Australian Labor Party, Shadow Parliamentary Secretary for the Environment, Climate Change and Water) Share this | | Hansard source

I begin my contribution to the second reading debate on the Clean Energy Finance Corporation (Abolition) Bill 2013 by acknowledging the discussion that we had yesterday in this place when we separated the package of bills out to be debated separately. The Leader of the Government in the Senate, Senator Abetz, said he had a mandate for this package of legislation. Well, I can tell you there is no mandate. We can repeal the carbon tax without abandoning the important principles of a holistic framework to manage carbon emissions in this country. We can have an ETS that commits us to binding targets and lets business work out the most efficient ways of cutting emissions. We can do this without abandoning the Clean Energy Finance Corporation, which is in fact the most efficient form of direct action that I have seen. We can also keep transparency, independent advice and good governance by retaining the Climate Change Authority.

Despite the shallow rhetoric of the coalition stating that it believes in climate change and that it supports action, it is very clear that nothing could be further from the truth. If the coalition government did believe in climate change then it would not be putting our nation in a position where we fall behind in playing our part in global action and—this is a very important point—we leave the Australian economy exposed in the future to unnecessary costs because we have failed to take adequate action. That action should include responding to the need to invest in renewable energy in this country and the need for more efficient energy generation from fossil fuels. These are core tasks of the Clean Energy Finance Corporation.

In putting forward this legislation, the coalition not only seeks to do away with the carbon tax—and I support doing away with it—but it also wants to do away with an emissions-trading scheme and the other vital tools that we need in this nation to address climate change. The Clean Energy Finance Corporation is one such tool. Despite the very successful operation of the Clean Energy Finance Corporation, this bill seeks to abolish it. It is a great shame to me that coalition senators have been unable to see past their so-called free-market blinkers and appreciate the very important role that the CEFC plays in the market in facilitating investment in renewable energy and other more efficient energy generation, with the cutting of emissions and energy consumption, which would otherwise be missed by normal commercial banks.

The coalition want to abolish the Clean Energy Finance Corporation for purely political reasons, with no logic and just negativity. Shallow, narrow arguments were put forward in the second reading speech, all of which can be dismissed when you look at the evidence. The coalition, for example, argue that the CEFC is full of risky ventures, when nothing could be further from the truth. We have a $10 billion fund generating a return to the taxpayer—a negative cost of abatement of $2.40 per tonne—with legislated-for good governance. Did you hear that? That is $2.40 generated as income for each tonne of abatement versus what has been put forward within what we know of the very spurious direct action policy, where we have not seen any costings or any analysis, where in effect you pay polluters. With a negative cost of abatement, the Clean Energy Finance Corporation are generating a return on investment. As they point out, the discipline of debt when it comes to cost abatement is very significant. It is the discipline of debt and the importance of that discipline versus paying the polluters to cut their emissions, where you just hand them some money to cut their emissions.

It seems incredible to me that those opposite would want to overlook these important economic principles in abandoning the Clean Energy Finance Corporation. The direct action fund is a $3 billion fund where we will pay polluters to reduce emissions, so that is abatement that will cost us, as opposed to the return to the taxpayer generated by the Clean Energy Finance Corporation. The thing is that the Clean Energy Finance Corporation makes investments to reduce emissions. We can reduce a lot more emissions through a $10 billion fund. It creates an asset that is owned and leverages more funds. Think about that: a $10 billion fund which is able to leverage a whole range of other investment versus the $3 billion fund of the coalition.

What the CEFC does is a good model and stakeholders know it. Stakeholders that gave evidence regarding the important work of the Clean Energy Finance Corporation to the Senate Environment and Communications Committee, which I am a member of, gave very compelling evidence and they argued very strongly that the Clean Energy Finance Corporation should be retained. It is but one part of a complete package for addressing climate change. We have not only priced carbon to reduce emissions but we have also put together a suite of policies, including the CEFC and the Australian Renewable Energy Agency. What we have here with the CEFC is a body which is able to facilitate comprehensive commercial loans and is set to fund emissions reductions at a negative cost—that is, it turns a profit. On the other hand, what we have from the coalition is an emissions reduction fund that will consume billions from consolidated revenue without a return to the taxpayer.

We know that since it began operation the CEFC has been very successful in providing loans to organisations. It has had the capacity to make investments that would account for 50 per cent of the five per cent emissions reduction by 2020, at a profit to the taxpayer of $2.40 a tonne. That is pretty impressive, and I cannot believe that those opposite would want to abandon this organisation and do away with it, unless of course they do not believe in targets, unless of course they do not actually believe in climate change and do not believe that it is important for our society and our economy to make a contribution to lowering emissions and going on a low emissions pathway. The Clean Energy Finance Corporation has $546 million in 47 projects in partnership with major trading banks, which means we have got private finance, private sector co-financiers, where we are leveraging and multiplying the available funding for investment by three to one. It is very impressive. We have leveraged from a little more than $500 million an additional $1.5 billion in private sector co-financing. This has created over $2.2 billion worth of renewable energy projects, of projects which help big companies lower their energy consumption. It has delivered around four million tonnes of abatement—and, as I said before, at a negative cost.

This is an absolutely brilliant record. It represents a return to the taxpayer and it is a return that is misrepresented in the explanatory memorandum to this bill, where the impact on both the fiscal and cash outcome of the budget is underestimated in terms of the benefit to the taxpayer of retaining the Clean Energy Finance Corporation. As Mr Yates described in estimates:

Our price per tonne is actually negative $2.40. The reason it is negative is that when we lend we earn a profit on that lending activity. Corporations use that money that is lent to become more efficient by reducing their energy costs and by reducing their energy usage they actually reduce emissions. It works very well that we lend. The taxpayer receives a return because we are running profitably on that money and the company receives a better return because they are actually becoming more efficient.

It is really important to recognise that what we are doing with the Clean Energy Finance Corporation is not just about renewable energy; it is very importantly about helping major corporations in this country lower their energy use. That can require a big investment. It is something that can be co-financed with the CEFC and with the banks, and in turn those corporations are able to repay the government and repay the banks with the efficiencies from their lower consumption costs. It is an incredibly effective model and about the most effective form of direct action that you could dream up. This is very important model, earning a profit to reduce emissions.

The former Reserve Bank board member who is chair of the CEFC, Ms Jillian Broadbent, said at estimates:

Instead of paying something, when you do a reverse auction you might say we are taking the lowest price, we move into the positive price. So for every tonne of emissions that we manage to encourage to be achieved, it has a return to the government of $2.40 per tonne.

So taxpayers are actually benefiting from the reduction in emissions.

We have heard from many stakeholders about the importance of what the Clean Energy Finance Corporation does. Nathan Fabian, who is the chief executive officer of the Investor Group on Climate Change, summarised in evidence for us the importance of the CEFC. He said that there are now 14 co-financing organisations around the world and they are needed for these important reasons:

Firstly, government cannot sufficiently finance low carbon alternatives to meet a two-degree outcome and private capital is needed. Secondly, the low-carbon investment market is relatively young and so deal flow needs to be supported. Thirdly, capacity in the finance sector must be increased through the experience of financing investments. Fourthly, financial participants welcome investment opportunities presented in new markets by an objective third party, even more than by investment banks.

This is particularly important because that is what the Clean Energy Finance Corporation is set up to do. It is set up to be that independent, objective third party, but it also has the expertise and governance to deal with energy issues, whether they be renewable or about creating greater energy efficiency. Mr Fabian goes on to say:

Lastly, co-financing organisations can actually earn financial returns for governments, delivering abatement at negative costs—and we think this is appealing and makes sense to all parties. Given the government's infrastructure agenda, we think dismissing co-financing as a useful policy instrument may be premature.

This is something that has been reiterated by many other submitters to the Senate economics committee. I do not have time to go through today all of the excellent evidence that they have put forward, but I will touch on what the Responsible Investment Association of Australasia submission highlighted. They said that the CEFC is not a novel idea and that, as was pointed out by Mr Fabian, many other countries are deploying similar financing models. The co-investment model, he says, is a prudent and cost-effective way to allocate limited funds and to leverage private investment to do the heavy lifting in the investment into a low-carbon transition. Again, the CEFC is actually earning a return on the government's cost of funds; taxpayers are gaining a significant return over and above the actual costs of funds.

Chair of the CEFC, Jillian Broadbent, went on to tell estimates:

… there really is an appetite for progressing emissions reduction, but it does need an advocate and it needs an encouragement to get on with the job, because the market has been very immobilised by the lack of bipartisan policy in this space.

This is exactly the gap that the CEFC has been highly successful in filling. It has had that expertise and that leverage there. It has had the understanding of clean energy investments alongside the capital required to get that extra investment out of the banks and make an important array of renewable and energy efficiency projects viable in our nation. This is going to be a great loss, if the Clean Energy Finance Corporation is repealed, because there will be billions of dollars of investment that we will forego, which will really put us way behind the eight ball in dealing with climate change and the need to adjust our economy in this country.

Industry, as Ms Broadbent pointed out, is actually looking for leadership on this issue. So let us get on with it. It is an example of government providing real, tangible leadership in response to a need for solutions. I think that we in this place—perhaps, unsurprisingly, other than those on the other side of the chamber—would all want to see those solutions being developed in partnership with the private sector. The CEFC was put in place to deal with imperfections in the market and it is clearly achieving that.

As Mr Yates, CEO of the CEFC, pointed out:

…we actually provide targeted monetary policy. When the government wants to encourage activity in one sector, it uses a very broad tool such as overall interest rates. By having an organisation such the CEFC, we are able to deliver a targeted monitoring policy to the clean energy sector, including those people who want to take action to reduce emissions and become more efficient. We can ensure that they have access to capital efficiently and at a lower cost.

So it is an incredibly efficient way of doing things.

I am not going to have time this afternoon to go through all of what I want to say in the 20 minutes that I have, but I will be pleased to save some of those issues for the committee stage of this bill. But what I want to say is that the CEFC, the Climate Change Authority and the emission trading scheme in the suite of bills all have separate and very important attributes. You could in fact retain the Clean Energy Finance Corporation and the Climate Change Authority and do that alongside direct action. They would be meaningful things to do, and it is an important reason to separate these bills. But the coalition is full of political warriors, not for any free-market ideal or any demonstrated ideological rationale, but simply because it is driven to remove all rational policy, however meritorious, because it was delivered by a Labor government.

In conclusion, I move the following second reading amendment:

At the end of the motion, add:

", but the Senate expresses concern over the impact that the abolition of the Clean Energy Finance Corporation will have on investment in renewable energy projects."

1:06 pm

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Taking effective, strong action on global warming is a challenge of my generation, and it is certainly why I am here in the Senate today and why the majority of my party room do what they do. Taking action on global warming and the gases that lead to global warming is not going to happen through a silver bullet solution; it requires a policy approach that uses multiple and complementary measures—sticks and carrots. Policies based on incentives. As an economist I understand economics is more about incentives than anything else—understanding how they work and how people and markets respond to them to get results.

Senator Nash interjecting

I will make sure I talk through Senator Nash's speech next, Acting Deputy President Gallacher.

The way I describe action on climate change to a lot of people I meet who maybe do not necessarily understand the complexities of things such as the clean energy package is that it is an insurance policy. If you think about insurance for a second you do not have to have proof to be prudent. Even if you face up to the climate sceptics—and I recognise there are a number of them on the other side of the chamber—then what we talk about here is risk management, managing what clearly is a risk. It is clear that most scientists and experts not just in this country but around the world recognise it as being a clear and fast-approaching risk. In fact, it is already in our economy and our society today. This is the basis on which insurance markets work.

In fact, speaking of insurance, it has actually been the insurance companies themselves who have led the charge on action on tackling climate change. As early as the 1980s they were the ones who chaired the first round tables on action on climate change, because they priced the risks of things such as extreme weather events and rising sea levels and they are well aware of the costs of climate change. So if we just focus on our jobs in government as managing risk then it becomes a lot clearer and the importance of what we do in this place to tackle what is the issue of my generation becomes more apparent.

We hear a lot of arguments and debate in this chamber about the cost of living—that somehow a small and questionable impost on your electricity bill is going to have a significant impact on your life. I agree that this debate should be about the cost of living, but it should also be about the cost of living with climate change and the impacts of climate change. We know from a number of international and Australian climate change authorities that the potential cost of climate change from things such as floods, rising sea levels, damage to ecosystem services and direct damage from extreme weather events—economic damage that is tangible and that we can measure—will rise into the trillions. It is certainly already in the billions. Whether you ascribe current extreme weather events to climate change or whether you believe the experts when they say to expect them to be more frequent in the future, either way these types of events are going to cost our economy significantly—not to mention our beautiful environment and our communities—so we need to take action and we need to show leadership.

On this note I would like to pay a special tribute to Senator Milne for all her hard work over many, many years in helping put together the clean energy package, but especially the work Senator Milne and the Greens party room did prior to my entry into the Senate on getting the Clean Energy Finance Corporation and the Climate Commission up and running in Australia. The Clean Energy Finance Corporation is just one of many measures set up by successive governments in this country to tackle climate change including: the carbon price, fixed and floating; the renewable energy target; and grant funding from agencies such as ARENA are other measures. They are all sophisticated approaches and they are designed to provide incentives to attract investment and influence prices.

Why was the Clean Energy Finance Corporation specifically necessary in this package of measures? Like all these measures it seeks to make commercial investments to counter market failures and impediments to financing. I have heard climate change or global warming described as the biggest market failure of our time. Why is it a market failure? We define that in pretty simple terms: it is because the activities, the costs of producing the pollution, the dirty energy from the polluters, does not reflect the external cost that climate change impinges on our economy and on our environment. We therefore have to take measures to price that externality into those production activities.

I would say this for Senator Cormann's benefit, because he is in the chamber at the moment. I have heard him say in this chamber that a fixed price on carbon or a floating price on carbon is not a market based instrument.

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

It is a government intervention.

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

A market based instrument by definition is anything that influences the price of a good or service that is traded on a market.

Senator Cormann interjecting

I have taught this at university, Senator Cormann, and I can tell you that a fixed price on carbon is by any definition a market based instrument. What are the impediments to finance? Clean energy finance quite simply helps de-risk investments in renewable energy, low-emissions technologies and energy efficiencies that are currently high risk, as was mentioned in the previous speech, by the nature of their development. These are young industries. As I mentioned when I first started, it is going to take a long time to reduce emissions and tackle climate change. Over a long period of time we have issues with financing.

There are other risks besides project risks to some of these technologies. We also have political risk. This is what is so ironic about the coalition and the Liberal Party's behaviour with repealing these bills. It creates more uncertainty for business. As Senator Cormann well knows, there is nothing businesses hate more than uncertainty. We can justify low-interest loans from the Clean Energy Finance Corporation because that is helping tackle an externality. By any definition we can justify governments taking action to help correct an externality.

Uncertainty cannot be justified. By repealing these bills and putting up phoney strategies to deal with climate change, we create more uncertainty that has worse impacts on business investment and on many thousands of jobs across this country that have been created by the revolution in our economy brought on by measures such as the clean energy package. We can see the transition to being 100 per cent renewable in this country; jobs for electricians and for renewable energy engineers; thousands of jobs for greater energy efficiency; investment in research and development and in innovation; and all the good things that we like to mention when we talk about jobs and wealth creation.

All these are under threat by repealing the package associated with the Clean Energy Finance Corporation, and more broadly when we look at repealing things such as the carbon price. At a recent Senate committee hearing, the Clean Energy Finance Corporation chair, Jillian Broadbent, who I point out is a former Reserve Bank board member, claimed the CEFC would be a significant contributor—if the full amount were spent over time—to emissions reductions in Australia. It would contribute net revenue to the Australian taxpayer. Her exact words were:

… this would contribute 60 per cent of the total abatement required to meet the bipartisan 2020 national abatement target, and at the same time deliver a net positive return to the taxpayer of over $200 million per annum.

If these types of structures are designed to de-risk investments that encourage co-investments and bring more research and development, innovation and jobs to Australia, why are we opposing an initiative such as the Clean Energy Finance Corporation by trying to repeal it? I will give you a couple of reasons that are talked about. Minister Hunt recently labelled the Clean Energy Finance Corporation a 'green hedge fund' borrowing in taxpayers' names to invest in speculative ventures. This shows a complete lack of understanding of the subject at hand and certainly the policy imperatives associated with the Clean Energy Finance Corporation.

The CEFC entails prudent application of capital, strict risk management frameworks and a commercially rigorous approach to investment and often co-investment. As was mentioned at that Senate hearing, it has brought significant private financial investment for our renewable energy sector. This is something that we have seen all around the world, not just in Australia.

It is also false because the Clean Energy Finance Corporation associates its investments with the developed end of renewable energy. The venture capital end, with higher risk investments and technology developments, is associated with ARENA. It was specifically structured to have that separation with risk premiums associated with the investments of this fund. So we are looking at well-established technologies feeding clean energy into our electricity grid. Another argument that is often used is that somehow government involvement will create what we economists call 'crowding out' an investment. Also at the recent Senate inquiry, Ms Broadbent said that in fact there had been a 'crowding in'. We have had three international institutions who have participated in the market for the first time, encouraged by the fact that there was a government-owned entity there at the table as a co-financer. So far so good, and there is absolutely no reason for us to imagine things will change if the CEFC sticks to its very strict investment mandates.

The real reason for opposing the CEFC with these repeal bills is purely political. It is purely ideological and it is bloody-minded: 'At all costs let's push through; never mind the casualties.' Or is it that the Abbott government are puppets of big business in this country—businesses who have an agenda of putting their own profits before the interests of the Australian people? Or is it big business interests who are directly trying to stifle competition from renewables in the energy sector? Certainly the most active public members of the Liberals' cheer squad on the subject of repealing the clean energy bills have been the Australian Chamber of Commerce and Industry, the Australian Industry Group, the Business Council of Australia and the Minerals Council of Australia.

Maybe Mr Al Gore was right in his recent comments concerning the Abbott government's repeal of our climate package. He said our democracy had been hijacked by special interests. It certainly appears the Liberal Party has been. What is the alternative proposed by the Liberals to the years of hard work and policy put in place to take real, strong and effective action on climate change at a low cost to the Australian taxpayer? It is a Liberal Party grants program, at straight expense and a net cost to the taxpayer. Direct Action will cost $3.2 billion whereas the existing legislation creates $7.3 billion. That is a total deterioration of $10 billion in the budget position.

Direct Action will run for only a few years, after which we will inevitably have to implement a carbon price again. One thing I understand from teaching this at university is that a price on carbon creates what we call 'secondary objectives', such as the planting of trees and soil carbon initiatives, all of which I wholeheartedly agree with. But they are much more effective and likely to happen if we can value those initiatives by having a price on carbon. The markets need the certainty that is brought on by a price on carbon. They are complementary measures. The idea that somehow they are not, or that they will work without a price on carbon, is plainly stupid.

Of 35 economists surveyed, only two thought that governments picking winners was better than a market based scheme. One of those two, Mr Danny Price of Frontier Economics, helped the coalition design their Direct Action policy. It consists of an Emissions Reduction Fund which will pay taxpayers' money to those firms—the big polluters—who think it is worthwhile spending the time bidding for a small pool of money.

In reality, doing nothing will be an easier option for them because they can pollute as much as they like with the cost borne by the rest of society, just as they did before. There is $1.5 billion set aside for the Emissions Reduction Fund, but with most of the money in the final year so they can claw it back when they no longer have to pretend the policy was ever going to work. I note $300 million will also be spent on a green army to plant trees. With absolutely no detail on the policy developed, with a green and white paper process still to go and with a depleted and demoralised departmental staff, the Emissions Reduction Fund is highly unlikely to be ready to start auctions by June next year. In other words, it is a phony.

Compare this to the achievements of the Clean Energy Finance Corporation and it looks like more of a joke. Every $1 it has contributed so far in financing has generated $3 of private sector investment. It has spent $536 million and so far has generated over $2 billion of new capital investment. As I mentioned earlier, it will make a net return to taxpayers. Within its first year of operation, the CEFC has generated investments responsible for 3.9 million tonnes of CO2 equivalent abatement annually, which has been generated at a negative cost of approximately $2.42 per tonne. A hundred and seventy-nine proposals for projects are in the pipeline, with an estimated value of $14.9 billion of investment in clean energy technologies. So much for the Greens being anti-jobs. This will be lost to the government's irrational distaste for low-carbon businesses, purely to keep an election promise.

We have a vision. The Greens are the only ones who have a vision for transforming the economy in this country to be 100 per cent renewable. We have a vision that will create new jobs, innovation, new research and development—and it is already working. The only reason we are seeing it repealed is an election promise that the coalition hides amongst hundreds of other things that voters went to the election with, saying it was the reason they were voted into power.

I would like to finish with a quote that is often used by my predecessor, former Senator Bob Brown. He quite simply says, 'A good policy is a policy that is good for your grandchildren'—not, in this case, what is good for your electricity bill, if in fact it even impacts your electricity bill, which I thoroughly dispute. To someone who cares about our children and future generations and taking real action on climate change, nothing is more frustrating or infuriating than this constant grind that somehow a questionable argument on cost of living is more important than looking after our kids and the future generations of this country in a way that is positive, that creates new jobs, new industries and hope, and that moves us away from traditional industries which we cannot always rely on and which in some cases are highly vulnerable. The clean energy package is a win-win for this country, producing more jobs, emissions reductions, and real, effective action on reducing global warming, the biggest threat to my future and the future of everyone in this chamber.

1:26 pm

Photo of Eric AbetzEric Abetz (Tasmania, Liberal Party, Minister for Employment) Share this | | Hansard source

With the introduction of the Clean Energy Finance Corporation (Abolition) Bill 2013 and the carbon tax repeal bills, the parliament is being given the opportunity to remove a job-destroying, economy-stalling and environmentally damaging tax. And yes, I will accept what Senator Whish-Wilson said: we are introducing this package of bills to honour an election promise. I have never heard a government being condemned, other than by the Greens, for coming into the parliament and saying, 'We are seeking to honour an election promise'. That is what we are doing, pure and simple. We accept that; we acknowledge that. We will wear it with a badge of honour. And, as Senator Whish-Wilson leaves the chamber, I simply remind him that opinion poll after opinion poll tells us that more Australians oppose the carbon tax than voted for the coalition at the last election. So it is not only coalition voters who do not like that carbon tax; there are Green voters and there are Labor voters and other voters as well. This is a tax that is abhorred by the Australian people, and quite rightly so.

These bills give the ALP the opportunity to purge itself of the deception it perpetrated on the Australian people in 2010. By voting for these bills, honourable senators will have the opportunity to play a positive role in helping to restore the economy, grow jobs, reduce the cost of living, help the environment and restore the Australian people's faith in their democratic and parliamentary system. Rarely has one bill delivered so many opportunities for the people of Australia.

In submitting ourselves to the Australian people in 2010, we said there would be no carbon tax. The ALP did exactly the same. Indeed, so adamant were our opponents that they accused us of being hysterical when we suggested Labor could not be trusted. The Australian people now know that the coalition was not being hysterical; rather we were being historical. We have seen Labor pull these stunts in the past.

I put to those opposite this very simple proposition: if a carbon tax is or was such a good idea—was good for jobs, good for the economy and good for the environment—why did the ALP so emphatically deny that they would introduce a carbon tax in the 2010 election campaign? Surely, if it was so good, they had a duty to embrace it and advocate for it and be proud of the proposition. So proud of the proposition were they that when they came into this place with the carbon tax, in cahoots with the Australian Greens, they guillotined the legislation through this place because they were so embarrassed to continue debating the issues.

And having so solemnly promised not to introduce a carbon tax the ALP of course did the exact opposite, thereby betraying the Australian people.

Some in the ALP claim they did not really want to introduce a carbon tax, but the Greens made them do it. Remember that kindergarten excuse: it was never your fault, it was always somebody else's fault; they made you do it? A lamer excuse is hard to imagine. But, seriously, would the Greens, under the leadership of former senator Bob Brown, have really said: 'No carbon tax under Labor will lead the Greens to supporting Mr Abbott, as Prime Minister, who emphatically promised no carbon tax'? I think not. The excuse is disingenuous and dishonest.

But I am willing for the purposes of this debate to take this lame ALP excuse at face value and remind those opposite that the Australian people freed them from that deal with the Greens on 7 September 2013, through the ballot box. Are those Labor senators now still saying the Greens are making them do it, even from opposition?

When a political party gets it wrong, it should admit the fact. Political parties have the same frailty as humanity: we get it wrong. That is, unless you are Bob Brown and the Australian Greens. The coalition got it wrong with Work Choices. We said it, we acknowledged it and, what is more, we showed our sincerity when dealing with it and its repeal in this and the other place. Being able to admit errors is a sign of maturity, a sign of integrity and a sign of respect to the Australian people. It is the right thing to do.

Today the ALP are being given the opportunity to right their wrong by voting down this toxic tax before Christmas and to admit they got it wrong. It is the best Christmas present this Senate could deliver the Australian people—and, if I might say, the ALP to themselves—and would get this monkey off their own back.

Mr Shorten and the ALP can be either Santa's helper or the Grinch. It is up to them. The 2013 election was a referendum on a number of issues, as Senator Whish-Wilson indicated. But, very clearly, if it was one thing, it was a referendum on the carbon tax—a tax so destructive, so unpopular, so despised that the ALP pretended to abolish it. Indeed, during the election campaign, Mr Rudd, the former Prime Minister, said:

… the Government has got a number of things wrong …

For example, I don't think our actions on the carbon tax were right.

And further:

To begin with we didn't have a mandate for it.

There he was, trying to say that they did not have a mandate and that they got it wrong. They even put out brochures saying that they had removed the carbon tax. Now that the election is over, they are reverting to their old ways and voting to keep the carbon tax, which they promised they would not have, which they then promised to repeal and which now they are not going to repeal. Indeed, another frontbencher from the Labor Party, Mr Marles, said:

Labor must "acknowledge the fact that Tony Abbott won the election and we lost" and the new government had a mandate to axe this tax.

The Labor Party know what is the right thing to do. Mr Rudd said it and Mr Marles said it, but they just cannot bring themselves to admit that they got it so terribly wrong—and not only wrong but did so with deception to boot.

The Labor Party even had the audacity to campaign, saying Kevin Rudd and Labor had removed the carbon tax. If they had removed the carbon tax, why do we need to spend time in this chamber debating these bills? The simple fact is that the Labor-Greens carbon tax is still in place; it was just another dishonest campaign technique by Labor in their desperate bid to win the 2013 election.

Those same ALP senators who put out those brochures are the ones who got elected in 2010 on the promise of no carbon tax. So, having been elected in 2010 on a promise of no carbon tax, they voted for one. Then at the 2013 election they go out, saying, 'We've repealed it.' Then, after the 2013 election, they come into this place to do the exact opposite. Oh what tangled webs the ALP have woven for themselves!

But let us make no mistake: the Australian people voted overwhelmingly to oust the carbon tax and they did so for good reason. So strong, so overwhelming, so unassailable were the reasons to abolish the carbon tax that the coalition promised to introduce this legislation as its first item of business. And we are here today honouring that solemn promise with these bills. We made that promise and the people voted for that promise because the tax was truly toxic. It was destructive and it was perverse.

As an aside, it is a matter of regret that the trade union leadership of our country sold out the interests of their members in pursuit of their own personal political ambitions. The workers and the minority of workers who were still members of the trade union movement clearly ignored the trade union leadership and voted for their jobs and voted to reduce their cost of living by voting for the coalition, many for the very first time in their lives.

The carbon tax is destructive of jobs, especially in the manufacturing sector. Every Australian-made motor vehicle carries a reverse tariff of $400, courtesy of Labor's carbon tax. Each Australian-made vehicle starts $400 behind each and every imported motor vehicle into our country. Yet where was the AMWU's leadership? Either missing in action or actively supporting the carbon tax because they were looking after their personal parliamentary prospects, whilst selling out their members.

Senator Kim Carr, who presided over the shedding of tens of thousands of manufacturing jobs, actively voted and cheered this toxic, job-destroying tax through the Senate. And what did the then general manager of Holden have to say about the carbon tax? In June, Holden's general manager, Mike Devereaux, said:

There is no question that a tax on electricity, in making it more expensive in input costs, makes it more difficult for me to make money building cars.

He said that repealing the carbon tax will reduce the cost of an Australian-made motor vehicle by $400.

But it was not just the auto sector; food manufacturing was similarly hit, making the industry's already very tough circumstances so much worse. Our abattoirs, which are so vital for the viability of our agricultural and pastoral sectors, were hit and hit hard. Even the home-building sector was slugged. The Housing Industry Association says that the carbon tax has an impost on every new dwelling of $5,000. And yet the previous government said they were trying to fight to reduce the cost of housing. They even had a housing minister. What use is a housing minister when that housing minister has no impact on policy which increases the cost of housing by $5,000 per unit, helping to put home affordability out of the reach of so many of our fellow Australians?

Being the far-flung country that we are, we rely heavily on the transport sector. It is about to be slugged with a Greens-ALP carbon tax, yet the Transport Workers Union leadership fails to connect this extra impost into the overall cost pressures that the road transport sector is currently battling.

We have heard from the tourism sector and the airlines what the carbon tax is doing: making their precarious sector so much more precarious. If a person flies from Perth to Tasmania for a holiday, there will be carbon tax payable. If that same person decides to holiday not somewhere in Australia but in Fiji or Bali, there is no carbon tax payable. How does that help the Australian tourism industry? But these are the measures that the Greens-Labor alliance guillotined so shamefully through the Senate without a mandate.

We all know, from going around the Australian electorate during the last election campaign—if we needed reminding—that Australian households are grappling with the cost of living. Household budgets are tight. Balancing them is exceptionally difficult. I heard the dismissive remarks made earlier in the debate by the Greens senator about the cost of living. You can be dismissive of cost-of-living pressures when you are on a senatorial salary; you cannot be so dismissive of cost-of-living pressures when you live in the outer suburbs of Hobart and work at the Cadbury factory, the zinc works or some of these other places. People are hurting out there. We recognised it. There is no doubt that the repeal of these carbon tax bills will, in effect, give a $10 per week after-tax pay increase to the average household—a modest but nevertheless genuine fillip in these tough times.

So, be it jobs in manufacturing, transport, tourism or housing—indeed, in every sector—or household budgeting, this tax is destructive of jobs, saps confidence from a low-growth economy and reduces people's disposable income. All this reckless damage ostensibly is being done in the name of fixing the environment. It is here that the cruel nature of the carbon tax hoax is fully exposed. Rather than helping the environment, it, perversely, makes things worse. The example of Coogee Chemicals is a classic: a $1 billion capital venture with a promise of 150 ongoing jobs and providing export earnings and import replacement by the billions—all this was available to our country but did not proceed in Australia. The venture did proceed, but not in Australia. Where did it proceed? In China. Why did they do that? Because they could not make ends meet under the carbon tax regime. But what is so cruel about this from the environmental point of view is that their carbon footprint in China will be twice what it would have been in a pre-carbon-tax Australia. That is why we say on this side that not only is it economically destructive and destructive of jobs; it is also destructive of the environment.

Indeed, the European experience shows us that. With their emissions-trading scheme, they saw a lot of manufacturing desert Europe. Where did it go? To Africa. Is there anybody in Australia who actually believes that the environmental safeguards in Africa are better than in Europe? Does anybody actually believe that the Europeans stopped using aluminium and manufactured products? Of course not. They still wanted them; they still demanded them; they still required them. So we then had the added impost to the environment of the fossil fuels used to bring all these goods back into Europe, once again damaging the environment.

These carbon tax bills have mugged our economy, both domestically and through its export efforts. They have also mugged people's faith in our democratic system. Our economy has seen a dramatic decline in growth, and Labor's last budget told us that. Labor budgeted for higher unemployment and lower growth—higher unemployment with all its socially corrosive consequences. Around the world, country after country are abandoning or scaling down their now discredited and corrupt carbon regimes. In the face of this overwhelming evidence, the Greens-ALP alliance will simply continue their mantra dating back from before the world conference at Copenhagen.

I quickly turn in the time left to the solution that the coalition has put forward. It is very simply this: you do not have to mug your economy. You do not have to destroy jobs to look after the environment. That is why our Direct Action Plan will deliver our five per cent carbon dioxide reduction target, beautify our landscapes and vistas with more trees, provide more fertile soils and make our energy generation more efficient. And all this, I stress again, without mugging our economy, destroying jobs or breaking household budgets.

The coalition rejects the extreme Green-ALP proposition that to be environmentally responsible you somehow need to be economically irresponsible. Somewhere in this debate we will no doubt hear what a great fillip the carbon tax is for our economy—and Senator Whish-Wilson went down that track. Well, if it is that good, why wouldn't you double or treble it? And we would get double or treble the benefits! I think we know why it is not being doubled or trebled; it is because it is so toxic that, if it were doubled or trebled, it would not just slowly poison our economy, it would finish it off once and for good.

We all know the carbon tax simply is not an economic boost; it is an unnecessary handbrake that damages the environment. Having betrayed their electorates in the 43rd Parliament, will those opposite now compound that betrayal by blocking this measure in the 44th Parliament? The coalition will seek to do everything it can to obtain the passage of these bills.

1:46 pm

Photo of Anne UrquhartAnne Urquhart (Tasmania, Australian Labor Party) Share this | | Hansard source

I rise to speak in the debate on the Clean Energy Finance Corporation (Abolition) Bill 2013. As expected, I will not be supporting this bill. I hope government senators and members listen to this debate and consider the benefits of the Clean Energy Finance Corporation.

Senator Abetz has just talked about a number of things in relation to car manufacturing. He might want to check his facts. As I understand it, the additional cost of a Toyota car is $115 and the additional cost of a house is $465, not $5,000. The AMWU is about jobs for the future. If you talk to the AMWU—a union that I am a proud member of—you would know that they have for a long time been arguing about jobs for the future for our members and also for future generations.

So I hope those opposite can put aside their ideological opposition to government co-financing and see the potential of the Clean Energy Finance Corporation. We have a bipartisan emissions reduction target in this country. We have agreed that we must reduce Australia's emissions by at least five per cent on 2000 levels by 2020. We clearly are not agreed on a path to achieve that target. We on this side want to stimulate private sector investment and use market based mechanisms to reward innovative businesses and send a price signal. This argument is based on many rigorous assessments conducted by Australian and international professionals on how to achieve emissions reductions at the least cost for our economy. At this stage the Australian people are unsure what those opposite believe. On one hand there is a fierce belief in the market over government control, yet on this, the fundamental issue of our generation, they want to throw out the market and revert to the dangerous pastime of picking winners.

This first debate is on the Clean Energy Finance Corporation, a body that is assisting companies and organisations finance clean energy technology and energy efficiency measures through commercial loans, not government grants. It is a body that is forecast to achieve a positive return to taxpayers of $2.40 per tonne of abatement, a remarkable achievement that no-one could have predicted when the corporation was founded just a few months ago. It is an achievement that we will no doubt be hearing a lot about today and into the future as we all grapple with the best ways for government to set policies and implement programs to reduce carbon emissions, which is how we can preserve jobs, preserve growth and prevent carbon shock in future years.

I have participated in the Senate Environment and Communications Legislation Committee inquiry into these repeal bills. It was definitely a quick and nasty inquiry. The chair, Senator Williams, did a fine job at the hearing keeping everyone to time; however, that time was too short. It was not fair on the witnesses, the organisations and the individuals who sought to make a submission and it was not fair on the Australian people. The coalition government referred the suite of repeal bills to the committee to examine the costs of pricing carbon on households and businesses. We, the opposition, referred the bills on the basis of examining how they fitted with Australia's long-term climate change obligations. Put simply, we start from and continue to see this problem through very different lenses. On one side the coalition government see climate change in terms of purely the here and now, while on our side we see the problem in terms of the medium to long term.

As important as any 2020 target is the need to have in place a pricing mechanism for emissions reductions beyond 2020, with a target for reductions at 2030 and 2050. We want to ensure the transition is a smooth one, but we acknowledge that we have to start somewhere. The former Labor government put in place a suite of measures to address climate change, including the establishment of Low Carbon Australia and subsequently the Clean Energy Finance Corporation. The value of the Clean Energy Finance Corporation extends beyond carbon pricing. The current clean energy legislation has put in place a clear path for Australia to transition to a low-carbon economy. Fundamental to that passage is government's role in fostering the development and rollout of clean energy in Australia. Labor established the Clean Energy Finance Corporation to facilitate finance for renewable and clean energy technology investments.

I would like to note at this point the depth of the submission that the CEFC provided to the Senate inquiry. I thank the staff at the CEFC for the efforts in providing this detailed information and I encourage all members and senators to read it. It covers the role of the corporation, the policy rationale for introducing the corporation, and its expected use-by date; the impact of abolition, including the cost to the taxpayer; and some comprehensive case studies on how the corporation is investing taxpayer dollars to reduce emissions and turn a profit. The corporation currently has 39 investments in its portfolio. Its investments are secured through facilitating comprehensive commercial loans. So far, it has co-invested $536 million with $1.55 billion of private sector funds. This $2.2 billion investment will deliver approximately four million tonnes of abatement and achieve this at a negative cost—a profit—of $2.40 per tonne.

The CEFC has been able to coordinate finance for emissions reduction that benefits business, provides returns to private sector investors and achieves a profit to government. The CEFC has funded projects that will generate or support over 500 megawatts of clean electricity. These investments are across a broad range of technologies, including wind, solar, energy efficiency and low-emissions technologies. Importantly, the CEFC's investments will deliver an estimated annual carbon abatement of 3.88 million tonnes.

The CEFC has demonstrated that it actually has the capacity to make investments that would account for 50 per cent of the five per cent emissions reduction target. The CEFC invests in projects that are demonstrating the benefits of proven technologies in the Australian market. Its team of financial experts, all with significant experience with major banks and financial institutions, conduct comprehensive risk assessments and financial evaluations of projects. This analysis then allows them to demonstrate to the private sector its confidence in a project. As the staff members are drawn from the private sector, they utilise their networks and contacts to build confidence in clean energy projects. So far, the CEFC has been securing $2.90 of private sector investment for every dollar it invests—a fantastic leverage rate indeed. The investments to 20 August 2013 carry an average yield of 7.33 per cent, and this compares very favourably to its cost of finance, the five-year bond rate, which on average was 3.11 per cent—well over double the return.

Beyond the first few projects, the pipeline for the CEFC looks good. Its submission outlined that it had conducted discussions with 37 proponents for projects worth some $4.5 billion, while initial assessment is underway of a further 142 projects. Together, this investment pipeline comprises almost 200 projects and $15 billion of opportunity. That is a $15 billion pipeline of investment, and we have barely taken the training wheels off the corporation. The CEFC's investments assist in building Australia's clean energy supply chain capability, funding projects in regional and rural Australia and supporting 21st century jobs in local communities. Many industries are benefiting from their financing, including agribusiness, property, manufacturing, utilities and local government.

I commend Ms Jillian Broadbent, the chair, and Mr Oliver Yates, CEO, together with their team, for the quality of their submission, their evidence and, more importantly, the quality of the work they are doing every day to help financiers appreciate the benefits to their business of investing in clean energy and energy efficient technology. The hearing was a difficult forum where, despite the best explanations from the CEFC officials, some government senators could not comprehend the purpose of the CEFC. The officials had to spend most of the hearing explaining that private investors need the coordinator to come to the table with some skin in the game—that chief financial officers would not turn up if the CEFC was not a co-investor in a project, and that the CEFC is much more than just a $10-billion government bank. Mr Fabian from the Investor Group on Climate Change summarised the need for the CEFC thus:

Investors do not turn up for chat; they turn up when there is a deal to be done. If we know that the counterparty can make the investment more attractive, then we are interested. We are not just going to come along for a bit of a chat about what might occur or what investment might take place.

Mr Yates highlighted the importance of financing in the corporation's role:

We need the ability to deploy cash so we are a real participant in the market, so that we can participate equally and on level terms with the private sector, so that we can actually facilitate transactions.

So where does this leave us?

The CEFC cannot operate without providing finance. It cannot leverage the private sector funds. The projects that it has financed so far—$2.2 billion worth of investment—will see over four million tonnes of abatement achieved, at a profit to the taxpayer. This seems to be a good program. The market does not provide the service required by all sides to achieve the bipartisan emissions reduction target. A government corporation utilises innovative financing to provide such a service and return a profit to the government—surely the new coalition government would seriously consider keeping this corporation as part of its direct action policy? Unfortunately, as is occurring all too often with this new government, ideology is getting in the way of good policy. Meanwhile, the emissions reduction fund will, as far as we are aware, consume billions from the budget, billing general government revenue for abatement, taking money off education, off health and off programs for families. It is clear that coalition senators have been unable to see past their free-market blinkers and appreciate the role that the CEFC plays in facilitating investment in renewable energy that would otherwise be missed by normal commercial banks.

As I mentioned earlier, the CEFC provided some quality case studies to the inquiry. I thought I would read one for the Leader of the Government in the Senate, as I imagine he has firsthand knowledge of the building in question. The CEFC has invested in a lighting upgrade for the Civic Centre in Kingston, Tasmania, which has cut the building's lighting energy costs by 75 per cent. The Kingborough Council replaced the building's fluorescent lighting system with more energy-efficient LED tube lighting, to make energy savings of more than $11,000 a year. The council covered the $45,000 up-front cost with finance from Low Carbon Australia, now the CEFC. The 20-year life expectancy of LED lighting, compared with four years for the old fluorescents, means that the council is also saving on its maintenance costs. I congratulate the member for Franklin, Julie Collins, on her work assisting the council with this loan. I urge the Leader of the Government in the Senate to venture up the road to the council chambers and flick the light on.

There have been a range of comments made by those opposite to deride the work of the Clean Energy Finance Corporation. Once again, the detailed submission of the corporation brought these to the attention of the committee, and I would like to take some time to share these with the Senate. On 'crowding out of private sector investment': the CEFC has actually done the opposite and encouraged investment where links were not being made. Ms Broadbent said to the hearing:

I think we have got evidence that there has certainly been crowding in rather than crowding out, because new financial institutions have come to participate in the market, being encouraged by a government owned entity's participation.

It is a fascinating concept, 'crowding in'. Where there is a market failure—

Debate interrupted.

Photo of John HoggJohn Hogg (President) Share this | | Hansard source

Order! It being 2 pm, it is time for question time.