Wednesday, 18 June 2014
Clean Energy Finance Corporation (Abolition) Bill 2013 [No. 2]; Second Reading
I rise today to oppose the government's move to abolish the Clean Energy Finance Corporation. It is critical that the government faces the fact that we are living in a global climate emergency. That is the fact of the matter. The greatest threat to human civilisation this century is global warming, and it is disgraceful that the Prime Minister refuses to acknowledge that. I want to talk about the Clean Energy Finance Corporation in that context. It is intergenerational theft not to face the threat of climate change. What it means is that life is going to be worse for generations to come if we do not deal with this threat now. We may already have gone beyond the tipping points from which there is no return.
The World Economic Forum have recognised that climate change is right up there in the 10 top threats—global risks of highest concern in 2014. They list in those 10 highest risks water crises, failure of climate change mitigation and adaptation, greater incidence of extreme weather events—floods, storms and fires—food crises and profound political and social instability. So at least five of the top 10 risks to the planet this century, recognised by the World Economic Forum, are covered in the climate space.
Not only that, but we know it from our own experience here in Australia. We only have to look at the consequences of the fires that we have suffered, the intense fires in the Blue Mountains and in Tasmania most recently, and the floods, the cyclones and the droughts we have had. We are seeing more intense extreme weather events. The losses are not just to people and property; the losses are very much to the environment. On the radio just today was a story about the koala population. They are already under huge threat because of loss of habitat, feral species, dogs and cats the environment, and disease, but because of the intensity and frequency of extreme heat and drought they are going extinct in Western Queensland. That is going to happen right across the planet. We are going to see a third of all species made extinct because of global warming, and that is likely to accelerate. That is the kind of planet that we will be leaving our children, and that is why I describe it as intergenerational theft.
You only have to look at our nearest neighbours in the Pacific. Just recently I hosted a delegation from Tuvalu and Kiribati. Those people came to see us to say that they are already suffering greatly, from the saltwater incursion into the freshwater systems and from storm surge. They are terrified that there is a point coming where they will be washed away from their island home, in the case of Tuvalu in particular. They are saying this happened as long ago as 2006. The Prime Minister of Tuvalu stood up in a conference in Kenya and said, 'Who will take my people?'
These are serious issues facing the planet, and Australia has its head in the sand if it thinks we can get away with pretending it is not happening and refusing to do something about it. The UN knows particularly that this is happening, and that is why there is now growing global momentum to deal with climate change. That is why Ban Ki-moon, the Secretary-General of the United Nations, is having a conference shortly, in September, to call on the leaders of governments around the world to act on global warming. Australia is snubbing—the Prime Minister is snubbing—the United Nations by refusing to attend, and I find that disgusting and disgraceful. Prime Minister Abbott needs to change his mind and get to that summit and explain to the rest of the world why he is going in the opposite direction as the rest of the world is starting to move.
Not only have we got the summit in September but we have the G20 in Australia in November, then we have the UNFCCC meeting in Peru leading into the global negotiations in 2015. Let me tell you in this Senate and in this parliament: the world is serious about getting to a global treaty. I was ashamed that our Prime Minister stood in Canada with the Canadian Prime Minister to say that they will do what they can to effectively tear down the success of achieving a global treaty. That is the context in which we are today discussing the Clean Energy Finance Corporation and its abolition. In Australia set up an architecture, if you like, to deal with these issues: the Clean Energy Finance Corporation. It is interesting that just overnight—and this really highlights the point and the value of the Clean Energy Finance Corporation—the United Kingdom signed a climate change agreement with China. In the signed statement from the leaders they talk about their commitment to Ban Ki-moon's summit in September. They go on to say:
The United Kingdom and the People's Republic of China have both taken substantial action to put in place policies to limit or reduce emissions and promote low carbon development. We welcome our existing strong relationship on low carbon cooperation that underpins our international work. Both sides agree to intensify bilateral policy dialogue and practical collaboration through the China-UK Working Group on Climate Change.
It is very interesting that they go on to list what the collaboration will actually focus on. The first thing is:
Green Growth and the Economics of Climate Change: The transition to a lower carbon, more energy efficient economy is an opportunity to drive new sources of growth and jobs in both economies.
Point 2 is:
Clean technology: The UK and China have launched a joint £20 million research programme on Low Carbon Innovation, including work on offshore renewables, low carbon manufacturing processes and technologies, and low carbon cities … electric vehicles, smart grids, cleaner fossil fuels and energy storage.
This is not a radical fringe. This is the Prime Minister of the United Kingdom. It is also the Premier of China actually doing this. Going on, renewable energy is the third thing they want to work on and then green finance. This is where the Clean Energy Finance Corporation comes in. On green finance they say:
The levels of investment needed to deliver a 2 degree world cannot be met by public finance alone—significant amounts of private investment are needed to achieve a sustainable low-carbon transition. This presents a major opportunity for business. The UK and China have been working together on areas including green finance, green credit and green procurement …
Are you listening, Senator Cormann?
Green finance, green procurement, why will you not recognise green credit? They go on to say they want to build on London's reputation as the green financial capital of the world.
The countries will continue this cooperation through the climate public private partnership. The UK aims at catalysing private finance specifically from institutional investors such as pension funds and sovereign wealth funds into low-carbon investments in China and other countries.
They go on to say they want carbon markets. Carbon emissions trading schemes achieve higher levels of emissions reductions at low cost while creating clean energy investments. And it says the UK has provided advice and expertise in the development of China's emissions trading scheme—if ever you saw an opportunity sitting there and saw the way the world is going. What you are doing in this country by trying to abolish the Clean Energy Finance Corporation is actually taking out of Australia the very mechanism that other countries are now trying to build in, and the opportunity cost to us is huge.
There is a report out today from CEDA, the Committee for Economic Development of Australia, that makes the point that it is an undeniable fact that Australia's economy will be critically exposed on two economic fronts if we do not ensure an appropriate response to climate change. The first is the costs of extreme weather events and the economic and social impacts of these events. But the second point is that where Australia stands exposed economically to the effects of climate change relates to the availability of capital to fund its infrastructure and other capital needs. The report goes on to say:
Australia is reliant on foreign capital to fund major projects and new developments in international climate change policy are likely to impact international capital flow and investment decision making.
Applying climate related risk assessment when considering investment and financing decisions is an emerging trend globally. It is the divestment trend and that is why the Greens keep saying, 'If you keep trying to invest in coal mines, coal ports, coal railways, you will fail.' These are stranded assets of the future. You are totally going in the wrong direction. Frankly, this move that you are trying to engage in now to destroy the Clean Energy Finance Corporation is such a wrong-way-go-back policy is unbelievable. It is dumb economics; it is dumb politics; it is dumb international engagement; and it is an isolationist rust-bucket strategy. That is what it is and that is why this parliament should reject it—and we will reject it.
I have been thinking about this point. If you had a prime minister sitting here in Australia and there was an army offshore and that prime minister said, 'I do not see it. In fact I cannot see it to the point where I am going to stand down our own army.' We would say the person is barking mad and needs to be removed. We have to actually act on the threat and we have to actually deal with this issue. But here we have a prime minister who is effectively barking mad on climate change, barking mad on the greatest threat that is facing this country and he is now the biggest opportunity cost to the nation in research and development, in rolling out new technology, in new jobs, in bringing down prices to the community in energy efficiency and in renewable energy.
The Clean Energy Finance Corporation now has $582.5 million of investment. It has now got a portfolio of $2.35 billion in investments. They are investments in a fantastic range of projects and proposals around the country. Its portfolio goes to manufacturing and to energy efficiency. Just yesterday I was talking to the local government association and there are so many councils that are pleased that they are going to get more energy efficient buildings, recreation centres and street lighting. Abattoirs are benefitting. Carnegie Wave Energy's future is tied up now with being assisted by the Clean Energy Finance Corporation.
You have got refrigeration upgrades, live scale solar boosted technology investments. You have got a tomato farm with solar innovation to bring down its heating costs, and great innovation at the Sundrop Farms in South Australia. You have got Pacific Hydro's Portland wind energy project. You have got egg producers turning waste into energy. You have got buildings transformed by upgrading. You have got converting waste to energy around the country, and it goes on and on.
A hospital saves on car park lighting, a leading pork exporter saves on energy and a stadium lighting upgrade in New South Wales reduced its energy by 60 per cent. The Gold Coast Burleigh Bears Leagues Club reduced its lighting bills by 65 per cent. A frozen food manufacturer replaced their existing commercial-style blast freezer with an industrial spiral freezer system that has cut annual energy consumption by 55 per cent, and on and on it goes.
Cool stores are reducing their energy costs, and a $1.15 million coolrooms upgrade is allowing a fruit supplier to save around a quarter on its refrigeration energy bills. A hotel complex, a multistorey, multiuse building in Queen Street, Melbourne has undergone a $1.3 million energy efficient upgrade making energy cost savings of more than 50 per cent. A foam manufacturer is reducing its lighting bills by more than 50 per cent, following a lighting upgrade to its Moorebank in Sydney's west plant, and so on and so forth.
Project after project after project is bringing down costs and making these projects cheaper to the community: more efficient manufacturing, more competitive. That is what the government wants to get rid of. Not only that but they have got in their pipeline a huge number of additional projects. For example, I asked at estimates: 'In the pipeline, what have you got?' The total project value of what the CEFC has in its pipeline is $10.7 billion worth of investment and what they have put in a bid for the CEFC to fund is $3.6 million. So you have got a massive leverage of private-sector finance out there ready to go in to make Australia competitive and, when you consider what I have just said about China and the UK and then you hear President Obama saying that he has brought in through the EPA a requirment for power stations to reduce their emissions and that that can be spread across states through emissions trading schemes or whatever, Australia is going to be left behind.
Some of our best brains are going to leave the country. Some of our best technologies will go overseas, and what we are we going to be left with? We are going to be left with a Prime Minister standing next to a coal pit telling us that that is the future for Australia. Well, it isn't. It is wrong. It is so last century. It is unbelievable, and that is why we have to get behind the Clean Energy Finance Corporation.
I recognise that, when we vote down this abolition bill today, it will be a trigger for a double dissolution. I say to the Prime Minister: if you are so convinced that ignoring climate change, tearing down the clean energy price, destroying the Clean Energy Finance Corporation and ARENA is the way to go, go to an election on it. I say: Go to an election on it because, increasingly, Australians are recognising how conned they were by the absolute trite, superficial nonsense of 'axe the tax'. Now the polls are showing that Australians want our country to take a leadership role in global warning. They want the benefits of energy efficiency. They want to get to 100 per cent renewable energy
People are showing, as they go out and buy solar panels for their roofs, that they want to engage in the new technology and they are becoming increasingly aware of how the rest of the world is moving and the risk to us of being left behind. As they get their insurance bills and their premiums have gone thorough the roof, they recognise that, if we don't deal with global warming and get these kinds of things that the CEFC is out there investing in—the energy efficiency measures—and we don't get a national disaster fund, then we are in big trouble and it is the community that is going to have to pay. What they will find is that the government is prepared to abolish the Clean Energy Finance Corporation, this $10 billion into improving Australia's renewable energy and energy efficiency future, and instead we are going to pay the polluters and take the money out of the pockets of the community in this budget through co-payments, through a tax on the unemployed. They are starting to see what a huge con job that this government has been on climate change all along.
I just want to go back to the Clean Energy Finance Corporation and its architecture. Most people do not realise that when we set up the Clean Energy Finance Corporation—this amazing Green bank to leverage finance in this—the idea was not only that it would bring down emissions. Part of its goal is to bring down emissions. and it is doing that at a negative $2.40 cost. You cannot get cheaper abatement than negative $2.40 a tonne. Negative! And the government is going to rob the taxpayers to pay the polluters goodness knows how much a tonne when they are actually getting negative $2.40 benefit a tonne.
If the Clean Energy Finance Corporation could roll out all of its financing it says that it could meet half of a lousy five per cent target. Of course, we need to be going to a 40 to 60 per cent emission reduction target by 2030, as the Climate Change Authority says. But that is the contribution that the Clean Energy Finance Corporation could make. And the profits that it makes are being put back into the Australian Renewable Energy Agency—ARENA. That is to fund research that is hard to fund, that early stage research and pilot development. So we have set up a situation where we are improving manufacturing efficiency, jobs and investment and the profit from that is going back to pay the research that brings on the new technologies. So we have a fantastic cycle happening that the government wants to smash. I just think it is the most backward and appalling policy position.
People might ask, 'Well, why would the government go to an election on one thing like the Clean Energy Finance Corporation?' The answer is that it is not on one thing; it is a choice. It is a choice about a future where you deal with the biggest threat you are facing and you adapt your economy; you get ahead of it and you make new jobs, new investment, new decisions and new leadership. You invest in your universities and you get into that scene or you get yourself locked into the past—leg roped to the past. That is why this is important and we should not support the abolition. (Time expired)
We are here this morning debating a critical policy agenda, which is around climate change and the mechanisms that we can put in place to address those issues.
What we discovered on the return of the Prime Minister from his recent overseas travels is that we have a new 'axis of carbon' in the world, which is the real problem that we are all confronting. Senator Milne just highlighted what is happening in the rest of the world and the ways in which the rest of the world is seeking to address a reduction in carbon emissions and the issue of climate change. But what we witnessed on the television last week was Prime Minister Abbott journeying to Texas, where he gave a talk to oil men and was awarded a 10-gallon stetson hat. He put it on and said, 'Yee-ha!' just like the good old cowboys of the Texan era. But his international travels were about protecting Australia's coal industry, whose expansion plans are going to make it absolutely impossible to bring climate change under control. And that is denying the science that surrounds us, with more evidence being brought to the public domain every day about the critical impacts of climate change.
And so the Clean Energy Finance Corporation (Abolition) Bill 2013 (No. 2) which we are debating this morning is fundamental to what Australia has been trying to do. The 'abolition' bill actually describes very benignly that it contains arrangements to ensure the orderly administration of the investments and the transfer of the existing contractual assets and the liabilities of the CEFC to the Commonwealth to hold and manage.
Senator Milne just talked about what those assets and contractual arrangements actually represent: more than $700 million in investments in more than 50 projects, with 150 projects in the pipeline—all of them making significant impacts. There is no logical argument for closing the Clean Energy Finance Corporation. The argument is an ideological one; the argument is, as Senator Milne just said, sticking to the mantra of abolishing the carbon tax and all of the associated arrangements around that, without any concession to the logic and the economic value of organisations such as the Clean Energy Finance Corporation.
The financial impact statement for the bill identifies—and I will quote from the explanatory memorandum:
These estimates do not make any allowance for the costs of shutting down the CEFC, such as employee redundancies and contract termination costs, nor do they make any allowance for the lower public debt interest costs of ceasing further CEFC investment.
So again we have a pretty dodgy economic argument that has been put up as a furphy to hide the fact that this is an ideological position of the government.
When the bill was first introduced late last year, CEFC chairperson, Jillian Broadbent, told Radio National Breakfast that the corporation, which was only established in 2012, had rapidly invested funds in 39 programs and delivered a 7.3 per cent return. She identified then that the CEFC could potentially deliver half of the coalition's targeted 2020 carbon cuts. At the same time, former Assistant Treasurer Arthur Sinodinos suggested that the CEFC's recent profits were evidence that it should be able to survive without government support. He said that scrapping the carbon tax and introducing the coalition's Direct Action Plan would deliver the promised 2020 targets. He said:
If this was commercially viable, it wouldn't need the government.
Senator Sinodinos missed the point. Ms Broadbent went on to say that ditching the corporation would be a huge economic mistake for the government, arguing that it is both making money and cutting emissions.
There has been plenty debate. We have had this debate several times here in the chamber already. The CEFC has already proved itself as a very cost-effective tool in the pursuit of emissions reductions. We all want to achieve emissions reductions—even the government acknowledges that—and we want Australian industry to be competitive in a lower carbon world. We have to engage in the marketplace, encouraging co-financiers to join us in pursuing those investments. Key to Ms Broadbent's pitch at the time was the argument that the CEFC could potentially save 64 million tonnes of carbon emissions every year. That is half of the five per cent abatement target for 2020.
We heard too from Senator Milne this morning about how the CEFC has been a catalyst for investment in the clean energy sector. As Ms Broadbent said, 'We've invested $536 million.' The most recent figure from the CEFC in May was $700 million, matched three to one from the private sector. That is a generation of almost $4 billion of private capital investment. That just does not happen by itself; it actually needs a mechanism, it needs an institution and it needs arrangements to enable that to happen.
When the bill was introduced last December without success, the government indicated that it was determined to pursue the abolition of yet one more independent organisation based purely on its ideological obsession to dismantle the achievements of previous Labor governments. There is no other logic to this. Of course, government senators are going to argue again that the government has a mandate for this. The problem is that the Prime Minister, having returned from his overseas travels—yee-ha—knows that the rest of the world wants to talk about climate change and wants to mobilise global action to reduce carbon emissions by investing in renewable energies and efficient technologies, and here in Australia we are moving backwards. The environment minister continues to promote the coalition's Direct Action Plan, although he was caught out with his million solar roofs announcement and swiftly swatted by the Treasurer, so he has retreated back to the shallow rhetoric of the Direct Action mantra.
The argument is so fundamentally flawed. If the coalition government believed in climate change then it would not be exposing the Australian economy to future costs and risks because we failed to take adequate action now. That action should include responding to the need to invest in renewable energy in this country and the need to be more efficient in our energy generation from fossil fuels. They, of course, are the core tasks. They are the key responsibility of the Clean Energy Finance Corporation. It is the most effective form of direct action. It is an important mechanism and has continued, despite the best efforts of the government, to play an important role in the market, facilitating investment in renewable energy and other efficient energy generation, cutting emissions, cutting energy consumption and those opportunities would otherwise be missed by normal commercial banks.
So the arguments do not stack up. They have never stacked up. The government argues that the CEFC is full of risky ventures. Nothing could be further from the truth. We have a $10 billion fund generating a return to the taxpayer and the government, a negative cost abatement of, at last estimate, $2.40 per tonne with legislated good governance mechanisms in tax. $2.40 is generated for each tonne of abatement, compared with the spurious Direct Action policy—dodgy costings and dodgy cost-benefit analysis, where the ultimate outcome is that the government is going to pay polluters to pollute. The clean energy investments reduce emissions, and we can do a lot more through this $10 billion fund. The Clean Energy Finance Corporation creates assets that are owned and leverages more funds as Senator Milne so rightly said this morning, but the government wants to abolish a $10 billion fund which is able to leverage well above that in other investments and replace it with what can only be described as a half-baked, muddled, $3 billion direct action plan.
There is plenty of evidence to the environment committee around the success of the CEFC and the capacity it has to make investments that would account for 50 per cent of the five per cent emissions reduction by 2020. There are 50 projects in partnership with major trading banks, which means that now we have private sector cofinanciers leveraging and multiplying the available funding. That is the tragedy of the abolition of the Clean Energy Finance Corporation. They are great projects, and I am wondering why we have heard nothing—we have no Nationals senators here in the chamber today. There are great energy projects, great projects like the Sundrop solar thermal greenhouse, 200 jobs and demonstrating sustainable food production and the re-use of desalinated—
Oh, we have one now. Desalinated water in South Australia. Or there is the Moree solar farm, which needed an investment to underwrite the senior debt and which, by the way, also benefited from an ARENA grant and the Australian Agricultural Company. There are 15 grid connected solar PV units across sites in Queensland. What are the nationals saying about these projects? Absolutely nothing.
The climate change deniers are arguing we can combat climate change by planting trees, which of course would work better if we were not battling constant drought and record heat. As we have heard in Senate estimates, there is a huge pipeline of projects—more than 150 projects under active assessment by the CEFC. The CEO of the Investor Group on Climate Change told the Senate committee that there are about 14 financing organisations around the world now playing a similar role. They are co-investing to finance low-carbon alternatives to meet the two-degree outcome. They are helping to build a robust low-carbon investment market. They are strengthening the capacity of the finance sector to understand and finance carbon-reducing investments. They are supporting investment opportunities in new markets, opening new markets and earning financial returns for governments delivering abatement at negative costs.
So why is it that this government is so determined to abolish the Clean Energy Finance Corporation? I think the budget explains exactly why. Not only did we have the election of the coalition government slamming the brakes on Australia's climate and clean energy progress; we are now going backwards. It is a budget that shifts the burden for pollution reduction from polluters to taxpayers. It is a budget that slashes renewable energy agencies and funding programs that are helping create the jobs and industries of the 21st century. It is a budget that rips hundreds of millions of dollars away from climate science, international climate finance and clean technology research programs. Climate and renewable energy did not even make it into the budget speech. That speaks volumes. Certainty about the future of coalition's Emissions Reduction Fund was not helped by the budget overview saying that the $2.55 billion thought to be for the first four years is all we get over 10 years. In Senate estimates, the minister said that was a misprint. Oops!
The government has reinforced concerns that any climate action is set to be hostage to the vagaries of the annual budget process. How much confidence can anybody—industry, investors, ordinary Australians—have in the now four-year-old promise that, once the ERF is up and running, it will spend an average of $1.2 billion a year? John Connor, writing for ABC Environment, belled the cat:
What's most tragic is that Australia was just starting to get on track. Our greenhouse gas emissions, which had been growing steadily for decades, have begun to decline. Emissions from electricity, the single most polluting sector, fell an impressive 8.7 per cent since 2012. Solar and wind energy tripled in the last five years, while solar and wind jobs nearly quadrupled.
We have laws that price and limit carbon emissions from 60 per cent of the economy; laws that require companies to take responsibility for their pollution. We have independent, non-partisan institutions investing in research and development for the next wave of clean energy technologies. All these steps are necessary to ensure low-carbon competitiveness and sustainable economic prosperity. Ironically, on the same day as the budget, all these forward steps were included in the conservative International Energy Agency's recommended toolkit for energy policies to help avoid two degrees of global warming.
Now the government is intent on winding back those achievements by repealing the carbon laws. Not only will this will give polluters a free pass on their pollution, but it comes, as many speakers will continue to emphasise, at a great cost to the economy: over $12.5 billion in forgone carbon revenue over the forward estimates. As well, taxpayers will be forking out $2.55 billion for the Emissions Reduction Fund, all while the government works out how it is going to ensure reductions from big polluters. Taxpayers are being asked to buy a half-baked carbon pollution policy from government and bin the credible alternative that the Labor government put in place. This is about putting lipstick on a pig.
And, in an effort to silence the dissenters, the government wants to take down the independent agencies. The coalition supported ARENA before the election and promised to keep it going, and what have we got? Another broken promise. ARENA now joins the Climate Change Authority and the Clean Energy Finance Corporation on the chopping block.
Why should motorists be paying, while miners' fuel subsidies remain? The fuel excise indexation is effectively a price on carbon and it should encourage greater efficiency, but why is it that ordinary consumers will be paying, while miners' fuel subsidies, worth more than $3 billion a year, stay in place? And why cut investment in public transport? Why ditch the logistics and corridor acquisition for the Very Fast Train route, which would have been such a sensible and catalytic infrastructure project?
The coalition promised hundreds of millions of dollars for homeowners, schools and towns for solar power—another broken promise. We have got $2.1 million in the budget for seven solar towns over four years. So make no mistake, colleagues: the government's retreat from climate action and clean energy is going to cost Australia dearly. Australia's prosperity this century depends on the world avoiding dangerous climate change, and that means we have to play our part and be ready for the transition to a low-carbon, ultimately carbon-removing, economy in the future.
With very few exceptions, the budget dodges all of those issues and asks Australians to gamble on a half-formed carbon pollution policy. We know that the government senators are going to argue in this debate that Australia should not have to go it alone. This budget shows that if there is anywhere we are at risk of going alone it is backwards.
Prime Minister Abbott's only real concern is protecting Australia's world topping coal industry …
Germany is what the future looks like. The leaders of Canada and Australia—highly educated, sophisticated, and wealthy nations, not to mention some of the most spectacularly beautiful places on earth—are clinging to the past, on behalf of the fossil fuel industries that dominate their governments. Eventually (and hopefully before the planet’s physics are completely out of control) voters in these countries will realise they’re being driven off a cliff.
We are all being driven off a cliff by the fact that this government—in seeking to abolish the Clean Energy Finance Corporation, in seeking to repeal the carbon reduction bills that have been before the Senate, and in seeking to undermine the co-investment and the opportunities that are developing across Australia in these new renewable energy technologies and the unimagined potential of new clean energy technologies—is denying Australia's future and is denying our students, our universities, our economies and our communities. That is the folly of the government's position.
I rise today to speak on the Clean Energy Finance Corporation (Abolition) Bill 2013 [No. 2], which has, sadly, again come before this place. We can all look to the fact that Tony Abbott has long been established as being unbelievable, as someone who cannot be believed, on climate change. He has demonstrated time and time again—not only by his words but also, more significantly, by his actions—that he does not believe in the science of climate change. If he did, the government would realise that Australia's emissions reductions target cannot be met without increased investment in clean and renewable technologies. This is what the Clean Energy Finance Corporation's core business is. It delivers and drives that investment in clean and renewable energy. Very sadly, because of the holistic abandonment of the CEFC and ARENA, it is very obvious to this nation that the government has no intention at all of taking advantage of the opportunities that are associated with clean energy technology and fuel energy. This will leave an appalling economic and social legacy for Australia. Not only will we not make our environmental contribution but we will be leaving behind the economy and the jobs of tomorrow.
Just a few weeks ago we had the Treasurer, Joe Hockey, calling wind turbines offensive and saying that they were a blight on the landscape. In fact they have incredibly successful energy generators making a great contribution to renewable energy in this country. We know that the Abbott government has appointed Dick Warburton to chair the review of the renewable energy target. This is a further indication of the government's lack of commitment to a clean energy future for Australia. Mr Warburton, incredibly for someone put in this position, has previously said that he does not accept the science of climate change. He has confirmed his scepticism of the contribution of human activity to climate change. To put someone like Mr Warburton in that position really indicates that those on the other side of this chamber have no understanding of the science of climate change, that they have suspended their scientific endeavour and any sense of logic when it comes to these issues and what is in our national interest. How can Mr Warburton be objective in his analysis of the renewable energy sector if he does not think that climate change has any connection with fossil fuel burning?
It is an incredible proposition. He cannot possibly be objective. Sure, if fossil fuels had nothing to do with climate change then perhaps he could, but if you look at the scientific evidence that is simply not the case so it is extraordinary that the government would put him in that position.
Previous reviews of the renewable energy target have clearly shown that the policy is delivering. It is delivering clean energy, such as solar and wind, and it has created thousands of jobs and significant investment around our nation—jobs and investment that will be left behind because this government is refusing to make the transition to a clean energy future. We know that these industries are also making a significant contribution to Australia's emissions reduction target.
Very sadly, in the budget this year we saw ARENA, the Australian Renewable Energy Agency, scrapped. The one million solar roofs program is scrapped, despite the fact that that was a recent election promise. This again demonstrates that the coalition cannot be trusted for anything that it says about climate change. Solar schools and solar communities are scrapped. The only thing left is a lousy $2 million for solar towns and that is a long way off the $600 million that was committed at the last election.
Those opposite like to carry on and say it is all about debt and deficit. This is about a return to our economy. These good solid investments generate jobs, but they do not see it that way because of their ideological blinkers in relation to climate change. This is all proof that as a government they are not serious about climate change and not serious about the renewable energy sector. They are simply treating this sector as a joke.
All around the world you can see bodies like the Clean Energy Finance Corporation providing support and investment to economies. There are roughly 14 organisations around the world that act as catalysts for investment in renewable energy and clean technologies. The CEFC is one of these and it puts us in a strong competitive position to develop our industries here. I really hope that this place will protect and maintain this organisation. It is within the role of the Senate to be able to do that.
We can see the CEFC playing a significantly important role in mobilising capital for investment. It is facilitating comprehensive commercial loans for both renewable and clean energy technology investments and is set to fund emissions reductions at a negative cost to government, as we have long said in this place—that is, it generates a return to the bottom line. When you look at the costs of abatement, that stands in stark contrast to the coalition's emissions reduction fund, which in effect is a big pile of money being handed to polluters.
Since being created by Labor as part of our clean energy future package, the CEFC has committed some $536 million of its own budget and has mobilised a massive $1.5 billion in private capital. When you want to look at efficient investment, you cannot go past the way the CEFC does business. Return on investment is currently about seven per cent, with the potential to return $200 million per year or $1.5 billion out to 2020, as well as doing the job we want it to do, which is significantly reduce our carbon pollution. Surely you cannot look past this. This argument was acknowledged by the Senate last time this legislation was considered here and it was soundly defeated.
We know that the CEFC has the capacity to make investments that would account for 50 per cent of Australia's current five per cent emissions reduction target—and that is not at a cost to the taxpayer, but at a profit to the taxpayer of $2.40 a tonne. Yet, despite all of this success, the government still seeks to abolish this organisation which returns significant benefit to our budget. You want to replace it with an alternative plan that will actually consume billions of dollars of taxpayers' money. What a waste.
The coalition have been unable to see past their free-market blinkers and appreciate the role that this organisation plays in facilitating renewable energy that would otherwise be missed by normal commercial banks. I know that you want to be able to say that you can just leave this stuff to the private sector and you can just get out of the way. But this organisation has been incredibly successful. It has been duplicated, with organisations like it doing similar work all around the world, for good reason. It does have the capacity to add that extra value and drive the extra investment. Why would you need your Emissions Reduction Fund at all if you could just leave it to the free market to drive these things?
The CEFC does not engage in risky loans. It is helping to develop a relatively clean energy investment sector. For example, in March this year it provided an innovative $20 million loan facility to Carnegie Wave for an incredibly groundbreaking wave energy installation in Fremantle. That technology truly has the capacity to generate significant renewable energy and jobs for the future of this country. The CEFC provided a $100 million debt facility to the Balmain Corporation for retrofitting ageing building stock, again making a difference not just with investment in renewable technology but in efficient buildings and efficient energy consumption. There was $50 million in debt finance for waste-to-gas facilities in Western Australia, again a project that is using cutting-edge Australian designed technology. Also, the Warrnambool City Council is set to become the first council in Australia to change its street lights to high-efficiency LED lighting. These are all projects that would have been on the margins of banking investment but can attract the extra leverage through the Clean Energy Finance Corporation.
Instead of accepting the success of the CEFC and acknowledging these projects, the government just wants to scrap it completely as part of its agenda to replace anything that was in the whole Clean Energy Future package for this nation with a thing called Direct Action. Let's have a look at direct action. The Senate Environment and Communications References Committee inquiry, which I was part of, got considerable evidence that demonstrated that the CEFC should not be abolished due to its positive investment in renewable and clean energy technology and its return to government. I will highlight some of that evidence.
AUSTELA declared that the CEFC 'has performed its intended and mandated functions effectively and is needed to address key market failures and barriers to investment'. You can still get that return on investment and you can still use a market mechanism, but you cannot just rely on the market to pick those winners for you. Mr Buckley from the Institute of Energy Economics and Financial Analysis told the committee that the function the CEFC performs in the market is unique and necessary for Australia to reduce its carbon emissions. He said:
… the CEFC is meant to lead the way, to pave for new technologies for deployment in the Australian market to show they are financially viable. In a regulatory framework that works, that makes entire sense. The domestic institutions will learn by that process and then follow. They will probably invest in deal 3, 4, 5 or 6 and then fund 100 per cent thereafter. You need the CEFC to pave the way to show that this can be done economically and viably with the right policy.
The Conservation Council of Western Australia suggested that the CEFC performs a unique function that does not duplicate other funding bodies as it is specifically focused on the low-emissions sector. The Council therefore rationalised that any decision to abandon the CEFC:
… could only be based on ideological grounds rather than consideration of the financial and investment merits of the fund.
That is the place we have arrived at today. Doctors for the Environment remarked that, even without accounting for health externalities:
The CEFC has proven economically successful and pays dividends to the government.
Another tick. 350 Australia similarly questioned the rationale for abolishing the CEFC while it makes a return on investment and contributes to emissions reduction:
… the Clean Energy Finance Corporation must remain as an essential and commercially viable part of moving Australia to a low carbon and ultimately zero emission economy. The CEFC is already growing long term business investment and jobs in clean, low carbon technologies.
Again, another tick.
The abolition bills in front of us today are nothing more than the misguided ideological position of a misguided government. The CEFC has been, and should continue to be, a clear success in driving investment in this country, reducing carbon pollution and boosting the government's bottom line. Instead the government is leaving us with a climate policy that has no intrinsic logic. It has no cap on emissions and no capacity to drive investment in renewables—only a plan for more pollution where the Australian economy, and the jobs of the future, are completely left behind.
The bill before us today, the Clean Energy Finance Corporation (Abolition) Bill 2013 (No2), shows the heights of absurdity and hypocrisy that the government has reached in its desperation to tear down each and every tool that Australia has in our arsenal to address climate change. Recently, those opposite have not been able to string a sentence together that does not include references to their confected budget emergency. Ludicrously, at the same time, they are busy trying to shut down the organisation that has not only leveraged $1.5 billion of private sector investment and cut carbon emissions by an estimated 3.9 million tonnes, but has added millions of dollars in profits to our national coffers at the same time.
We are often told by the conservative side of politics that only the free market can save us. However, when they are given a shining beacon example of a program that is leveraging private sector investment for the good of the nation, what do they do? They shut it down. If ever there was solid proof that this government is determined to maintain a fact-free zone around all policies relating to climate change, it is in this attempted repeal of the Clean Energy Finance Corporation.
The bill before us today shows with crystal clarity how those opposite are ignoring the advice of experts, presumably so their welded-on climate change blinkers do not shatter under the weight of real evidence. A recent opinion piece in The Age by Ian Berryman got it right when he said the Prime Minister has declared war on the Australian renewable energy industry, the environment and science itself.
If, as those opposite say, there is a budget emergency, why on earth would they be closing down the very organisation that has cut our nation's carbon emissions while returning a profit to Australian taxpayers? The plan to close down the profit-making Clean Energy Finance Corporation is not just a callous act of environmental and economic vandalism but one completely devoid of any reasonable justification. It is further proof that there is no budget emergency, just an unbridled ideological rampage that presents the clearest and most wide-reaching attack on the environment that I have seen.
If those opposite truly believe that the budget is in such a dire situation and if, as they say, they believe wholeheartedly in the very real risks of climate change, then why would they make one of their own first acts the shutting down of an organisation that has a proven track record of cutting carbon emissions while turning a multimillion-dollar profit? Frankly, it defies belief.
Of course, a closer perusal of the budget beyond the three-word slogans will reveal that this is actually entirely consistent with their true agenda of attacking Australia's climate change response wherever possible. Last week Mr Abbott told the world that he takes climate change very seriously. But the truth is that he has not moved forward an inch from the days when he actually told the truth that he believes climate change to be 'crap'. If Mr Abbott really took it seriously, would he be trying to organise a global right-wing uprising against action on climate change? Again, it does not take a climate scientist to realise that it is nothing short of a bald-faced life.
To get to the truth of the matter, let us look at the government's record so far in this area. First, they banished climate change from the ministerial portfolio titles, significantly demoting and devaluing its importance. Then they cut the Climate Commission, which was set up to advise on the science and economics of carbon management. The Climate Change Authority, which provides advice on our national carbon targets and our progress towards meeting them is also on the hit list. The Australian Renewable Energy Agency is to be abolished. The promise of one million solar roofs is to be broken. The renewable energy target is set for the chopping block, with a review headed by former Caltex head, Dick Warburton, who has publicly questioned whether carbon emissions cause global warming.
There will be $111 million in cuts to CSIRO's overall budget, which will undoubtedly impact on Australia's ability to be at the forefront of climate research. Even the future of the government's climate policy, the Emissions Reduction Fund, appears in doubt. The budget committed only $1.14 billion over the next four years, well short of the $2.55 billion pledged by minister Greg Hunt nearly a month ago. In fact, the budget papers show funds for climate change related programs will shrink from $5.75 billion this year to $500 million by 2017-18. And we have the bill before us today, to eradicate the Clean Finance Corporation.
Against this backdrop, it is not surprising that the former head of CSIRO's atmospheric research team, Graeme Pearman, has labelled the government's response as an 'extreme ideological approach that all but rejects global warming as an issue, despite ever-mounting evidence'.
The truth is that Mr Abbott clearly does not believe the science on climate change. If he did, his government would realise that emissions reduction targets simply cannot be met without increased investment in clean and renewable energy technologies. And that is exactly what the Clean Energy Finance Corporation is doing.
Abolishing the Clean Energy Finance Corporation runs counter to expert opinion and global commitments, at the expense of future generations, our international reputation and the future. The truth of the Clean Energy Finance Corporation is that it has been a spectacular and widely acclaimed success. The truth of the Clean Energy Finance Corporation is that it is run by some of the brightest business minds in Australia. It has also leveraged investment from the biggest investors around. The truth of the Clean Energy Finance Corporation is that it actually grows government coffers to the tune of $200 million a year. By 2020, it will return $1.5 billion to our economy, while reducing carbon pollution at the same time.
So it is nothing short of perverse for the coalition to set out to dismantle something that is so undeniably successful in meeting its objectives—the very objectives that they purport to support. How could it be that those opposite are willing to force a $200 million hit to the budget, whilst the chance to meet our carbon targets recedes further and further into the distance?
Last time we considered this bill, it was interesting to note that many of the government speakers hardly mentioned the Clean Energy Finance Corporation in their contributions, despite the fact that that was the very reason we were talking. This leads me to believe that those opposite know, just as I do, that the arguments to justify this action simply do not exist and that it is, quite simply, indefensible.
The $10 billion Clean Energy Finance Corporation was set up by the previous Labor government to mobilise private sector investment in the commercialisation and deployment of Australian-based renewable energy, low-emissions and energy-efficient technologies. Its self-described mission is: 'To accelerate Australia's transformation towards a more competitive economy in a carbon constrained world, by acting as a catalyst to increase private sector investment in emissions reduction.' That is exactly what it has been doing. The CEFC was created to respond to a slow uptake on behalf of investors when it came to adopting green investment opportunities. This was not due to a lack of financial viability of energy-efficient projects, but it resulted from investor unfamiliarity, the size of the loans required and the relative level of technological complexity involved.
The CEFC helped address these problems by acting as a bridge between investors and projects. It provides invaluable independent advice, tailored finance and advocacy in the marketplace. In its short life, the CEFC has provided $1 for every $2.90 of private sector investment in green initiatives. In doing so, it has leveraged more than $1.55 billion in private capital investment and facilitated more than $2.2 billion in projects. Together, these projects account for a reduction of 3.9 million tonnes of carbon—an impressive outcome for an organisation still so young.
On its own, this is a very laudable outcome, but it becomes even more remarkable when you learn that the CEFC has also been able to secure a return to Australian taxpayers of over seven per cent for their investments. This is particularly impressive when you consider that the five-year bond rate across the portfolio was only 3.11 per cent.
The CEFC has invested in a diverse portfolio mix across the economy. It has invested in projects including wind, solar and bioenergy across Australia, as well as energy efficiency and low-emissions technology projects in manufacturing, building and local government. They boast benefits including improved energy productivity, faster technological advances and greater acceptance of green projects in the finance sector. We have also seen improvements in technology design, supply-chain depth, construction practices, operating skills, financing structure and market-risk appetite.
There is little doubt that the CEFC is supporting 21st century jobs in rural and regional Australia and building Australia's clean energy supply-chain capability. If allowed to continue to do their good work, the CEFC has the capacity to make investments that would make up half of our five per cent emissions target by 2020, and in doing so they would return a profit to the taxpayer of $2.40 per tonne of abatement.
Really, it is not surprising that the Australian Financial Review recently said:
Getting rid of the CEFC makes sense to few business people who have observed its commercial success in its short existence.
In its submission to the Clean Energy Finance Corporation inquiry, the Responsible Investment Association Australia said:
The CEFC co-investment model is a prudent and cost effective way to allocate limited public funds to leverage private investment to do the heavy lifting in the investment into a low carbon transition. A testament to this model is that global trend by many countries to put in place such public finance institutions to help catalyse investment flows into low carbon assets, including the UK Green Investment Bank, Germany's KfW, China's Development Bank, the US Department of Environment's Loan Program Office, the New York Green Bank, California Clean Energy Fund, European Investment Bank and many of the multilateral development banks such as the Asian Development Bank.
The truth is that co-financing is a tested and proven model to encourage private sector investment, reduce emissions and provide a return to taxpayers.
The CEFC is just one of 14 such co-investment schemes across the globe. Its work is overseen by chair and respected businesswoman Jillian Broadbent, who has a distinguished career in the banking sector and was one of the longest-serving members of the Reserve Bank Board. In her evidence to the recent inquiry, Ms Broadbent presented a compelling overview of the incredible achievements of the CEFC.
She was also clear when asked about the government's proposed Direct Action scheme, which will provide grants to big polluters. She said:
I don't think you have to make a grant to get that emissions reduction. Our experience is you're better to make an investment to get the emissions reduction.
Of course, this opinion is entirely in keeping with the opinions of climate scientists, economists and policymakers right around the world.
It baffles the mind that the coalition would choose to waste more than a billion dollars on their Direct Action plan, which has been widely and vigorously criticised by experts, rather than maintain a body which has proven itself not only to reduce emissions but also to bolster the budget bottom line.
Currently, I serve as the Chair of the Senate Environment and Communications References Committee, which was recently charged with considering the impacts of the government's Direct Action policy. The inquiry received more than 100 submissions from across the country, and the overwhelming message we got was that the Direct Action Plan is simply not up to the task; it is expensive, is riddled with design problems and will not come close to meeting Australia's carbon emission reduction targets. In fact, the committee did not hear evidence from one single witness who was willing to support Direct Action as an effective or appropriate stand-alone solution to address climate change.
The greatest failing of Direct Action is that it throws away the widely accepted market based model of 'polluter pays', in favour of an under-resourced 'taxpayer pays the polluter' plan. Direct action is nothing but a billion-dollar slush fund for big polluters. But, worse than that, it's virtually a foregone conclusion that it will not meet its emission reduction targets. In fact, we heard last week that Direct Action may fall as much as 300 million tonnes short of Australia's 2020 emissions reduction goal, according to modelling by RepuTex. To meet the 2020 target, Australia needs to cut emissions by 421 million tonnes of carbon dioxide equivalent between 2015 and the end of the decade. However, the Emissions Reductions Fund is likely to buy just 30 million to 120 million tonnes of emissions, leaving a shortfall of about 70 per cent of the abatement challenge. Despite what those opposite say about believing in climate change, it is hard to believe them when they are systematically dismantling all the tools we have at our disposal to tackle it.
Last year, China's second-largest province, Guangdong, which has a population of around 100 million, set up the world's second-largest emissions trading scheme. In fact, 99 countries have pledged to reduce or limit emissions by 2020. This covers 80 per cent of global emissions and includes all major emitters.
The truth is that the global economy has embraced the renewable energy industry. Last year wind power grew by 25 per cent worldwide and solar power by 30 per cent. On May 11, Germany met 74 per cent of its electricity demand with renewable energy. Only Australia is moving backward.
The government would have you believe that just because they won a majority in the other place that gives them carte blanche to do whatever they choose. Given the chance, those opposite have proven they will gladly dispose of all the annoying dissenting voices, particularly those who provide rational, reasoned evidence of their failed policies. They tell us again and again that it is the Senate's responsibility to rubber stamp whatever nonsense is placed before us, and to suggest otherwise is somehow antidemocratic. Those opposite seem to hold the curious idea that being in government makes it somehow illegal or unethical for anyone to oppose them. They seem to say that no-one in this place has the right to maintain opposition to their policies, regardless of how ludicrous, counterproductive and ideologically driven they may be.
What the government did achieve was a mandate to introduce their policies and present the arguments for their passage through this place. And it is our democratic responsibility to stand up against regressive ham-fisted policies like this one. We in Labor will not 'get out of the way'—as Mr Hockey so arrogantly put it yesterday—and acquiesce to the dishonest and dangerously antiscientific policy regime that the government is waging. We also have a responsibility to the Australian people to fight as hard as we can for the very best policy outcomes for all of us, not just for the rich and entitled. So, no, a win at the election does not mean we will simply wave through bad policy. We will stand strong and we will not be bullied into supporting a bill that will be detrimental to the budgetary bottom line, our nation and the planet.
I rise to speak on this debate on the Clean Energy Finance Corporation (Abolition) Bill 2013. This is the second time that I have spoken on this bill and I will not be supporting it. This time I hope that government senators and members listen to this debate and consider the benefits of the Clean Energy Finance Corporation. I hope that those opposite can put aside their ideological opposition to government co-financing and see the potential for the Clean Energy Finance Corporation.
We have a bipartisan emissions reduction target in this country. We are agreed that we must reduce Australia's emissions by at least five per cent of 2000 levels by 2020. Clearly, we are not agreed on the path to achieve that target. On this side, we want to stimulate private sector investment and use market-based mechanisms both to reward innovative businesses and to send a price signal. This argument is based on many rigorous economic assessments conducted by Australian and international professionals on how to achieve emissions reduction at the least cost for our economy. At this stage, the Australian people are unsure what those opposite believe. On one hand, there is the fierce belief in the market over government control, such as their decisions around the car industry and SPC Ardmona; yet, on climate change and the Cadbury chocolate factory in Hobart, they want to throw out the market and revert to their favourite pastime of populist politics.
The Clean Energy Finance Corporation was established to assist companies and organisations finance clean energy technology and energy efficiency measures through commercial loans, not through government grants. The Clean Energy Finance Corporation 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 around a year ago; an achievement that we will no doubt be hearing a lot about today and into the future, as we grapple with the best way for government to set policies and implement programs to reduce carbon emissions.
How can we preserve jobs, preserve growth and prevent a carbon shock in future years? I participated in the Senate Environment and Communications Legislation Committee's inquiry into this bill and the suite of carbon price repeal bills late last year. It was definitely a quick inquiry. It was not fair on the witnesses or on the organisations and individuals who sought to make submissions and it was not fair on the Australian people that it was done so quickly. The new coalition government referred the suite of repeal bills to the committee to examine the costs of pricing carbon on households and businesses. 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 new 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 reduction beyond 2020, with targets for reductions at 2030 and 2050. We want to ensure the transition is a smooth one, but we acknowledge 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 the rollout of clean energy in Australia. Labor established the Clean Energy Finance Corporation to facilitate finance for renewable and clean energy technology investments.
I note the depths of the submission that the CEFC provided to the Senate inquiry, as well as the comprehensive further updates the parliament and the people of Australia have received over the course of this year. I thank the staff at the CEFC for their efforts in providing this detailed information. I encourage all members and senators to read their great work. The submission covered 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 of how the corporation is investing taxpayer dollars to reduce emissions and to turn a profit.
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 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, conducts comprehensive risk assessments and financial evaluations of projects. This allows the CEFC to demonstrate to the private sector its confidence in a project. As the CEFC staff members are drawn from the private sector, they utilise their networks and contacts to build confidence in clean energy projects.
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 our local communities. Many industries are benefiting from the CEFC financing, including agribusiness, property, manufacturing, utilities and local government. I commend Dr Jillian Broadbent, the chair, and Mr Oliver Yates, the CEO, together with their team, for 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 in energy efficient technology. Last year's hearing in particular was a difficult forum where, despite the best explanations from the CEFC officials, some Liberal and National senators just could not comprehend the purpose of the CEFC.
The officials had to spend most of the hearing explaining that private investors need the co-ordinator 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. The Liberal and National senators have been unable to see past their free-market blinkers and appreciate the role the CEFC plays in facilitating investment in renewable energy that would otherwise be missed by normal commercial banks. The CEFC does not engage in risky loans; it is helping to develop a relatively new clean energy investment sector.
Turning to evidence provided by the business and investor community, I note the summary from Mr Fabian from the Investor Group on Climate Change on the need for the CEFC:
Investors do not turn up for a 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 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 to 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 from education, from health and from programs for families. The Prime Minister has made it clear that the Emissions Reduction Fund will not receive the additional funds we all know it will need to meet the five per cent reduction. 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 will read one for the Leader of the Government in the Senate, as I imagine he has firsthand knowledge of this building. 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 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. Dr 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.
Crowding in is a fascinating concept—where there is a market failure and government intervention and investment is supporting and encouraging private sector investment rather than discouraging it.
I turn to the Emissions Reduction Fund. Would this crowd out or crowd in investment? Would it encourage investment or is it simply doling out grants? Almost every investment by the corporation has included co-financiers encompassing many of Australia's major financial commercial entities. Would these entities, the big banks, investment funds et cetera, be interested in supporting a government grants program? Indeed, would they even be asked? The supposed party of the market appears to be doing its best to exclude the market from this vital area of investment and policy into the future. As I outlined earlier, the CEFC has received proposals from over 170 proponents seeking finance of $15 billion to roll out clean energy technology and create jobs in Australia. It is clear that demand for the CEFC from the market remains high. The question is: why abolish it, is it about risk?
Claims have been made that the CEFC invests taxpayer's money in 'high-risk' ventures. Treasurer Hockey claimed in his second reading speech last year that the CEFC was investing in high-risk ventures. I am sure the Treasurer is actually aware of the Australian government's own direction to the corporation, which clearly states that the CEFC must invest across the spectrum of clean energy technologies. It must in aggregate have an acceptable but not excessive level of risk relative to the sector. They are not allowed to venture into the high risk arena, so they have not. Its portfolio is mostly in relatively low-risk, loan-based transactions and as at the end of last year none of Low Carbon Australia's loans were in default after three years of operation.
In addition, to protect taxpayers into the future the CEFC has rigorous procedures in place. If senators have a quick look at the experience of CEFC staff and board members it is clear this is a team of experienced people who have operated credit and risk areas in traditional banks. The CEFC knows finance and they know risk. Further, not all projects make it to financing, with numerous checks by staff and the board ensuring only the best investments are made. This is probably a significant reason why the CEFC is set to yield around seven per cent and abate emissions at a profit to government of $2.40 per tonne abated. It is a sophisticated institution, and it is embarrassing that the current Treasurer, Mr Hockey, has not bothered to move beyond the rhetoric—particularly when he is all too happy to dole out cash to the second-biggest food manufacturer in the world. Sure the tourism centre at Cadbury will create a few jobs. But if taxpayer resources are so precious, as our Treasurer claims, then surely they should be spent on co-financing clean energy projects before being used to reward lobbyists.
The embarrassment does not stop with the Treasurer. Soon after the election, in seeking to beat his chest and show that he could be an anti-environment minister for the environment, Mr Hunt said that the CEFC was a 'giant green hedge fund' and demanded that the institution stop issuing finance. But I would take on board the advice of the CEFC and Mr Fabian from the Investor Group on Climate Change on the role and purpose of the corporation. Firstly, the CEFC claims that it is not in any way acting like a hedge fund; of its $536 million of investments, there are no dollars invested in hedging, there are no dollars invested in derivatives and there are no dollars invested in guarantees. Mr Fabian noted at the hearing that the business model of the CEFC is not an investment banking business model. It is not there to maximise the returns for the broker. It is this distinction—that a finance corporation can exist to seek to grow a market rather than simply grow profits—that appears to be the real issue for those opposite.
A further slight on the CEFC perpetrated by those opposite is that it is undercutting the market by providing concessional loans. This is despite it being established that there is insufficient private sector appetite for engaging in the types of finance provided by the CEFC, and the basic fact that many private sector providers also offer discount rates. The facts are that the CEFC has only provided discounts amounting to $14 million, or just around 2.5 per cent of the total funds that it has lent. This sort of proportion seems very low and indicates that the rate of a loan has not been an issue for the clean energy industry; it is the availability of finance that is the issue. Plainly, the CEFC cannot be accused of undercutting the market. The facts are clear.
A final attack on the CEFC that I will use my time to debate is the notion that the CEFC does not produce any clean energy. The argument goes: there is a renewable energy target of 20 per cent, so why do we need to spend $10 billion of borrowed money? Basic maths shows that 20 per cent is not 100 per cent. Also, the renewable energy target is quite narrowly defined, so cleaner energies, such as gas, quite rightly do not comply. Therefore, there is a strong potential for the CEFC to finance renewable and cleaner energy outside of the RET.
The CEFC provided examples for the inquiry of clean energy investments which are not RET-supported. Interestingly, these investments seek to lower energy costs for rural and regional users. Maybe those opposite just cannot stomach that co-financing can be used to achieve an environmental policy objective. Depending on this cabinet's mood, it is fine for other industries and for other sectors of our economy and our society, but it is wasteful spending if it is about protecting our environment and setting our economy up for a low-carbon future.
It is this sort of lack of leadership that is why they have had the quickest fall from grace of any government in living memory. Their budget stinks. Their environment policies stink. And their lack of a coherent industry policy stinks. The Australian people have had enough of their attitude of running government like they are still in opposition.
Labor will fight tooth and nail to keep the Clean Energy Finance Corporation. We know it is not a 'great green hedge fund experimenting in all sorts of unviable projects', and we need those coalition senators who appreciate that to stand up and be counted, as we saw with the deficit levy debate where two coalition senators opposed the levy. Regardless that they opposed the levy for different reasons, they spoke their mind and took a chance. Senators who understand and appreciate the benefits of the Clean Energy Finance Corporation need to come out of their offices today and be heard. They need to do so because it is one of the right policy tools for tackling climate change. The free marketeers over there must be hating the thought of that great big slush fund, the Emissions Reduction Fund, doling out cash in an inefficient, ineffective manner, wasting taxpayers' dollars that could be used to pay for fighter jets or tax cuts.
The CEFC is allowing Australia to get chief investment officers of renewable and clean energy projects and bank officials around the table talking about the deals they can do. Abolishing the CEFC comes at a cost to the taxpayer. It is reckless and irresponsible to remove this tool from our policy suite in tackling climate change. I know that it is foggy outside today, but I urge coalition senators to get their heads out of the clouds on climate change and vote no on this legislation.
I am very pleased to be speaking on the Clean Energy Finance Corporation (Abolition) Bill 2013 [No. 2] again. We are standing here today at a tipping point in the politics of global warming. It is long overdue and in fact it may well be arriving far too late, but at least it is here.
The global climate science community is watching the fingerprints of another El Nino cycle forming across the Pacific, and Australia just recorded its warmest year since instrumental records began. What happens if we swing back into another El Nino is really anybody's guess. Global warming is no longer a matter of theoretical conjecture for the future; it is a matter of life and death today. And the signs are everywhere.
I want to just pick three different examples of the various ways in which this issue touches everyone. The Center for Climate and Security is a non-profit policy institute in the United States and it has on its distinguished board mainly retired military and national security professionals from the United States. They do excellent work on the impacts of global warming on US security policy. I will just read into the record one representative quote. CCS Advisory Board member Rear Admiral David W Titley, retired from the United States Navy, points out:
Compared to many other threats the Department of Defense faces, we know a lot about both the timing and the magnitude of climate change. As today’s testimonies make clear—the time for action is now.
The United States military might view global warming through the prism of the security challenge and of how they need to change US military posture—and we might have a very interesting conversation about the degree to which Australian military doctrine lags probably a decade behind some of the thinking going on in the United States—but, nonetheless, this body is not, you would have thought, a likely candidate for being part of the global socialist conspiracy that some in this country seem to believe that global warming is.
From the worlds of commerce and finance, a correspondent with Senator Milne this week who works in currency markets in the city of London wrote:
Where a conservative government would seek to repeal an institution that is, from my research, successful in acting as a commercial entity and turning a profit means it can only be a pure anti-climate change act.
We might pause to consider those words for a moment. Again, it is not exactly someone coming from the margins.
The third example is from local government. I, Senator Rachel Siewert from WA and a number of other WA MPs from across the political spectrum breakfasted yesterday with mayors, CEOs, councillors and staff from the Western Australian local government sector and I had the good fortune to sit and spend a bit of time with Mayor Tracey Roberts from the city of Wanneroo. I had not really put two and two together that one of the fastest growing areas of local government expenditure is adapting to coastal erosion as infrastructure, coastal housing, parks, roads and power conduits are eaten away by coastal erosion.
These are three indicators from across the world and across very different areas of our community that show just how deeply entrenched and ongoing this problem is. What is bearing down on us is utterly forbidding. I refer to the most recent State of Our Cities report before the government abolished the Major Cities Unit that was doing such useful work on documenting Australian cities. We are one of the most urbanised societies in the world and must make real attempts to mitigate and adapt to climate change, amongst other things. The last State of Our Cities report before the Abbott government bowled that entity over said that heat deaths would double by 2050 in all Australian cities and quadruple in Perth and Brisbane. That is people within our lifetime dying as a result of the increased heat strokes and heat impacts from heatwaves in Australian cities. That is something we could do something about, but of course this government seems determined to blindfold itself from the challenges bearing down on us. We appear to be now looking not at a metre sea level rise by the end of this century but potentially three metres of unavoidable sea level rise if the West Antarctic ice sheet continues to collapse. That does not happen necessarily within our lifetimes but it is a relentless accelerating problem that we are leaving for our kids and grandkids to content with. I do not imagine they would thank this present generation for walking them into that future with our eyes open even though we knew that is what we were committing them to. I believe now the evidence is sufficiently strong that we can say with confidence that we live in the age of dangerous climate change, and the choice that we face is whether to press over the edge and commit ourselves to catastrophic climate change.
Renewable energy obviously is one important part of the answer. During the brief, rapidly shrinking window of agency that we have to prevent the very worst impacts where things are basically irreversible and nothing we do really matters and it is simply a question of bracing for impact, renewable energy is obviously a very big part of the answer. Particularly in a fossil and carbon intensive economy like Australia's, it helps in decoupling economic development from growth in fossil fuel combustion. Renewable energy as a relatively new part of the energy sector needs assistance. It needs assistance in research and development, in industry development and in education and training, and we should not treat that as though it is some kind of aberration from the economic development of industrialised economies.
The coal industry was built entirely by taxpayer endeavour. In my home state the Swan River colony effectively took one of its great growth spurts on the construction of the East Perth power station, of course at taxpayer expense. How else was that economy going to develop? Similarly the gas industry decades later benefited—in the public interest, you can argue, if you are setting aside climate change issues—from billions, not millions, of dollars of taxpayers' investment in the development of the Burrup and the Dampier to Bunbury natural gas pipeline. Again it was done for the purposes of state economic development with taxpayers' expense. Now the very same players and the same industries have benefited from such largess, you could argue in the public interest, are determined to slam the door on the renewable energy sector, condemning subsidies and assistance quite clearly to prevent a fast-moving competitor from eating up their market share.
Of course renewable energy needs industry development assistance while it gets on its feet. That is how the Chinese government built the largest PV fabrication plants in the world. That is how the German government, with the use of a feed-in tariff legislated and negotiated by the German Greens, built a photovoltaics industry out of nothing. You put the supports in the place and when the industry matures you take that supports away, and that is precisely what we are seeing occur in Europe now that the industry is mature. Australia is benefiting from that industrial development, much of it led by Australian research and ingenuity at the University of New South Wales and elsewhere. Those people then distributed that through solar PV companies in China, Europe and North America, leading to some of the greatest innovations in the world, and Australians then gets the benefit of that in the form of very low cost photovoltaics.
Regarding the form of industry assistance that has come about, let us pay some bipartisan credit here. It was John Howard's government that introduced the Renewable Energy Target. It was only two per cent at the time but it did get the industry on its feet. It was the Rudd government, with the legislative support of the Australian Greens, that expanded that target out to 20 per cent. That is effectively bootstrapping an industry into existence. The Renewable Energy Target is one of the most important industry supports to mature and diversify the renewable energy sector and it is extraordinary that the Australian government has chosen to install Mr Dick Warburton, who is under something of a cloud as a result of his involvement—
Not a single person on the panel that has been tasked with reviewing the Renewable Energy Target has the faintest amount of experience in the renewable energy sector. In fact, the government has installed a climate change denier to lead that review.
The other elements of the policy obviously include the Clean Energy Finance Corporation, the bill to abolish which we are debating today, which makes a positive return for every tonne of carbon that it abates. It creates jobs and it returns a positive benefit of $2.40 a tonne to taxpayer. The surplus it has generated is then folded back into the Australian Renewable Energy Agency, ARENA, which does the research and development, the commercialisation, the early work, some of the risk capital in bringing the next generation of renewable energy technology to market. This is precisely what this government, led by someone who thinks climate change is absolute crap, is proposing to bowl over.
It is going to cost the taxpayers money. And you are screaming all over the landscape about a budget emergency, yet you are proposing to knock the Clean Energy Finance Corporation over. In case you have not noticed, it generates a positive return for the taxpayer while creating Australian jobs and bringing forward the next generation of renewable energy plants for deployment in Australia. It is absolutely unbelievable. No wonder none of you can make eye contact in here this morning. I note also a significant lack of coalition—Liberal or National—speakers on this bill. That is because you know it is indefensible.
In the pipeline, up for grabs by the Clean Energy Finance Corporation, is $10.7 billion in total project value, two-thirds of it private sector capital. There is $3.7 billion of investment by the CEFC in the pipeline. What that looks like in my home state of WA is $460 million invested by the CEFC, which has a positive return to the taxpayer, leveraging just over $1 billion in private sector finance. What on earth is wrong with that? I am a little sick of being accused of being the socialist by these so-called capitalists on the other side of the chamber. They somehow think that bringing about a market mechanism that takes $6 billion or $7 billion a year from the heaviest polluters, the heaviest and most carbon-intensive quarters of industry, and transfers it into clean energy at a positive return to the taxpayer is part of some gargantuan left-wing conspiracy.
Senator Johnston interjecting—
Speak up if you like, Senator Johnston. Why don't you put yourself on the speakers list and defend this obscene policy you are bringing forward. I do not think you will. I would also like to add my commendation of the CEFC Chair, Jillian Broadbent, and the CEO, Oliver Yates, for standing up to the absurd bullying that has been levelled at them over the last 12 months. It started when this government was in opposition and said, 'At some point we're going to bowl you over, so we want you to stop investing.' Thank goodness Ms Broadbent and Mr Yates had the common sense to say, 'Our legislation says we invest $2 billion a year, and that's exactly what we're going to do.'
In Western Australia there are direct benefits to companies like Carnegie Wave Energy. This is exactly the kind of innovative technology we are talking about. It is based in my home town of North Fremantle. It is a plant that operates 24/7 on wave energy. It can generate clean electricity from the limitless power of the oceans, or it can be switched across to desalinate water. Their first commercial client is the Australian Navy—something I would have thought Senator Johnston would be a bit interested in. That is precisely the kind of industry and investment we should be encouraging here in Australia. Instead we are getting precisely the opposite: you are trying to cut those people off at the knees.
This is the tipping point that I referred to, and this is why I think what is about to happen in the Senate today is so powerful. The tipping point in climate politics is that you have lost the argument. We saw that in Western Australia, where Liberal and National senators could barely show their face in public. They are still feebly murmuring the same tired talking points about abolishing the carbon tax. Senator Back, I notice your furrowed brow. You are the one honourable exception—ironically enough, not somebody who was up for re-election. Senator Back did front an energy panel at the Perth Town Hall. But at virtually every other public meeting I attended the Liberals were completely invisible—because what you are up to is indefensible. Your vote fell by another five per cent. The Australian Greens, campaigning almost solely on a clean energy platform of saving the CEFC, recorded our highest ever vote. So now let's talk about just how confident you are that 'Whyalla is about to be wiped off the map' and 'climate change is absolute crap'!
I think what we have seen is a very powerful sea change in the Australian community. Maybe people believed what they were told about the so-called toxic carbon tax over the last couple of years and it has worn increasingly hollow as people realise that your Prime Minister was simply making it up. In Western Australia, because the state government, similar to its federal colleagues, has basically abandoned the policy space and is simply locked in behind the coal and gas industry, the Australian Greens engaged an independent consultant, Sustainable Energy Now, to conduct a study on what 100 per cent renewable energy for the south-west grid would look like. We called it Energy 2029. Since we released it at the end of last year, we have had to revise the figures because the operating costs of large-scale renewable energy have come down so rapidly. What it shows is that the cost of 'business as usual' is more expensive than the cost of transitioning to renewable energy.
It might sound a little unusual that that would be the case; but, when you think about it, by the end of that transition to renewable energy, you have eliminated your fuel bill for all time. It is capital intensive upfront, it is vastly more labour-intensive than old fossil fuel fired power stations; but, once that transition is completed, you have eliminated the coal and gas bill, you have eliminated your fuel bill for all time, and there are only operating and maintenance expenses from there on. In one year, the average cost of electricity generation for onshore wind power fell by 18 per cent. The cost of tracking solar PV fell by 20 to 30 per cent depending on the energy market. The cost of concentrating solar power—that is, solar thermal, the next generation of better than base load large scale solar plants—fell by anywhere between eight and 27 per cent depending on the technology type and the energy market. Renewables overall saw levelised cost of electricity reductions of about 20 per cent.
And that, I think, is the key to this debate. People like me are scratching their heads wondering why a party of so-called economic rationalists would bowl over an entity like the CEFC, which is making a positive return and contributing more than its fair share to the cost of driving greenhouse gas emissions down. It is not because renewable energy cannot do the job, it is not because the clean energy sector is not effective enough. It is because it is succeeding a little too well—and it has deeply rattled your financial backers in the Liberal and National parties, who receive so much money every year. You scoff, Senator Johnston. Why don't you read into Hansard what the coal and gas industry spend propping up the Liberal and National parties every year—and then the position and the picture becomes much more clear. The renewable energy industry is doing a little bit too well, and it is in the process of stranding the assets of your coal and gas backers. That is what is actually going on here. You are doing everything you can, using your position of political incumbency, to nobble a competitor. It is no more simple or complex than that.
Imagine, just for a moment, that you are standing in the wheelhouse of the Titanic. A dirty grey iceberg has come looming out of the fog and the ship's navigators and engineers are screaming at those on the bridge to turn the wheel before impact. Imagine how it would feel to elect a captain who would confidently declare the iceberg to be absolute crap, sack the navigators, smear the reputations of the engineers and order that the ship immediately increase speed. In the fog of statistical uncertainty and the unpredictability of the weather at the best of times, we do not know how far ahead the iceberg is. Some in the climate science community think we might have hit it already. We do not have the luxury of knowing; we just have to turn the ship, if it is still possible, or, at the very least, open our eyes and brace for impact.
This is the political tipping point that I am referring to. Prime Minister Abbott, if you really believe that this is absolute crap and that the Clean Energy Act is going to wipe Whyalla off the map, how is that working out? If you really believe that renewable energy cannot deliver, then here is the double dissolution election trigger you have been waiting for. The world is starting to move—in fact, parts of the world are well ahead of Australia. We are lagging and the hour is late. So, if it is an election you want, then bring it on.
My remarks will be relatively brief. I want to comment first on the process by which the Clean Energy Finance Corporation (Abolition) Bill 2013 (No. 2) was brought on, which was a resolution of the Senate that I supported. I want to put on the record that I supported that resolution with some reluctance, because I am concerned about the business of the Senate being taken out of the hands of the government. But, ultimately, it is the will of the Senate to determine how the business is determined.
I do understand the urgency that Senator Milne placed on this piece of legislation, and I respect that. I did vote for the resolution for this bill to be given precedence over all other bills. I want to say that there ought to be a heavy onus before you vote in such circumstances to take away the business of the Senate from the government of the day. I thought that, on balance, it was justified, but it was still a close call in my view as to whether it should have been done at this time.
Let us go to the legislation at hand and the Clean Energy Finance Corporation. I previously spoke on this back on 4 December 2013, so I do not want to unnecessarily restate what I have already said, but there have been some developments in respect of that. I want to set out that, rather than attacking the government in respect of this, I want to put forward a different perspective. I am taking a conservative view in respect of this piece of legislation, and the conservative view—in the small 'c' conservative way—is that we ought not to abolish the Clean Energy Finance Corporation for a number of reasons.
Firstly, it is set up to provide a commercial rate of return. Secondly, in relation to the government's position that this is a piece of legislation that is not needed because the market will sort it out, there are precedents here and elsewhere that show that, where there is evidence of the markets not working, of market failure or of market dysfunction, there is a role for government to play to provide a finance mechanism. Back in the 1960s and 1970s, until the early 1980s, we had the Commonwealth Development Bank that had a very valuable role for regional Australia in helping rural businesses obtain finance and succeed where they could not get finance through the commercial banking sector. So there is a precedent—a sensible precedent—in terms of having this sort of mechanism to provide finance for the sector.
Thirdly, there is the issue of the state of play of carbon bills and carbon legislation. I did not vote for the carbon tax and I raised a number of concerns, not least because it was a reverse mandate of the former government not to introduce it, given the promises made my former Prime Minister Gillard. Notwithstanding that, there is a bipartisan commitment, which was given at the last election, that there ought to be a five per cent reduction on greenhouse gases by 2020 based on 2000 levels. That is an important commitment. It is basically a bipartisan commitment where both sides—the major parties—are saying that we ought to be reducing our greenhouse gases, not increasing them, and tackling it in an effective way. There is a debate as to whether that five per cent target is adequate, and many scientists and commentators are saying that we need to go further in relation to that. Notwithstanding that, there is that commitment that the government, when in opposition, made of a five per cent reduction.
The government also made a commitment not just to abolish the Clean Energy Finance Corporation but also to maintain ARENA, which is the Australian Renewable Energy Agency. That was a commitment that was broken in the budget. I do not want to talk about which commitments were broken and which were not kept, but I think we need to look at the overall issue of climate policy in this country. I think that getting rid of ARENA is a retrograde step for a number of reasons. We have huge reserves of geothermal energy in my home state of South Australia. Geothermal energy can provide a real alternative to coal-fired power stations. Because of its nature, if you can tap the technology and overcome the technical difficulties there are at the moment in this sector, you can have 24-7 power. Between them, each of those geothermal pools can last 20 to 30 years, and it provides that stable, long-term power. I think that planning to get rid of ARENA, the Australian Renewable Energy Agency, is a backwards step and it must be considered in the context of this piece of legislation in relation to the Clean Energy Finance Corporation. That is why I am taking a conservative approach to say that it is very unwise to be looking at abolishing the CEFC.
I know I have had many arguments with my colleagues from the Greens about the whole issue of wind energy and its impact on communities, and one of the issues that I have raised in respect of wind energy—leaving aside the issues of community impact—is that the economics of wind energy concern me for a number of reasons. Firstly, it is not reliable. It is intermittent in its nature and, on those very hot days when energy demand is at its highest, a number of wind turbines have to be shut down because of a number of operational issues, including the risk of being a fire hazard. So I have an issue with the extent of wind energy we have in this country, particularly in my home state of South Australia where I believe the Rann and now Weatherill governments have gone down a path of over-reliance on wind energy in the renewable energy basket, because of the effects it can have on electricity prices, the distortion it can cause on the merit order of electricity pricing and also on the investment in other forms of renewable energy. I think it is a bad move and I think there is a lot of scope for, effectively, baseload renewables in terms of solar thermal and even PV solar being much more reliable than wind energy—without the community concerns and impacts that have arisen in relation to the proliferation of wind energy that we have.
That is not an argument to get rid of the CEFC; in fact, it is an argument to say that we should keep it to ensure that we can build up other forms of renewable energy in the energy basket. These are the sorts of issues we ought to be looking at. I believe the CEFC has played a valuable role in ensuring that renewable, cleaner energy is given a chance to be financed and to provide a commercial rate of return. I do not think it is inconsistent with the aims of the CEFC for the government to provide a directive to express its concerns in relation to wind energy projects, given the concerns that have been expressed in terms of the economics of wind and also the real potential that solar thermal and PV solar have, as well as other forms of renewable energy, such as tidal power, to fill the need for greater levels of cleaner energy. The CEFC needs to work in conjunction with ARENA, the Renewable Energy Agency, in some projects and the finance that that can provide. The two can work hand in hand. Abolishing ARENA, as proposed by the government, creates even greater problems for the CEFC. I think the CEFC does play a valuable role in ensuring that we meet that bipartisan target of a minimum five per cent reduction in greenhouse gases on 2000 levels by 2020.
I think that we need to take a conservative, cautious and sensible approach to this issue. We do not have enough detail about the Direct Action Plan—and I am not implacably opposed to Direct Action. I think with sufficient modification it can be an efficient way of reducing greenhouse gases, but not in the form in which it has been presented. We need to listen to sensible think tanks in relation to this. Before we go further on the Direct Action Plan, we need to listen to people such as the Carbon Market Institute, who, I think, have some sensible, practical ideas to improve Direct Action in a very substantial and appreciable way. But the details are scant in respect of that—and it is not a criticism of Minister Hunt who, I believe, genuinely wants to do the right thing by the environment and genuinely wants to see that target of five per cent, as conservative as it is, met by this government. But I think it is important that we achieve that in a sensible way.
I believe that to abolish the CEFC, the Clean Energy Finance Corporation, at this time would be most unwise. From what I have seen of its activities, its charter and the way that it has operated, it has done many good things in terms of the sector. So I think it is unwise. I think coalition supporters need to understand that there is bipartisan commitment to reduce greenhouse gas, and there also was a commitment by the coalition to keep ARENA, which itself could play a valuable role in unlocking the potential of geothermal energy, of which my home state of South Australia has enormous reserves. To seek to abolish ARENA—despite the coalition saying the contrary, and I am not going to beat up on the government in relation to that; I do not think that would be useful at this point—and to not have the details that we require in relation to Direct Action, and to not make it unambiguously clear that those targets will be met in terms of what the government is proposing, and then to seek to get rid of the Clean Energy Finance Corporation as part of that mix would be, in my view, very unwise and reckless. From my point of view, the government has not made the case to abolish the Clean Energy Finance Corporation.
I want to make it clear that I want to engage with the government and my crossbench colleagues constructively—with my colleagues in the Greens, with Victorian DLP Senator John Madigan and the incoming senators from the Palmer United Party, the Australian Motoring Enthusiast Party, the Liberal Democrats Senator-elect David Leyonhjelm and Family First's Bob Day—to get a good public policy result where we actually do something good for the environment and tackle the issue of unnecessarily high electricity prices, which are not simply due to the carbon tax. I think the research, the findings and the evidence show that only about one-third of our electricity price rises are due to the carbon tax and that about two-thirds of it is due to unnecessarily high network fees. This morning I was on radio, on the Leon Byner show in South Australia—which you are familiar with, Mr Acting Deputy President Fawcett—and the Australian Energy Regulator was explaining what their powers are and looking at the whole issue of network charges.
I think if we are serious about reducing unnecessary burdens on electricity prices we need to give more power back to the AER and reduce network spending proposals. We need to deal with the ability of the Australian Energy Regulator to conduct detailed optimisation analyses of electricity networks' asset bases to uncover instances of excessive or premature spending—and those powers do not exist to the extent that they ought to. If we give the AER more powers, and if we shake up the national electricity market rules, I believe we can give real and significant benefits to consumers in terms of lower electricity prices and to businesses, large and small, who are paying too high a price for electricity in this country.
If we can relieve that burden for those businesses, it gives us more scope to do good things when it comes to reducing greenhouse gases. If you can ameliorate the price effects of some of these antiquated rules that allow power networks to—I believe in some cases—price gouge consumers, then it gives you more leeway and scope to do more in terms of reducing greenhouse gases, given that renewable energy is generally more expensive. So that is where I am coming from in relation to this. I believe the CEFC does still have a useful and valuable role to play. I cannot support the repeal of it. I want to make it clear to the government that I actually want to see lower electricity prices in this country, but at the same time I believe you can do some sensible work in terms of being bolder in terms of reducing greenhouse gases. I am taking a conservative, cautious approach. That is why I cannot support this legislation.
Firstly let me thank all senators who have contributed to this debate on the Clean Energy Finance Corporation (Abolition) Bill 2013 [No. 2]. Let me also say that the Australian people have already voted on this legislation. Indeed, the government took a very clear policy to the last election, which was to abolish the carbon tax and to abolish the Clean Energy Finance Corporation. The judgement of the Australian people is very clear. Labor and the Greens are about to ignore the government's mandate in relation to this for the second time, in defiance of the Australian people and the judgement they made at the last election.
Fundamentally, we do not believe it is appropriate for the government to continue to borrow in order to underwrite a $10 billion taxpayer funded bank which cherry picks investments in direct competition to the private sector. This is really what goes to the crux of the issue. Australia does not have a good history when it comes to running government owned banks. I suspect Senator Xenophon would be very well aware—indeed you, Mr Acting Deputy President Fawcett, would be very well aware—of the history of the great state of South Australia when it comes to the issues that developed with government owned banks. Some senators in this debate have again asserted that this Clean Energy Finance Corporation, this government owned bank, is delivering a commercial rate of return. To make that assertion less than a year after this government bank has started to write loans is very heroic indeed. It reminds me of the former Treasurer Wayne Swan in May 2012 asserting that he had delivered a surplus. Of course we know what happened to that. You cannot make judgements and you cannot make assertions about what an organisation like the Clean Energy Finance Corporation will deliver in terms of a rate of return until you have come to the ultimate conclusion on the loans they are currently writing.
Fundamentally, we do not think this is an area government should be involved in. Fundamentally, we do not think it is appropriate, given our fiscally challenging circumstances, that we continue to borrow money in order to underwrite this sort of activity. We do have a superior policy when it comes to achieving the emissions reduction target of five per cent by 2020, which we will continue to implement. But, consistent with the judgements made by the Australian people at the last election, we urge the Senate to support this bill. I can flag that the government intends to reintroduce a bill to abolish the CEFC next week, ahead of the new Senate taking effect from 1 July 2014, if this particular bill should be unsuccessful.