Australia’s so-called green bank, the Clean Energy Finance Corporation (CEFC), has warned that the conservative Liberal-National government that plans to shut it down could cost the federal budget hundreds of millions of dollars.
The previous Labor government set up the CEFC as part of the carbon price laws, to invest up to $10 billion in renewable energy projects and to help attract private sector investment.
While it invests government funds its activities are designed to be commercial and it returns profits to the government.
The Liberal-National government wants to shut it down as part of legislation it is trying to get through parliament to repeal Australia’s carbon price laws.
However, the Labor opposition and the Australian Greens Party, which hold the balance of power in the upper house Senate, have vowed to block the move.
ABC News reports CEFC chair Jillian Broadbent said the fund had so far invested $500 million, which would help cut greenhouse gas emissions.
She told a Senate hearing the fund’s contribution could be very significant if it was allowed to invest the full $10 billion, while at the same time returning $200 million a year to government coffers.
“This would contribute more than 50 per cent of the emissions abatement that’s required for the bipartisan 2020 target,” she said.
“And it would be done so with a $200 million a year return to the taxpayer after having covered the operating costs.”
Ms Broadbent, a former Reserve Bank Australia (RBA) board member, rejected the view of a Treasury official that the CEFC crowds out private investment and takes risks with public money.
“I certainly don’t think there’s been any crowding out in any of our investments that we have made,” she said.
“In fact, there’s been a crowding in, where we’ve had three international institutions who’ve participated in the market for the first time, encouraged by the fact that there was a government-owned entity there at the table and being a co-financier.”
She went on to say that the Liberal-National government’s replacement Direct Action plan, in which companies and landholders bid for funding for emissions reduction projects, will have a net cost to the taxpayer.
“We’re investing and trying to develop the market’s appetite for participating in this field,” she said.
“Grants have a very different role, and when you’re investing, you’re going to get the funds repaid and you’re earning a return on your money.
“Making a grant is just a straight expense.
“There’s a role for grants in emerging industries, but I really think the investment model of the Clean Energy Finance Corporation is a more fiscally responsible path to encourage the industry to be self-sufficient and wean itself off this government handout.”
The finance that funds the CEFC’s investment comes from public borrowing, but Ms Broadbent insisted that, given time, the taxpayer would see a return on the money.
“We’re actually not a cost at all, but an earning, so every emission that we’re achieving has a return to the government of $2.40, if it’s consistent with our current portfolio it’s very hard to compare a positive return with a cost,” she said.
“I’m strongly of the view that the Clean Energy Finance Corporation is a fiscally responsible and effective way for catalysing private sector investment into emissions reduction,” Ms Broadbent told the Senate hearing.
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