The Clean Energy Finance Corporation is likely to be directed away from lending to wind farms in favour of programs that support the Coalition’s “direct action” plan such as energy-efficiency schemes and leasing for solar hot water systems.
In the wake of Clive Palmer’s declaration this week that his senators will vote to retain the CEFC, it has emerged that Joe Hockey and Finance Minister Mathias Cormann have the power to alter the CEFC’s investment mandate without parliament being able to reverse the move.
Senior government sources have told The Weekend Australian the CEFC could be instructed to favour direct action-style programs such as providing leasing for households to install solar hot water systems and for energy-efficiency programs instead of wind farms. Twenty-two per cent of the CEFC’s loans in its first year were for wind projects.
The likely change of direction for the CEFC comes as funding for the $2.55 billion Emissions Reduction Fund, the centrepiece of the Coalition’s direct-action policy, was contained in an appropriation bill that passed both houses of parliament this week.
Government sources remain hopeful of having the bill passed, despite Mr Palmer’s announcement that he would not support direct action because it was a “waste of money’’.
If direct action is blocked, with the money already allocated in an appropriation bill, an alternative plan is to distribute money to the states for carbon abatement programs under Section 96 of the Constitution.
Under Section 96, the federal government is able to provide tied grants to the states.
This would enable direct-action funding to be paid to the states for programs addressing energy efficiency, boosting soil carbon initiatives and increasing the take up of solar hot water systems.
In the wake of Mr Palmer’s announcement this week that he would support the abolition of the carbon tax, it is likely to be abolished either on July 14 or soon after.
The Palmer United Party leader’s call for an emissions trading scheme rated at zero appears doomed after failing to gain government support.
Mr Palmer is also backing the retention of the CEFC and the Climate Change Authority and will not support changes to the Renewable Energy Target before 2016 – after the next election is due.
Environment Minister Greg Hunt on Thursday split the CEFC repeal bill from the main body of the carbon tax repeal bills. The former appears set to be debated by the Senate after the main carbon tax repeal bills.
Under the legislation establishing the CEFC, the Treasurer and Finance Minister can provide direction on matters of risk and return, eligibility criteria for investments, allocation of investments between different types of clean-energy technologies, the types of financial instruments that may be invested in and “broad operational matters’’.
While the government can alter the investment mandate of the CEFC, existing legislation guarantees the CEFC the ability to write up to $10 billion in loans over the next five years.
The CEFC legislation allows the corporation to write $2bn of loans every year and, if it fails to reach the ceiling, the unused portion can be carried over to the next year.
As the political debate over its future has raged, the CEFC has written to all sides of parliament, including the crossbench senators, arguing its case for survival. It has also had meetings with MPs on its operations.
While the government can change the investment mandate, its ability to change the CEFC board, whose members have been given five-year terms, is limited.
Since it began operating from July last year, the CEFC has written $700 million in loans and has mobilised more than $1.8bn of private sector investment, for a total of $2.5bn in projects.
It argues its abolition would cost the government $100m a year in lost revenue.
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