Australia’s $10 Billion Climate Fund Fights to Stay in Business
Australia’s A$10 billion ($9.1 billion) clean-energy fund, set to be wound-up by the new Coalition government, is lobbying to stay in business to aid the nation’s fight to reduce greenhouse gas emissions.
“We welcome extreme scrutiny of our record,” Jillian Broadbent, chairwoman of the Clean Energy Finance Corp., said in an interview. The fund would be able to work as part of the government’s proposed Direct Action Plan to cut emissions, she said.
Prime Minister Tony Abbott’s government introduced legislation within weeks of his Sept. 7 election to dismantle a carbon price, the fund and related agencies established by the previous Labor Party administration. The clean-energy fund is expected to survive to at least until July, when a new Senate is sworn in, as opposition parties join together to block the suite of bills shutting down several climate programs.
“The odds of the Clean Energy Finance Corp. surviving beyond July are low but improving,” said Nathan Fabian, the Sydney-based chief executive officer for the Investor Group on Climate Change. “The government is finding it more difficult to confuse the carbon tax with broad-based support for the fight against climate change.”
In a last-ditch appeal to stay open, the clean energy lender submitted a paper to lawmakers last week claiming it can contribute more than half the emissions reductions that the government has promised by 2020.
The fund is using borrowed funds to make “highly speculative” investments that merely displaces other private sector lending, Environment Minister Greg Hunt said this week at the Climate Expo in Melbourne. “How does that create additional emission reductions,” he asked.
“Our biggest challenge is to counter the misconceptions that are out there, that we are a green hedge fund, that we take high risks,” Broadbent said yesterday. “Our job is to catalyze private sector investment in emission-reduction projects.”
The fund is making a profit of A$2.40 per ton of carbon abated, and abolishing the fund would cost taxpayers about A$200 million a year in lost revenue, Chief Executive Officer Oliver Yates, a former Macquarie Group Ltd. (MQG) banker, said in the filing to a Senate committee.
About A$536 million that the Sydney-based fund has loaned so far will cut the nation’s greenhouse gases by an estimated 3.9 millions metric tons a year, he said. If the fund is allowed to invest the full $10 billion over the next five years, the projects it backs would achieve more than half of what’s needed to meet the bipartisan target for a 5 percent emissions reduction by 2020, he said.
“The government’s decision to close down the Clean Energy Finance Corp. appears to be more about politics than policy,” said Kobad Bhavnagri, head of research in Australia at Bloomberg New Energy Finance. “It’s operating model is consistent with the principles of the Coalition’s Direct Action policy.”
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