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Federal

Oct 18, 2011

The Coalition game of deterring renewables
investment

The opposition is pursuing a clear strategy of trying to scare investors away from anything to do with renewables. And some others are joining in.

The federal opposition’s self-appointed role under Tony Abbott as a sovereign risk machine is, at least politically, well understood. Not merely content with forecasting a looming apocalypse as a consequence of the carbon pricing package, Abbott has deliberately embraced the tactic of adding to business uncertainty with a cross-my-heart-and-hope-to-die promise that he would repeal the package.

With any luck, that will discourage business investment in renewables, undermine the trading period of the scheme, which is likely to start before he can pass legislation to repeal it, and continue to place some upward pressure on electricity prices by reducing certainty for big generators looking to roll over debt.

Not so good for either the economy or the task of decarbonising it, but eminently sensible from the point of view of an opposition that has embraced a wrecking strategy to undermine a weakened government. This is a longer-term strategy by Abbott, by the way — one of his first acts as leader was the appointment of Barnaby Joyce as shadow finance minister, from which vantage point Joyce proceeded to campaign against foreign investment (particularly Chinese foreign investment, a particular obsession of Joyce’s) and predict Australia was at risk of default.

Joyce these days likes to claim that somehow he accurately predicted the risk of debt ceiling debacle in the US, but he insisted Australia, too, would be unable to pay its debts. The Abbott opposition embraced sovereign risk as a political tactic right from the outset.

The two significant problems for the strategy are the issue of compensation for carbon permits and one of the direct action components of the package, the Clean Energy Finance Corporation. The latter is problematic because, even if Abbott’s warnings about repeal deter private investment in renewables, there’ll still be billions available via the corporation, to be overseen by Jillian Broadbent, who graced many a Coalition-appointed board with her presence in the Howard years.

The idea of taxpayers funding a vast renewables investment portfolio intended to produce a commercial return is the worst component of the carbon pricing package (of which, more later this week), combining the winner-picking of the Coalition’s risible direct action plan with significant risk for taxpayers (c.f. Barack Obama’s current problems with the Solyndra solar panels company). But that isn’t what concerns the Coalition, instead it’s the capacity of the corporation to drive renewables investment even after an Abbott-induced flight of investors.

That’s the basis for the remarks by Joe Hockey, as reported by Lenore Taylor today, to warn business off from even accepting investment from the CEFC. Hockey made the explicit point that loans could be “revokable at any time”, in essence suggesting that if any business should be foolish enough to accept investment from the corporation, it could be immediately ripped out by an incoming Abbott government regardless of the impact on jobs or the companies involved.

There’s a slight problem with that plan, in the melodramatic “at any time” bit. The CFEC governance structure, while still being designed by a panel of experts for the government, is intended to be independent of government, for obvious reasons. Hockey, in whose portfolio the corporation would be, would thus have to remove Broadbent and, presumably, most of the rest of the board and install some compliant directors who would oversee the withdrawal of existing investments, based on a new ministerial “statement of expectations”.

But standard practice for independent boards is that directors are only removable if they engage in criminal or wildly inappropriate behaviour, so Hockey would presumably have to wait until the Labor-appointed directors’ terms expired — a bit like the Howard government had to wait to for Justice Fisher’s term at CASA to expire when he and his fellow board members declined John Sharp’s demand that they quit en masse for the crime of being appointed by the Keating government.

Still, that’s a small detail for Canberra insiders that most investors are unlikely to be aware of.

And while the opposition likes to gloss over the issue of compensation for permits, preferring simply to demand that business not buy any (which may well be a subtle admission that, yes, they would indeed be property and require compensation), there was a most unusual intervention today on the issue from David Murray of the Future Fund, who proposed the genuinely bizarre idea to The Australian of two types of publicly created property rights — those created within three years, and those older than three years, so that governments couldn’t commit future governments.

Core and non-core property rights, perhaps.

Murray’s intervention in the debate is motivated by a simple fact: he’s a scientific illiterate and climate denialist and under him the Future Fund has tried its best to ignore climate change as a significant investment issue. Thus the phrasing of his remark to The Australian about “whether you believe in this stuff or not” — Murray definitely does not believe in “this stuff”.

Murray also opposes the carbon pricing package because “it’s very bad time given what’s happening in the global economy”. It’s a curious view for Murray to express, given that in August he was calling for massive budget cuts to “stabilise debt levels”. By that logic, Murray thinks prudent fiscal policy would be to rip the floor from under demand at the moment when the global economy is facing problems so bad as to undermine the rationale for carbon pricing.

Then again, we had years of strong economic growth before the GFC, and it was always apparently a “very bad time” to take action on climate change back then, too. People such as Murray will always find reasons to delay reform, like they always find reasons to dispute climate change.

His over-long term at the Future Fund finally ends on April 3 next year. Labor, oddly, reappointed him. Judging by Hockey’s remarks, that’s not a fate to which Jillian Broadbent can look forward.

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50 comments

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50 thoughts on “The Coalition game of deterring renewables
investment

  1. Peter Ormonde

    Welcome back Bernard. Don’t go away again.

    Core and none core property rights – just lovely.

    I think it is about time we considered changing Abbott’s position from Opposition leader to Lead Saboteur. The tantrum elevated to a political strategy.

  2. D. John Hunwick

    I agree with Peter – welcome back and don’t go away again – my sanity can’t stand such a long absence of common sense and explanation. Perhaps you can explain why it is that the stupidity of Abbott and Hockey and others can’t be made crystal clear to a greater number of people – not on the basis of politics, but on the basis of clear argument and explanation. The hard won “carbon tax” must remain in place – ie withstand the assaults of Abbott et al – in order for the Planet to support us. What is it that they do not understand? Perhaps potential political candidates should take a scientif literacy test before being allowed to stand.

  3. Microseris

    Not to mention Baillieu’s sabotage of wind in Victoria but all systems go for coal.

    Looks like O’Farrell may follow Baillieu’s lead.

    Could be part of the national Liberal strategy..

  4. GocomSys

    Bernard, a breath of fresh air!

  5. Michael Wilbur-Ham (MWH)

    The main problem with the Rudd/Wong/Turnbull CPRS was that it “locked in failure”.

    It did this by giving polluters long term property rights so that any future government who wanted to make greater cuts than what the CPRS was designed to achieve would have had to buy back the property rights of the free permits issued under the CPRS.

    Though I mentioned this problem with the CPRS many times as my main justification for saying that the CPRS was worse than doing nothing, I cannot recall a single response which accepted my justification.

    But now that property rights for permits can be used as a reason for saying that Abbott is wrong we get articles and comments talking about property rights.

    I’m sure that it would be much cheaper for Abbott to scrap the carbon tax than it would have been for a government to go from the CPRS to something closer to what the science says is needed.

    So now that property rights for permits is taken seriously, are then any Labor supports who will finally admit that this is why we are better off not having a CPRS?

  6. davidk

    I am not often surprised at dispicable actions by the coalition but I was genuinely staggered at this eventuality. Not content with opposing ever initiative of this government and denying its’ mandate to govern at every turn, this disgusting opposition has moved to crucify business by increasing its’ risk in not only current, but future investments. I already believed Abbott, Hockey and Joyce to be imbeciles when it came to commerce but I would never have guessed the rest of the party would go along with such outrageous behaviour. I clearly underestimated just how evil these people can be. Imagine what they’ll do if they don’t get elected next time, legislate for national parks to be turned into nuclear waste dumps? Nothing is beyond them.

  7. Kristen Smith

    ‘or the task of decarbonising the economy’ what a laugh, only a true believer could write such drivel, it is almost beyond parody.

  8. Michael

    @BERNARDO !!!

    You’re back?
    What a relief, the gumnuts have run riot whilst you were away.
    No leadership.

  9. Aphra

    Despite the anti carbon tax campaign, the CEO of Rio Tinto, Sam Walsh, reports that they have just spent half a billion dollars (that is, half a billion dollars) on building a new generation power station in the Pilbara, which has immediately cut emissions by 35%. The company’s belief in climate change and environmental concerns – both management and employees Walsh says – is unshakeable. (The Weekly Review, p3, 19/10/2011 – Virginia Trioli’s column).

    I guess that Rio Tinto is either a true believer or employs a gaggle of dimwits.

  10. zut alors

    ‘…we had years of strong economic growth before the GFC, and it was always apparently a “very bad time” to take action on climate change back then, too. ‘

    It will never be a good time, let’s be frank. Very few people are prepared to put up with the necessary pain, cost, lifestyle adjustment or inconvenience. Initiatives will probably need to be imposed upon us.

    The reptilian Abbott and his spherical side-kick, Hockey, are behaving like irresponsible hoons. Or four year-olds. Their mission is to wreck and destabilise – these are not qualities of statesmen.

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