Coalition vows to scrap 'volatile' energy fund
The Clean Energy Finance Corporation, established to invest in clean energy projects and technologies, is expected to match the Australian government's five-year bond rate, now 2.8 per cent, its investment mandate has revealed.
"By adopting a commercial approach, it is expected that the corporation will invest responsibly and manage risk so it is financially self-sufficient and achieves a benchmark rate of return," according to an explanatory memorandum issued on Wednesday.
"The government is conscious of the risks inherent in investment in a large portfolio of financial assets. It acknowledges that in practice this will involve some short-term volatility in the corporation's returns, including the possibility of losses in some years."
Loans at cheaper rates will not exceed $300 million each year, it added.
The finance corporation has previously flagged plans to sign contracts with financiers and clean energy projects, such as wind and solar energy, in the coming months. The corporation is able to deliver funds to projects from July.
But the Coalition has vowed to scrap the CEFC if it wins the federal election.
It also says it will save $20 billion through scrapping Australia's carbon price and associated industry and household assistance. It says savings will also be made by merging the departments of environment and climate change, and closing the Climate Change Authority and the Climate Commission.
The Coalition plans to replace the carbon price with its "direct action" policy under which companies will bid for money to fund emissions reduction programs.
Frequently Asked Questions about this Article…
The CEFC is a $10 billion clean energy fund set up by the Gillard government to invest in clean energy projects and technologies. Its mandate allows it to sign contracts with financiers and projects such as wind and solar, and the corporation said it will be able to deliver funds to projects from July.
Yes. The CEFC’s investment mandate says it adopts a commercial approach and aims to be financially self‑sufficient over the long term. It is expected to match the Australian government’s five‑year bond rate—about 2.8% at the time of the mandate—as a benchmark rate of return.
The government acknowledges that a large portfolio of financial assets will involve short‑term volatility. The mandate explicitly notes there could be some volatility in returns and the possibility of losses in some years, even while pursuing long‑term financial self‑sufficiency.
The CEFC’s rules state that loans at cheaper rates will not exceed $300 million in any single year.
The CEFC has flagged plans to contract with financiers and clean energy projects such as wind and solar. According to the mandate, the corporation is able to start delivering funds to projects from July.
Yes. The Coalition has vowed to scrap the CEFC if it wins the federal election. That political risk could affect the continuity of the fund and existing or planned investments if policy or funding is changed.
The Coalition says it would save $20 billion by scrapping Australia’s carbon price and related assistance, merge environment and climate change departments, close the Climate Change Authority and Climate Commission, and replace the carbon price with a 'direct action' policy under which companies bid for money to fund emissions reduction programs.
Investors should watch for political developments (including election outcomes) that could affect the CEFC, announcements about contracts the CEFC signs with financiers and projects, the start of fund delivery from July, and any updates to the CEFC’s investment mandate, loan limits (the $300 million cheaper‑rate cap), and expected benchmark returns.
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