industry but it's not all bad Carbon capture snub turns renewables cash to 'slush'
The Gillard government would do well to remember the ghost of the disastrous Victorian Economic Development Corporation when it is scoping out its new $10 billion green bank, which will be bankrolled by taxpayers as part of the new carbon tax program.
The Gillard government would do well to remember the ghost of the disastrous Victorian Economic Development Corporation when it is scoping out its new $10 billion green bank, which will be bankrolled by taxpayers as part of the new carbon tax program.The VEDC was set up as a venture capital fund in the 1980s to pick winners. It collapsed ingloriously due to poor management, a lack of transparency and a blatant inability to pick winners. Tricontinental Bank was another government-inspired bank that lent money to entrepreneurs, only to collapse in a heap in 1990.In the case of the Clean Energy Finance Corporation, it is already carrying the hallmarks of being half baked, agenda-driven and creating profound distortions in the renewable energy market.Indeed, the Greens senator Christine Milne admitted yesterday that Treasury had not had time to properly assess the $10 billion package. "They didn't get that information in time to model it. Treasury modelling takes a long time to do, the nitty gritty of this agreement was really worked out in the last couple of months ...," she said.The new bank will kick off in 2013-14 and will provide finance for projects through commercial loans, concessional loans, loan guarantees and equity.About $5 billion will be allocated for investment in renewable technologies, wind, solar power, geothermal and wave energy, and the other $5 billion will target general clean energy investment, such as low-emissions cogeneration technology.Not surprisingly, this decision to pick winners and exclude others has created immediate distortions on the ASX, and stocks in the "winner" category are soaring.These include Carbon Conscious, a carbon offset company, which closed 9.7 per cent higher at 34? Silex, which has a solar division, jumping 6.8 per cent CO2 Australia up 8.2 per cent Petratherm, which is a geothermal company, soaring 15 per cent wind farm group Infigen Energy up 5.4 per cent and Carnegie Wave Energy rising 23 per cent. Not bad for a day when the overall market was down 1.5 per cent.It is a fund/bank that the opposition spokesman on finance, Andrew Robb, labelled a slush fund. "The fact that this fund will be banned from investing in carbon capture and storage highlights how this is a cynical political exercise," he said in a statement.He has a point. Given Australia is a big exporter of brown and black coal, it is difficult to comprehend why the CEFC has decided to exclude carbon capture and sequestration technologies, gas and biomass.Carbon capture and sequestration (CCS) technology is a means of mitigating the contribution of fossil fuel emissions to global warming. The process is based on capturing carbon dioxide from large point sources such as fossil fuel power plants and storing it in such a way that it doesn't enter the atmosphere.Given so much of Australia's wealth is created through carbon, and iron and steel requires coal, it is foolhardy to ignore it.To put it into perspective, every year Australia exports more than 300 million tonnes of coal, along with liquefied natural gas, which generates almost $70 billion in revenue.While the Gillard government has tried to brush it aside saying it has been looked after through different schemes, the reality is different.The CCS Flagships Program committed $1.8 billion a couple of years ago to the fund but it has so far only invested $100 million, Peter Cook, the chief executive of the Cooperative Research Centre for Greenhouse Gas Technologies, says.Carbon capture and sequestration technologies have been given financial support in several countries including Britain, the US and Canada. In 2009, the British government included in its budget specific measures to encourage the development of carbon capture and sequestration technologies.It stated there would be no new coal without carbon capture and sequestration demonstration from day one and full scale retrofit of carbon capture and sequestration within five years of the technology being independently judged as technically and commercially proven.To exclude certain technologies from access to funding prompted a backlash from the industry, raising justified concerns that it would polarise the market.The fear is that all the projections of bodies such as the International Energy Agency clearly show that we will need carbon capture and sequestration for at least 20 per cent of the global mitigation effort in the coming decades."If we do not include CCS in the overarching clean energy package and the Clean Energy Finance Corporation, we run the risk of taking a highly polarised approach to lowering our carbon footprint," Dr Cook said. "Without inclusion of CCS, there is no solution to the greenhouse issue."The government will have its work cut out for it when it comes to setting up the $10 billion fund. Besides polarising the industry before it has even begun, it will need to pick the right board and management to ensure it doesn't suffer similar fates to other organisations that were set up in New Zealand and Australia. It will need to make sure it is not open to political influence.It will have to do this against the backdrop of the findings of the Productivity Commission's sobering report Carbon Emission Policies in Key Economies in May. After assessing eight countries, including China, Britain and the US, the Productivity Commission found the impact of policies to encourage small-scale renewable generation are substantially less cost-effective and have led to relatively little abatement.Put simply, they are uncompetitive and expensive and don't do much for the cause.