Numbers add up to keep Clean Energy Finance

This article from Climate Spectator tells us that shutting down the Clean Energy Finance Corporation (CEFC) will actually cost the government $200 million each year in lost revenues.

The article refers to an article (by Laura Tingle) in the AFR. Apparently my $3 per day subscription doesn’t entitle me to see the article online – the first time I’ve encountered this problem.

In the dead tree version we are told that the CEFC is making 7% on funds invested, as against their benchmark of 3%, being the five-year bond rate. Other than being a good Labor idea, I think the Government’s objection may be that the CEFC adds to gross debt. The fact that it adds nothing to net debt is apparently irrelevant.

The dividend stream more than covers the cost of administration. The Direct Action alternative is to pay public servants to hand out taxpayers’ money without a return.

Each dollar spent by the CEFC leverages $2.90 in private capital expenditure. So far over $500 has been spent leveraging $1.55 billion of private capital investment.

Apparently the CEFC operates in a niche that would not happen without it.

It has been able to do deals that are too small, too complicated, or not previously done in Australia. In other words, deals that bankers can’t get past their own credit committees which prefer easier propositions.

Perhaps the CEFC’s real crime is to offend Big Coal.

11 thoughts on “Numbers add up to keep Clean Energy Finance”

  1. Really Brian if the investments are going to be so fruitful why do they need a quango at all? Surely if they are such viable ideas then surely they can attract private investment.

  2. Iain: because they can take a different view than the banks on the value of said investments.

    From Brian’s post:

    It has been able to do deals that are too small, too complicated, or not previously done in Australia. In other words, deals that bankers can’t get past their own credit committees which prefer easier propositions.

  3. Any economically literate person would leave this to get on with its business. If it is abolished it is clearly a matter of ideology.

  4. Doug, I agree. We are getting a lot of ideology from this government, including ‘small government’ from Hockey.

  5. Iain Hall @ 1:

    why do they need a quango at all?

    I thought that would have been obvious …. given the thirty years of inefficiency and illusionary “wealth(??)” we have had since we abandoned the successful Australian mixed economy in favour of so-called Privatization, which is closer to Bureaucratic Communism than anything else.

    Doug @ 4:
    Like Brian, I agree with you too. Long-term planning in our present Rob-&-Run economy extends no further than the next quarter – or maybe the next financial year in rare cases.

    What should be worrying is that we are now so used to this sort of ideological ratbaggery replacing long-term policy that we take hardly any notice at all when yet another ridiculous example pops up.

  6. Correction

    “Other than being a good Labor Green idea that Labor in the end was convinced to support but let’s not forget it has had to be defended along with ARENA from the previous government’s budget cuts”

    carry on

  7. Thanks myriad74. I think there has been a tendency amongst the likes of Combet, Ferguson et al in Labor to say that now we have the ETS all will be taken care of and these other things a fringe optional extras. In that sense John D has a point.

  8. Thanks, Brian @9, but they haven’t forgiven me for ceasing to buy the AFR πŸ™‚

    The heart of the problem is that Abbott and his mob have lost sight of the hard cold fact that they are supposed to be running a government, not a business conglomerate. Previous governments, at times over the past thirty years, also forgot the main reason for their continued existence.

    There are some similarities in running any large organization – a government, a global corporation, a religion, an international sporting body – but that’s all they are: similarities.
    Of course, lessons and methods from one type of organization, might, with very careful forethought and prudent application, be used in another type.

    Trying to run a government – which has its own quite specific and challenging tasks – as though it is a business corporation is a sure fire recipe for failure.
    Horses for Courses …. and if Abbott and his mob keep sending their government “horses’ off to the dog-food factory they’ll soon be riding Shanks’s Pony.

    It’s not too late for them to sack their ideological “Red Guard” fanatics – such as the ones whose rampage closed down the CEFC – and thereby help them reach a full term in government.

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