The Clean Energy Finance Corporation, the $10 billion bank dubbed a “giant green hedge fund” by the incoming Abbott government, is obligated by law to ignore Coalition demands that it cease making loans, according to legal advice obtained by conservation groups.
The Australian Conservation Foundation and the Environment Defenders Office Victoria said they had received legal advice from Stephen Keim, SC, on whether a minister could stop the CEFC's operations without changing legislation.
“The CEFC's activities cannot be terminated by executive action,” Mr Keim said in the advice. “If given some unlawful direction by the responsible ministers (or anyone else) to cease operations or some aspect of its operations, the board would be obliged to ignore that direction.”
New Environment Minister Greg Hunt and other Coalition ministers have vowed to scrap the CEFC, saying it provides funding that the private sector already offers and was exposing the taxpayer to potential losses if projects failed.
Advocates of renewable energy, however, note the CEFC has been crucial in prompting ventures that bring on board commercial lenders but would not have been funded with partial backing from a government-backed agency.
Tony Mohr, the Australian Conservation Foundation climate change campaign manager, said the CEFC had deliberately been modelled on the Export Finance and Insurance Corporation – which has operated independently for more than half a century – to shield it from interference.
The CEFC “cannot just be shut down holus-bolus like this”, Mr Mohr said.
“The Treasurer can’t actually write to the CEFC and direct them in any way,” Mr Mohr said. “The directors and the board of the CEFC are legally obliged to keep on...investing in projects because that’s their purpose as written in their act.”
It is understood the CEFC has obtained advice similar to that made public by the Australian Conservation Foundation and the Environment Defenders Office Victoria.
The bank, which began making loans on July 1, sought legal advice after the Coalition said in February it would scrap the organisation if it won government.
The CEFC stopped making new investments when the federal election was called and caretaker provisions began. It received a letter from Treasurer Joe Hockey's office on Wednesday the bank cease new investments stop.
The bank says it has committed about $500 million in projects with private capital providing about $1.6 billion more. Last week, Pacific Hydro announced that it had received $70 million from the CEFC for its wind farms in western Victoria, with commerical banks tipping in $158 million.
The CEFC is likely to make further announcements of investments - once counterparties sign off. All of the new projects were completed before the caretaker provisions came into force and are within the $500 million total already made public.
Mr Mohr said the CEFC had been established to assist clean energy firms who “really needed to avoid their funding source being some sort of political roundabout.” The CEFC is required to lend $2 billion annually for five years.
The legal advice from Mr Keim has also been sent to Mr Hunt's office, Mr Mohr said.
"Our position hasn't changed on this," a spokeswoman for Mr Hunt said.
The CEFC is hoping to convince the new ministers that the bank can also serve the Coalition's Direct Action plan to address climate change and is therefore worth retaining.