Coalition faces legal battle to stop CEFC’s green investments

The newly installed Coalition government faces a potential legal battle over its plans for the Clean Energy Finance Corporation, and may not be legally entitled to instruct the green investment bank from ceasing new investments.

The Tony Abbott government has vowed to close the CEFC, and other institutions and policy initiatives relating to climate change, carbon pricing and clean energy investment.

On Thursday, environment minister Greg Hunt signed executive orders to close the Climate Change Authority, which provides independent advice on emission reduction targets and renewable energy policies, and ordered the immediate closure of the Climate Commission, which provided scientific advice, and the sacking of its commissioners, including Tim Flannery. (See also our story on HSBC warning Australia swimming against the tide and risking stranded assets).

However, to close the CEFC (and the CCA) the Abbott* government  needs to introduce legislation into parliament. This cannot happen until late October at the earliest, and in any case is unlikely to be supported in the Senate.

In the meantime, the new government is trying to stop the CEFC from investing more funds – it still has $1.5 out of its $2 billion budget for 2013/14 available. On Wednesday, Treasurer Joe Hockey wrote to the CEFC board asking it to cease making new investments – something it had volunteered to do during the “caretaker” period leading up to the September 7 poll.

However, Australian Conservation Foundation and The Environment Defenders Office Victoria say they have received legal advice from Stephen Keim, SC, on whether or not the CEFC’s operations, which are established by law, can be stopped by the direction of a minister.

The legal advice from Stephen Keim QC states: “Administrative law principles clearly dictate that, to be lawful, any exercise of discretion by the responsible ministers should be exercised in good faith for the purposes of the CEFC Act, and not designed to frustrate or prevent the achievement of the purposes of the CEFC Act.”

It says further: “A direction to cease activities or cease investments, or to cease payments, would frustrate the legislative purpose of the CEFC Act, would be inconsistent with the CEFC Act and would not be authorised by s 64(1) of the CEFC Act.

“The CEFC’s activities cannot be terminated by executive action. 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.”

This is consistent with the CEFC board’s own legal advice, and which is why it has been seeking – so far unsuccessfully – meetings with the new government to see how that can be addressed. As the Seim advice says, and as we have reported here, there is ministerial discretion to influence how the CEFC invests, but not if it invests, and the board is keen to seek common ground as at least an interim measure.

The CEFC said on Wednesday that it is seeking a way to work with the new Government “which realises their policy objectives” with respect to CEFC and ensures viable projects progress that reduce carbon emissions and lower energy costs for business.

CEO Oliver Yates said the CEFC will not approve new investments pending these discussions.

“The CEFC will continue to operate within its legislative framework to meet its existing legal and contractual obligations, including in relation to payments,” he said in a statement.

“The CEFC wishes to engage in consultations about the transition and looks forward to engaging with the new Government concerning how its activities can best be supportive of their policy priorities under Direct Action.”

“The CEFC Board and the executive officers appreciate the Government’s stated intentions and are committed to working with the Government in accordance with the correct and proper legal processes.  In this regard, it is important that any changes are implemented in a way that meets the respective legal obligations under the CEFC Act and the Commonwealth Authorities and Companies Act 1997.”

The CEFC is seeking meetings with Hockey and/or his staff. However, the new Treasurer is expected to leave Australia next week for a G20 meeting.

ACF climate change program manager Tony Mohr said the legal advice is clear that the CEFC  must keep investing in clean technology unless or until there is legislation that changes its functions.

“We call on the Federal Government to respect the law and not attempt to stop the CEFC from continuing its good work. The CEFC is helping emerging technologies such as solar thermal, geothermal and wave power graduate from universities and research centres into a clean, national electricity market.”

So far, the CEFC has announced loans for wind farms, a solar PV project and various energy efficiency measures – although it is believed to be looking at investments in other new technologies.

(* This story has been corrected to say the Abbott government rather than Howard government, although sometimes it is hard to spot the difference).