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The EFIC bill didn’t hit the headlines, but it really should have, as both sides of government voted to fast-track taxpayer funds to fossil fuel projects.
In the final sitting day before the election, Senators passed a bill to greatly increase the powers and funding of the Export Finance and Insurance Corporation (EFIC).
Under the guise of Australia’s “step-up” in the Pacific, the Senate has turned this obscure agency into a larger “development bank” for infrastructure overseas.
The changes were strongly criticised by Australia’s development community, and as Australia Institute research has warned, risk fast-tracking taxpayer funding towards fossil fuel projects in the region, undermining the climate action on which the safety of the Pacific depends.
What is the EFIC?
EFIC is a lending agency whose core job is lending to support Australian exporters, ostensibly small and medium-sized enterprises.
In recent years the government has used EFIC to administer the Northern Australia Infrastructure Facility (NAIF)—the agency that wanted to lend Adani $1 billion dollars for its railway line—and the government’s multi-billion dollar Defence Exports Facility.
By passing the Export Finance and Insurance Corporation Amendment (Support for Infrastructure Financing) Bill 2019, the Senate gives EFIC nearly unfettered scope to fund any sort of infrastructure, and access to an extra billion dollars, increasing six-fold its “callable capital” to draw on to back up even larger loans.
Despite the stated purpose of supporting development, under the changes, EFIC is required only to maximise “Australian benefits”. There is no mention at all of the development needs and challenges of countries where EFIC would invest.
Instead, EFIC can now lend simply to benefit “a person carrying on business or other activities in Australia”, which the government states will empower EFIC to promote fossil fuel “energy” exports from Australia.
Taxpayers funding fossil fuels
EFIC has a long and sorry history of funding fossil fuel projects, both overseas and in Australia. Half of its current portfolio is in the fossil fuel and mining sectors.
Despite being a Commonwealth agency, EFIC explicitly states it is not constrained by the goals of the Paris Agreement and it has refused to disclose how it considers climate risk.
The biggest thing EFIC has ever done was backing the PNG LNG project, a massive gas project in Papua New Guinea. EFIC was warned in advance it would likely lead to civil conflict and economic disruption. And it did, sparking conflict verging on civil war.
Right now, under current rules, EFIC is thinking about lending money to Woodside to develop an oil and gas field in Senegal in Africa. EFIC has previously been in talks with Adani about its coal mine.
Projects like Woodside’s, or PNG LNG, or even coal power stations, or mines like Adani’s to fuel them, stand even more likely to get Australian taxpayer funding in the future.
Overseas development funding is an important contribution to our neighbours and our standing in the region. But after years of shameful cuts Australia’s aid program is now at a record low level, and this bill is a poor substitute.
Australian development experts and NGOs were unanimous in their criticism of the bill, urging major amendments or rejection, concerned about the lack of safeguards and the Australian benefits test. The Australia Institute’s analysis of stakeholder submissions shows all of the external support came from companies and banks that could benefit from the bill.
EFIC does not have a development mandate, and its track record is, to be polite, concerning. EFIC has been involved in numerous projects overseas that have triggered social conflict, economic disruption and environmental damage. EFIC is also exempt from FOI laws.
But the Australian Government assures us everything is under control, and saw no need to implement any new safeguards or accountability.
What just happened?
In short, the legislation was rushed through the House of Representatives and the Senate before the end of this Parliament.
When the bill was sent to an inquiry to investigate its impacts, the Senate committee did not even hold public hearings to hear the concerns of stakeholders.
This bill passed with Government and Opposition support.
Members of the crossbench, the Australian Greens and Independent Senator Tim Storer both moved amendments, which were also backed by the Centre Alliance.
The Greens amendments would have stopped EFIC from funding coal projects. Under the bill, EFIC could end up funding coal power plants overseas, then fund the coal supply to fuel them.
Senator Storer’s amendments would have required EFIC to consider the interests of the recipient country and to consider the goal of the Paris Agreement on climate change when lending.
These were sensible amendments that would have improved the Bill, however, these amendments ultimately failed to pass.
However, even better would have been to send the legislation back for a proper review through public consultation with stakeholders, including development experts, rather than being rushed through the Senate in the final hours of the second-last day of parliament on the eve of an election, under the promise of a future review.
If Australia is going to meet its Paris commitments, in both the letter and the spirit of the law, then Australian policymakers should not be supporting new fossil fuels projects—here or abroad.