Since Fairfax Media revealed on Sunday that Treasurer Joe Hockey and Finance Minister Mathias Cormann had instructed the CEFC to alter its investment focus to exclude wind farms and all but the largest solar projects, the Coalition has claimed it is steering the CEFC back to its "original mandate". Former ACTU secretary Greg Combet. Credit:Michel O'Sullivan Environment Minister Greg Hunt said the green bank was conceived by Labor to back marginal technologies that could not otherwise advance, such as geothermal electricity. Mr Abbott, who on Monday accused other countries of making "airy fairy promises" on climate change, said his preference and election promise was to abolish the CEFC. But, he said: "As long as it exists, it might as well be as useful as possible and … invest in new and emerging technologies, the things that might not otherwise get finance."

But Mr Combet said the 2012 legislation that created the CEFC was never "technology-specific". "The original intent of the CEFC was to address market failures in the field of clean energy and renewables. It was not technology-specific. That is, it was not prevented from investing in any particular technologies, whether they were proven or emerging," he said. "It was open to invest in any technology for the purpose of addressing market failures." The CEFC is closely examining the government's instructions on wind and solar and has called in the lawyers. Chief operating officer Meg McDonald said: "We are taking legal advice on what's been proposed … we are probing everything about it, what the implications are for us in terms of observance of our responsibilities under the act."

The Clean Energy Finance Corporation Act stipulates the government must not make a direction that has the effect of "directly or indirectly requiring the [CEFC] board to, or not to, make a particular investment". It is understood that the government sought legal advice before issuing the draft mandate, and believes it can direct the board's investment functions and specify investments — in particular, clean energy technologies. The mandate will be tabled in Parliament when finalised. 'Conflict with charter' Mr Combet and other figures who worked on Labor's 2011 "clean energy future" package said the language of the act and announcements at the time conflicted with the government's recent statements about the CEFC's original charter. The first investment mandate letter says the corporation would "catalyse and leverage the flow of funds for commercialisation and deployment of renewable energy, low-emissions and energy efficiency technologies".

Labor has accused the government of "setting the CEFC up to fail" by insisting on higher returns from the profit-making agency without any further risk while at the same time narrowing its options to invest. The CEFC has backed a number of finance packages designed to facilitate small businesses, low-income households, residents of apartments and community groups joining home owners in buying into solar power. Market experts such as the Climate Institute's John Connor said the policy uncertainty that has flourished under the current government had "handicapped" the green bank's second main role, to build investor confidence in the market. The latest ructions have created more unease, with the CEFC forced to issue a statement on Monday assuring investors that any change in its mandate would not affect existing investments. Mr Hunt, who has been under fire from Agriculture Minister Barnaby Joyce for granting approval to the massive Chinese-owned Shenhua Watermark coal mine in northern NSW, was asked on Monday whether a wind farm was uglier and noisier than an open-cut coal pit.

"Look, beauty is in the eye of the beholder, I have said that. I'm not in the business of making aesthetic judgments," he said. Environmental Justice Australia lawyer Ariane Wilkinson said if the government prohibited the corporation from investing in wind and small-scale solar, it raised the question "as to whether that complies with … the object of the act", adding such a directive could be subject to a judicial review. NSW Environmental Defenders Office principal solicitor Sue Higginson said the spirit of the law implied the government was not supposed to influence the corporation's specific investment decisions. "They are meant to be seen as financially independent decisions of the government of the day," she said. If the directive is finalised and a judicial review is launched, Ms Higginson said it was most likely to be brought by a company that missed out on funding.

Barrister Stephen Keim told Radio National on Tuesday that while the government had the power to give a direction to the CEFC about investments, it had to tread a "thin line" as it could not make it do things that were inconsistent with the corporation's act. But he cautioned that the act called for investments in both projects for the "development or commercialisation of, or in relation to the use of, clean energy technologies". "It seems to me that the emphasis that the government has [in terms of specifically 'new and emerging technologies]' is not something that's spelled out in the act," he said. Follow us on Twitter