This article is more than 2 years old

This article is more than 2 years old

The minister for trade, Steve Ciobo, overturned a ban on government-backed loans to domestic miners last year without consulting his department.

The controversial decision meant the federal government could start funding coalmining projects at a time when Australia’s major banks are increasingly distancing themselves from investing in coal.

Freedom-of-information documents obtained by Guardian Australia show Ciobo overturned the ban on government-backed loans to onshore miners even though his department had not requested it.

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The Department of Foreign Affairs and Trade sent no written material to the minister arguing for the need for government agencies to start funding onshore mining projects to address a growing “market gap” for project financing.

Ciobo asked the Export Finance and Insurance Corporation (Efic) last year to change its mandate so it could start financing onshore resource projects.

At the time, he said protesters and activist groups had so discouraged Australia’s retail banks from financing “otherwise viable exporters in the coal sector” that the government had to step in to fund a growing “market gap.”

His decision came after the Commonwealth Bank indicated it would not be lending money to Adani’s proposed Carmichael coalmine in Queensland, leaving the mine without financing from any of the big four banks.

NAB was the first of the big four banks to rule out lending to the Adani mine in 2015, with ANZ following suit in December 2016. In April last year Westpac became the third of the big banks to rule out funding the project, drawing criticism from the then resources minister, Matthew Canavan, who said the bank had a conflict of interest because of its interest in other coal-producing regions, and called for a boycott of the bank.

The banks’ withdrawal angered Coalition MPs, who blamed “green agendas” for putting at risk potential projects in their electorates.

Ciobo’s decision to overturn the ban was criticised by the progressive thinktank the Australia Institute at the time, with Rod Campbell labelling it an “extraordinary” decision.

After learning Ciobo’s department had not requested the change to Efic’s investment mandate before committing taxpayer finance to the mining sector, Campbell said the government appeared determined to remove any barrier to subsidising coal in Australia, even as countries such as the UK and Canada have committed to phasing out coal.

“What this FOI shows is that this was purely a political decision, made by the trade minister without any advice from the trade experts in his department,” Campbell said.

“It’s concerning that the government is making decisions without expert input, particularly when the Productivity Commission has given clear advice that taxpayer funds should not be lent to large mining projects, like Adani.

“Efic has met six times with Adani and refuses to rule out supporting its controversial mine.

“At the very least Efic should have a policy to ensure taxpayers are not funding new coal development, in line with major banks like Westpac and NAB.”

A 2012 Productivity Commission inquiry found Efic had a bias towards large corporations and Efic’s services to them were unjustified. It was particularly critical of Efic’s provision of finance to resource projects in Australia.

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It prompted the then trade minister, Andrew Robb, to change Efic’s statement of expectations so it could no longer provide finance to onshore resource projects.

Late last year, Ciobo reversed Robb’s changes to once again include domestic resource projects.

Ciobo’s office was contacted by Guardian Australia and said the issue had been dealt with in Senate estimates in October, where Labor senators’ questions about the rationale for the change were answered on notice.

The answers on notice referred senators back to Ciobo’s media release announcing the change on 11 September 2017.

“The changes to the mandate are in response to an increasing number of resource projects in some market segments facing difficulties obtaining private market finance for otherwise viable projects,” the release said.

Asked by Guardian Australia if Ciobo received any verbal advice from the department about the need for the change, Ciobo’s office did not reply by deadline.