The Coalition is considering changing the Clean Energy Finance Corporation rules to fund new coal-powered plants.

One week after the CEFC chief executive, Oliver Yates, told a Senate committee that investment in new coal plants were a very risky proposition for taxpayers, the energy and environment minister, Josh Frydenberg, said the change was an option because “it’s called the Clean Energy Finance Corporation, not the renewable energy corporation”.

Currently, the CEFC cannot invest in any project that does not reduce emissions by 50% or more on the average across the national electricity market. The CEFC rules, set by the previous Labor government, also rule out funding nuclear power and carbon capture and storage.

Frydenberg said the newer high efficiency lower emissions (Hele) coal-fired plants – also known as ultra-super critical plants – could not be funded under the CEFC.

Asked whether he thought the standard of a 50% missions reduction was unreasonable, Frydenberg said on the ABC’s Insiders program: “The issue is if you can lower emissions and stabilise the system with baseload power, that’s a pretty good outcome for Australian households.

“That is certainly one of the options that we are looking at because we have recognised that we have an obligation after what we have seen in South Australia to ensure that this does not happen across the country.”

Labor immediately ruled out supporting any legislative change to the rules, with the shadow environment minister, Mark Butler, saying it would not be party to changing the Clean Energy Finance Corporation into the coal finance corporation.

“The government’s so-called clean coal is twice as polluting as gas-fired power, as well as being more expensive than renewables and gas,” Butler said. “New coal plants are inconsistent with Australia’s obligations under the Paris agreement, to have a net zero emission energy system by mid-century.

“The CEFC has itself said coal would be ‘very risky for taxpayers’ and has said it would not support new coal investments.”

Butler said the government had no real energy policy and was using coal as a distraction rather than doing the serious work to remove policy uncertainty.

Australia’s chief scientist, Alan Finkel, is currently conducting a review of the electricity market after South Australia suffered statewide blackouts. His interim report found investment in the energy sector had stalled due to policy uncertainty. Finkel also warned that Australia’s current climate policy would not allow the country to meet its emission reduction targets signed on to in Paris.

Frydenberg invoked Finkel – who will present a final report in June – to support the government’s push for new coal plants.

Asked if Finkel would recommend new coal-fired power stations, Frydenberg said the chief scientist “says that low emissions coal with CCS, carbon capture and storage, is a very effective and very legitimate technology – that’s Alan Finkel’s words”.

But Finkel has been reluctant to state whether taxpayers should subsidise new coal plants.

At the prime minister’s first key speech of 2017, Malcolm Turnbull flagged the government moving to a technology neutral approach to lower emissions, opening up the possibility of “clean coal” – a move strongly pushed by his resources minister, Matt Canavan.

The deputy prime minister, Barnaby Joyce, also suggested it would be “morally prudent” to support new coal-fired plants “so that poor people can turn the lights on like we do”.

But key Senate crossbencher Nick Xenophon called on the Coalition to look at an emissions intensity scheme to stabilise the electricity system and make Australia’s electricity supply more stable.

“More and more experts are saying that that is the best way to reduce power prices and ensure security of energy supply,” Xenophon told ABC.

Frydenberg initially said an emissions intensity scheme, where big energy polluters have to pay more, would be considered as part of Australia’s climate policy.

Within 24 hours, Frydenberg was forced to rule it out when several backbenchers and the senior frontbencher Christopher Pyne criticised the option. The former Liberal senator Cory Bernardi used it as an example of why he left the Liberal party to sit on the Senate crossbench.

On Sunday, Xenophon said the toxic culture of federal politics had prevented political parties working out a policy solution at the same time as his state of South Australia was hit by rising power prices and blackouts.

“The way to achieve our Paris agreement [emissions reduction] targets ... is to have more gas-fired generators in the short term to give you the baseload of supply and, of course, once we get battery storage perfected, then you can let it rip in terms of intermittent forms of energy supply,” he said.

The Greens’ climate change and energy spokesman, Adam Bandt, said coal was dirty and the only way new power stations would be built was if the government propped them up.



“Subsidising coal because we need electricity is like subsidising asbestos because we need houses,” Bandt said. “The CSIRO has told us that the best way to cut pollution and make the electricity grid stable is through renewables and storage, not more coal.

“Redirecting its renewables money towards coal and changing its rules to allow projects that don’t even cut pollution by half would kill off the Clean Energy Finance Corporation, just like Tony Abbott tried and failed to do.”