Federal Labor appears ready to sacrifice the Australian Renewable Energy Agency it established just a few years ago as it reacts to Coalition government taunts that it is not serious about “budget repair”.

In a decision that will rank – along with the Coalition’s removal of the carbon price – at the very top of the Stupid List, Labor appears to have accepted the Coalition’s challenge to pass a $6.5 billion omnibus budget repair package that includes stripping $1 billion from ARENA’s legislated funds.

The move to strip funds from the agency responsible for bringing in new technologies, business models and ideas that will be critical to efforts to cut emissions appears extraordinary in a country that has possibly the strongest budget in the developed world and one of the worst records on climate and emissions policies.

The decision was all but confirmed by Labor leader Bill Shorten in his address to the National Press Club, which represents an institution so obsessed with line items in the budget and being a political insider, it has virtually abandoned its coverage of actual policy.

It was the Abbott government that first attempted to strip the remaining funds from ARENA, along with its attempts to abolish other institutions such as the Climate Change Authority and the Clean Energy Finance Corporation, and the carbon price.

ARENA’s abolition remains policy, despite the elevation of Malcolm Turnbull, who has changed little of the Abbott-era climate and clean energy policies, despite his previous vow not to lead a government that did not take climate change seriously.

But as the Climate Institute says in its new report on Wednesday, the Australian government is facing a policy train crash if it ever decides to take its commitment to the Paris climate deal seriously.

This is why support for ARENA is important. It has funded more than 200 projects, ranging from research to community projects, to funding trials and tests of new technologies, testing new business models for battery storage, and accelerating the rollout of large-scale solar PV and micro-grids.

All will be critical for Australia’s attempts to reach net zero emissions and its share of the Paris climate target, and to seize on the clean energy opportunities it has in its own country and for export.

This makes Labor’s capitulation on the issue all the more remarkable and bloody minded. It was borne, as we have reported, by Labor’s angry reaction to the response by NGOs to Turnbull’s original decision to create a new “innovation fund”, borrowing money from the CEFC and de-funding ARENA.

The NGOs were full of praise for the “new” innovation fund, and the decision to retain the CEFC, but most of them overlooked the fate of ARENA.

Labor’s climate and energy spokesman Mark Butler said last year that that reaction made it difficult for him to maintain support for ARENA as Labor prepared its own pre-election budget strategy.

The ALP then made allowances to cut $1 billion in funds from ARENA – keeping $300 million for large scale solar towers with storage and community projects, and locked it into its budget repair package.

And on Wednesday, Shorten showed no inclination to backing down. “We’re serious about budget repair”, he insisted, although he did say that Labor would want to see the package in detail, but that mostly seems to be about the “clean energy supplement” and its impact on those on social security.

However, in a separate statement, shadow treasurer Chris Bowen said that while Labor would look at the omnibus package, its position “will reflect the position we took to the election.”

If the bill is passed after being introduced next week, it will leave ARENA with just $300 million of legislated funding, over and above its current budget that includes $100 million earmarked for supporting large-scale solar schemes.