Mandating the Clean Energy Finance Corporation to invest in "clean coal" would require a spectacular government backflip just nine weeks after it issued the lender with strict conditions on the profitability of new projects.
Federal Energy Minister Josh Frydenberg and Finance Minister Mathias Cormann told the agency that its purpose was to help mobilise investment in "renewable energy, low emissions and energy efficiency projects and technologies", and instructed them to "apply commercial rigour when making investment decisions".
In particular, the direction said the CEFC must strive for an average return across the portfolio of 3 to 4 percentage points above the five year bond rate (2.3 per cent).
However, there are only three carbon capture and storage projects operating in the world and none are currently commercially viable. Super critical coal-fired power stations would also struggle to deliver commercial returns, while also not meeting current guidelines to reduce emissions by 50 per cent.