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Craig Kelly may back Barnaby Joyce CEFC amendment to allow coal investment | Australia news

The outspoken Liberal backbencher Craig Kelly says he will look at an amendment from Barnaby Joyce that would allow the Clean Energy Finance Corporation to invest in coal.

Joyce took Liberals by surprise on Tuesday night by proposing an amendment to the government’s CEFC bill intended to allow for new investment in “high efficiency, low emissions” coal-fired power.

Just before the House adjourned for the evening, Joyce told the chamber he would be moving an amendment to his own government’s policy because he was willing to put his “name to the paper” and stand up for jobs in the coal sector.

To quell a potential rebellion within its own ranks, the government withdrew the bill from the order of business for Wednesday.

Craig Kelly said on Wednesday morning he was interested in the amendment. He told Guardian Australia he was yet to see the wording, but he was “absolutely interested”.

Kelly said if the government was prepared to allow investments in gas to stabilise the grid, then it should be prepared to countenance investments in high efficiency coal as well.

The Liberal predicted the amendment would have support from “half the Nationals”. When half was queried, Kelly said 40%.

Nationals MP Llew O’Brien has also backed Joyce, confirming he “absolutely” supports the amendment.

“The Nationals have obviously put forward a policy paper that sought to increase manufacturing in the country and assist coal fired power as part of that policy,” he said. “Barnaby’s amendment to this legislation is in line with that policy.”

O’Brien said he would be prepared to cross the floor to vote for the amendment regardless of whether the rest of the government voted against – but would still vote for the final bill if the amendment is defeated.

O’Brien signalled that if the amendment is unsuccessful the Nationals could seek Angus Taylor to make the same pro-coal rule change through regulation, noting it “doesn’t have to be done through legislation”.

Flagging his amendment in the chamber on Tuesday night, Joyce said: “The biggest issue for our nation, I hate to say, is not climate change, the biggest issue is the pre-eminence of China as a growing superpower, and our need to make this nation as strong as it possibly can be”.

“Our biggest issue is to understand that in the future, if we get a slide of American influence out of our region, we have to make this nation as strong as it can possibly be – and that means we have to be very mindful of our situation as compared to the situation in Europe or the Americas, because we live in a different part of the world”.

“Anything we can do to make this nation stronger, to bring back its manufacturing, to bring back its capacity to be resilient enough to withstand problems that may eventuate in the future, if the course of events in the past is to be any sort of guide – we must have the capacity to have the cheapest and most reliable power we can get.”

It is unclear whether Joyce will be joined by other Nationals in trying to amend government policy. The parliamentary freelancing on Tuesday night follows weeks of open conflict between Liberals and Nationals about Scott Morrison’s frequent signalling of conditional support for a net zero emissions target by mid-century.

During Tuesday’s regular meeting of the Coalition party room, Queensland National George Christensen sought a commitment from Morrison that any change to the government’s policy on emissions reduction targets would come to the party room for approval.

Under the government’s legislation, the Clean Energy Finance Corporation (CEFC) would take responsibility for a long-promised $1bn “grid reliability fund” that would be used to underwrite new “dispatchable” electricity generation that can be called on when needed, including “fast-start” gas-fired power plants, pumped hydro and batteries.

The changes would explicitly allow the CEFC to use the new fund to support gas-fired power on the grounds the fossil fuel would “support the achievement of low emission energy in Australia” by backing up variable solar and wind generation.

The government wants the grid reliability fund to be exempt from a requirement that every CEFC project must deliver a return for taxpayers. Its legislation would also give the energy minister, Angus Taylor, the power to direct the green bank to look at investing in particular technologies.

Labor supports the creation of the grid reliability fund, but is opposed to the CEFC being allowed to back loss-making projects and giving the minister the authority to direct the agency’s board. It reasons this would be likely to rule out the green bank investing in gas.

Labor’s new climate and energy spokesperson, Chris Bowen, told the House of Representatives that gas was not a low-emissions technology, as the government claimed.

“It has a role to play and it’s important, but it is not a low-emissions technology, and the government is engaging in sophistry by suggesting that it is,” he said.

“We on this side of the house believe that the CEFC should remain a renewables and decarbonisation funding agency, not one that can be directed by the minister of the day to fund fossil fuels, as important as gas is.”

The push to amend the bill is supported by the Greens – which wants to amend the bill to include language explicitly ruling out the CEFC supporting gas projects – and independent MPs Zali Steggall, Helen Haines and Andrew Wilkie.

The Greens leader, Adam Bandt, said the government’s changes would turn the bill “into the minister’s slush fund for gas”.

The CEFC was created in 2012 under a deal between Labor, the Greens and independents with a mandate to invest in renewable energy, low-emissions technology and energy-efficiency projects that would deliver a return.

Taylor has claimed the agency is already able to invest in gas-fired projects, pointing to comments made by the then-climate change minister, Greg Combet, in 2012 that the fossil fuel may “technically be eligible for funding as a low-emissions technology”.

Combet also said at the time gas was not expected to win backing from the CEFC as it had a track record in getting financed. The government has not said why the legislation needs to be changed to allow gas to be supported if it believes it is already eligible.

If the changes are passed, the CEFC could use the grid reliability fund to support six renewable energy and five gas developments shortlisted by the government early last year, though it would not be limited to these projects.

The changes would require the grid reliability fund to deliver an overall return for taxpayers, but remove an expectation that individual CEFC investments would have to meet that condition.

Taylor told parliament in August that the demands of the future electricity grid meant the government needed to back more reliability investments, such as flexible gas generators or significant pumped hydro projects.

A month earlier, the Australian Energy Market Operator had found additional gas-fired power was an option, but not essential, for a grid increasingly based on renewable energy, and gas prices would need to stay at lower levels than expected if it was to compete with pumped hydro, batteries and other alternatives.

Five former senior officers of the CEFC and the Australian Renewable Energy Agency last year wrote to MPs recommending they vote against the bill in its current form on the grounds it would explicitly allow the agency to fund fossil fuel projects.

The Business Council of Australia has called on the government to abandon its plan to underwrite new electricity developments on the grounds it would distort the market by deterring other companies from investing in new plants.

The council is among the major industry groups and investors to have supported draft legislation proposed by Steggall that would set a national target of net zero greenhouse gas emissions by 2050 and lay out a path to get there.

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