The Australian Renewable Energy Agency will not be able to invest in carbon capture and storage after the Senate voted to disallow a government instrument expanding its investment remit.
Labor, the Greens and crossbench senators combined on Tuesday night to disallow a controversial instrument written by the energy minister, Angus Taylor, to allow investment in a broader range of technologies including some using fossil fuels.
The defeat was an upset for the government, which had expected to block the move with two votes from One Nation.
But the One Nation leader, Pauline Hanson, abstained from the vote, which crossbench senators and interested stakeholders attribute to her dislike of gas companies that pay no tax and pay dividends to foreign shareholders benefiting from the changes.
If the instrument had been allowed to stand, Arena could have invested in carbon capture and storage, “clean” hydrogen made using gas, heavy transport, low-emission cars, industrial energy efficiency and micro-grid pilot programs.
An initial vote was lost 27 votes to 28 when the Coalition and One Nation’s Malcolm Roberts combined to defeat the disallowance. Jacqui Lambie and Rex Patrick voted with Labor and the Greens.
But after 7.30pm, the Greens senator Peter Whish-Wilson told the Senate he had missed the vote because he had “a dicky hip” and “couldn’t run fast enough” to enter the chamber and cast his vote. He asked for the vote to be retaken.
Labor’s Jenny McAllister then revealed that Centre Alliance senator Stirling Griff, who is absent this week with leave, was supposed to be paired for the vote but his wishes “were not reflected” in the lost vote.
After some confusion, Coalition senators agreed to retake the vote, and about 8.20pm the disallowance motion passed the Senate 28 votes to 27. Hanson was absent from both votes.
The Greens leader, Adam Bandt, said the result was “a massive blow to this coal and gas-fired government”.
“Coal and gas are not renewable energy,” Bandt told Guardian Australia.
“Arena was a key achievement of the Greens/Labor/independent power-sharing parliament. First the Liberals tried to abolish Arena and then redirect its funds to coal and gas, but by backing the Greens motion, the Senate has just saved Arena.”
Taylor tweeted: “Labor have shown their true colours – opposing investment in new clean technologies which will create jobs and economic opportunities.” The energy minister said Labor didn’t “believe in technology to reduce emissions”.
The shadow climate change minister, Chris Bowen, said Labor would “continue to defend” Arena and the Clean Energy Finance Corporation.
Bowen on social media told Taylor “we’ve opposed and defeated your efforts to water down Arena’s commitment to renewables and give yourself … the power to determine what a ‘low emissions technology’ is”.
Using regulation to attempt to change Arena’s investment remit was controversial even among some Liberal senators.
On Friday, Guardian Australia reported that the standing committee for the scrutiny of delegated legislation, chaired by the Liberal senator Concetta Fierravanti-Wells, had warned that changing Arena’s investment rules without legislation could be illegal.
The Liberal senator Zed Seselja, representing Taylor, told a Senate estimates hearing last month the government had “strong legal advice” that the changes to Arena could be made through regulation.
In a letter to Taylor on Thursday, Fierravanti-Wells noted the objective of the laws governing Arena was “to improve the competitiveness and supply of renewable energy in Australia”.
The Liberal senator said there was nothing in the bill’s explanatory memorandum “to suggest that it was contemplated that the Arena would have the ability to foster anything other than renewable energy technologies”.
“The committee is concerned that the [change] deals with the significant matter of expanding the jurisdiction of the Arena from investing in renewable energy technologies to programs relating to energy efficiency and low-emissions technology,” Fierravanti-Wells wrote.
The committee believed the changes were “more appropriate for parliamentary enactment”, meaning they should be made through legislation, she concluded.