Federal Budget Insights 2022-23

From ambition to action: how the Federal Budget will be the first look at the new Government's plans to achieve Australia's emissions targets

^{Share this article}

Varya Davidson, Energy Transition Lead Partner

Even though the ink is barely dry on the Bill that enshrines an ambitious emissions reduction target of 43% by 2030, working toward net zero by 2050, the upcoming Federal Budget is a significant opportunity to shape the future of Australia’s energy transition. 

The new Government has come out of the blocks running, signaling a new era when it comes to our energy transition, and Australian businesses, industries and communities appreciate this greater certainty. And when it comes to our net zero target, the Budget is our first chance to look at the fine print.

From Federal Budget ambition to zero carbon emissions

A few key challenges that could spell the difference between success and failure should be front of mind for the new Government as it delivers Australia’s energy transition targets. 

One challenge is the timeline to replace our energy baseload from fossil fuels to renewables including solar, wind and hydrogen, the speed of which will be critical. Extensive infrastructure to transport and distribute renewable power will also be needed to support this transformation. 

A skilled workforce will be essential for driving these changes, and the Federal Budget is an opportunity to address the skills shortages currently facing the nation - and to recognise that the skills for the jobs tomorrow are very different to those of today. Allocations towards women in science, technology, engineering and mathematics, and support for First Nations Peoples to study and retrain can ensure a more diverse and inclusive clean energy workforce. And we mustn’t forget about those regions and communities that will be most affected along the journey.

As the transition picks up pace, now’s the time to give these transitioning regions and communities the certainty and support they need to thrive and add value in new ways. 

Australia is home to a world-renowned ideas-led economy, and the Budget is a chance to build this burgeoning industry by increasing support for the research and development (R&D) of climate change technology. It means more investment in local start-ups, more high-value jobs for locals, and more technology for a faster and more seamless transition.

The unprecedented complexities facing the world have exposed supply chain disruptions and vulnerabilities, and the need for more capable onshore manufacturing, something that will be front of mind for the Government as it plots a course for energy transition success.

The Federal Budget may also help to kickstart opportunities for the government, business and the private sector to work together to accelerate our journey to net zero, and it paves the way for a truly integrated renewable energy system with reduced competition between states.

Driving our energy transition agenda

Financing the renewable energy transition remains the single biggest challenge facing governments and the private sector. 

The new Government’s emissions reduction goals pave the way for more investor confidence, tax and other incentives for R&D. Support for smaller pilot renewables projects, cleantech and other net zero advancing start-ups and scale-ups could be the key to further encouraging investment. 

Greater certainty about regulations, and deregulation measures where appropriate, are other priorities that merit consideration in Budgetary deliberations.

The new Government has a bold approach to climate action, but it must continue to send loud and clear messages about speeding up our efforts. Support for the initial uptake of new technologies such as sustainable aviation fuel and green hydrogen are ways to do just that. 

We would also encourage any measures that pave the way for standardised reporting and disclosures, or incentives for both innovative small-scale and larger infrastructure investments.

A successful accelerated energy transition depends on a steady stream of private sector investment - well ahead of the curve - in order to shore up Australia’s comparative advantage and ensure it becomes a global competitive advantage. 

Businesses are leading the way in our energy transition journey but they need regulatory certainty, measurement and reporting consistency, and new solutions for fossil fuels and heavy emitting industries.

Incentivising businesses to speed up energy transition

With collaboration vital to a successful transition, the Government could also turn its attention to how it supports businesses to play their part in picking up the pace on the path to net zero. Direct investment and grants for worthy projects, faster and more seamless approvals and reduced red tape will bring business to the table. Likewise, subsidies for jobs and the transitioning of communities and regions.

When it comes to the energy transition, there’s no greater enabler than a booming critical minerals industry. Critical minerals such as cobalt, silicon and lithium are essential to renewable energy technology, and Australia is home to some of the largest deposits of critical minerals in the world. The Government’s $15 billion National Reconstruction Fund has already earmarked $1 billion for a Value Adding in Resources fund.

Building a National Battery Strategy would be a further catalyst for investment in Australia’s energy transition manufacturing capabilities and could potentially transform global perceptions about our current minerals plans. Our hydrogen industry is another that could be set to benefit once the Budget is tabled.

Australia’s new emissions legislation means we’re now on the path to net zero. What’s contained in the Federal Budget will be an important first-look at the Government’s roadmap to achieving these targets.