On Tuesday night, the Australian Treasurer delivered the first Federal Budget since the nation’s parliament put net zero targets into law.
The budget papers detail more than $4.5 billion in climate-related spending, including nearly $4 billion in funding towards reducing Australian emissions.
Among the measures announced are significant investments towards the substantial emissions reductions Australia can make by 2030 to play its full part in limiting global warming to 1.5 degrees Celsius.
Importantly, these programs lay the groundwork upon which the Government can build to overachieve on the legislated 43 per cent target.
Below we take a look at some of the big-ticket climate spending in this year’s Budget, but there’s also money for small businesses, sustainable agriculture, funding to reduce transport emissions and more. We’ll continue to analyse the Budget papers and you can expect to hear more from us on the topic in the near future.
Hydrogen Headstart
Hydrogen was the subject of the biggest single climate spend in the Budget, with more than $2 billion for a new Hydrogen Headstart program to ‘scale up development of Australia’s renewable hydrogen industry’.
In announcing the investment, the Government cited Climateworks analysis for the Australian Industry Energy Transitions Initiative (Industry ETI) which found that in a modelled least-cost, 1.5 degree-aligned scenario, decarbonising Australian industry could require as much as 364,000 tonnes (44 PJ) of hydrogen by 2030 and 2,230,000 tonnes (268 PJ) by 2050.
The $38 million Guarantee of Origin scheme to track the emissions intensity of energy products is also an important step in attracting investment to Australian renewable energy projects, including hydrogen projects.
The funding for renewable hydrogen builds on previous announcements – including $3 billion of the National Reconstruction Fund to unlock investment in renewables and low-emissions technologies – as well as the Powering the Regions fund.
Energy efficiency package
The second-largest single climate spend in the Budget was $1.3 billion for the establishment of the Household Energy Upgrades Fund.
This fund will provide $1 billion to the Clean Energy Finance Corporation (CEFC) for them to partner with banks and other lenders to provide low-interest loans for household energy upgrades.
Eligible upgrades include battery-ready rooftop solar, energy efficient electrical appliances, double glazing and other improvements. The Government estimates that more than 110,000 households will benefit from this fund.
The Household Energy Upgrade Fund’s remaining $300 million will be spent in partnership with state and territory governments on upgrades to 60,000 social housing properties.
Our analysis shows that this initial government investment would be best invested in helping households swap gas for efficient electric appliances, especially for space conditioning and hot water, as well as improving the thermal shell of their home through interventions such as double glazing, ceiling, wall and floor insulation. Ensuring the Fund addresses thermal efficiency of the homes as well as efficient electrification is essential to improve comfort and reduce peak electricity demand.
This support to households is a good first step and will need to be expanded and leveraged to ensure that most of Australia’s 11 million households can invest at least $10,000 to $40,000 to switch off gas and achieve higher levels of thermal efficiency.
It is therefore critical that private finance – banks and other lenders – leverage the Household Energy Upgrade Fund to enable households to undertake comprehensive energy performance upgrades. Every residential and private mortgage or loan is an opportunity to help households switch off gas and improve energy performance – each a step towards a healthy net zero future.
While the Budget supports homeowners and social housing, it leaves a gap for the nearly one third of Australians who live in rental homes.
Rental homes are often the worst performing buildings, and there is still a need for stronger regulation for renters, such as mandatory energy performance disclosure and minimum rental standards.
In addition, the budget also includes funding for an expansion of the Nationwide House Energy Rating System, as well as an expansion of the Greenhouse and Energy Minimum Standards program. This is important to help householders understand how their home’s energy performance can be improved.
This package is a good first step. More funds will be needed in each of the coming years if Australia is to step up to the challenge of retrofitting and upgrading most of the nation’s existing homes.
Climateworks is developing analysis to inform energy performance upgrades for the 16 most common types of Australian homes in all climate zones.
Net Zero Authority
Also included in Tuesday’s budget was more than $83 million for the recently announced national Net Zero Authority – with a start date of 1 July and $23 million in the first year to establish the Authority.
This body will be essential in coordinating the various government programs to ensure regional Australia can seize the economic opportunities the energy transition offers.
According to the federal government, the new authority will:
- support workers in emissions-intensive sectors to transition to new jobs and learn new skills
- coordinate programs and policies across government to help regions and communities attract and take advantage of new clean energy industries
- help investors and companies take up opportunities in the net-zero transformation.
In our view, these are the right areas for the Authority’s focus.
The Authority is long overdue and can help Australia make the most of this once-in-a-generation economic transformation.
Climateworks will be working with the Authority to ensure it can unlock the opportunities available to Australia as the world transitions to a net zero global economy.
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