The Budget acknowledges that tackling climate change requires a dual focus on ensuring social justice, and on developing new world-leading clean energy industries.
It allocates a total of $3.6 billion to two new big-ticket climate and energy programs – with $1.6 billion largely targeting households, and $2 billion earmarked for renewable hydrogen.
Importantly, the Budget also provides modest dollops of funding for an array of measures including a carbon border levy inquiry, a review to strengthen national greenhouse gas accounts, action to implement the Chubb ACCU review recommendations, and the development of a new net-zero roadmap for transport and infrastructure.
The Budget's recognition of the climate action and social justice link is mainly reflected in the establishment of the new Net Zero Authority (funding of $83.2 million over four years) and the $1.6 billion package for energy saving upgrades for homes, businesses and social housing.
The new Net Zero Authority – announced ahead of the Budget – will start operations within the Department of Prime Minister and Cabinet pending its formal establishment, and will have a remit focused on just transition measures in regional areas.
PM&C has already been heavily involved in just transition work through its coordination of the cross-departmental Net Zero Economy Taskforce, which has focused on how best to support regional communities through the transition and will shortly wrap up its work.
The lion's share of the $1.6 billion energy savings upgrades package comprises $1.3 billion to establish a Household Energy Upgrades Fund, which will involve $1 billion administered by the Clean Energy Finance Corporation.
The CEFC, in partnership with financial institutions, will provide support through the fund for household energy upgrades, with the aim of assisting more than 110,000 households to lower their energy bills.
Importantly, $300 million from the Household Energy Upgrades Fund will be directed at supporting upgrades of social housing, which is expected to benefit about 60,000 social housing properties.
Significant expansions of efficiency rating schemes
Another $36.7 million from the energy savings package will go largely towards expanding the Nationwide House Energy Rating Scheme (NatHERS) so that it applies to existing homes, which would give buyers and renters information on the energy efficiency of older dwellings.
Some of the $36.7 million will also go towards a significant expansion of the GEMS minimum energy efficiency and labelling scheme, which currently rates and labels a far smaller range of equipment than international counterpart schemes.
The energy savings package also includes $310 million for a Small Business Energy Incentive, which will provide businesses with annual turnover of less than $50 million with an additional 20% bonus tax deduction on spending that supports electrification and the more efficient use of energy.
The bonus deduction will be available for up to $100,000 of total eligible expenditure, with a maximum bonus deduction of $20,000 available to individual businesses, and the government says it will help up to 3.8 million SMEs achieve save energy.
Support for up to a gigawatt of electrolyser capacity by 2030
The Budget's focus on making Australia a renewable energy superpower is heavily banking on renewable hydrogen, with $2 billion earmarked for a new Hydrogen Headstart program.
This will provide "revenue support for large‑scale renewable hydrogen projects through competitive hydrogen production contracts".
The program's aim is to help bridge the commercial gap for early projects and put Australia on course for up to a gigawatt of electrolyser capacity by 2030 through two to three flagship projects.
Both the Department of Climate Change, Energy, the Environment and Water and ARENA will be involved in administering the Hydrogen Headstart program.
The Budget doesn't clarify the timeframe over which the money will be allocated.
Instead, nearly all the program's funds will be held in the government's Contingency Reserve, which covers items that cannot or should not (for commercial sensitivity reasons) be precisely allocated in Budget papers.
New and rescued agencies
It was only a year ago, the day before the 21 May 2022 federal election, that the Labor Party committed to establishing an environmental protection agency, and this Budget provides $121 million over four years to get it up and running.
Another new agency, Environment Information Australia, will receive $51.5 million over four years, with the goal of ensuring consistent, reliable and broad access to environmental data across governments, project proponents and scientists.
Alongside the three new agencies – the Net Zero Authority, Environment Protection Australia, and Environment Information Australia – this Budget also completes the rescue of the Climate Change Authority.
The last Budget delivered by the Coalition, in March 2022, proposed that the Climate Change Authority have a staff of 11 in FY23 and total resourcing in that year of under $3 million.
The government has already boosted staffing to 38 this financial year and expenditure this year is expected to be $11.6 million, and the Budget provides for 65 staff in FY24, and total resourcing of $14.9 million.
Budget papers also show CEFC average staffing will increase from 156 to 190 in FY24, while Clean Energy Regulator average staffing will increase from 337 in FY23 to 388 in FY24.
Support for renewables infrastructure auctions
The new Capacity Investment Scheme – with total funding that is "not for publication" – aims to underwrite more than $10 billion of investment in firmed‑up renewable energy projects up and down the east coast.
It will start with the provision of support for projects that are successful in renewables auctions held in South Australia and Victoria, but will then extend to other jurisdictions.
Minister Chris Bowen, with the backing of state and territory energy ministers, flagged the establishment of the scheme last December.
Funding for Chubb response, focused on HIR
The Budget allocates $18.1 million over the next two years to implement priority reforms to the Australian Carbon Credit Unit (ACCU) scheme.
Just over half of that is directed at human induced regeneration (HIR) projects, with $5.9 million allocated for audits of HIR projects, and $4.5 million to be directed to upgrading the Clean Energy Regulator's systems to publish HIR carbon estimation area data.
The remainder will go towards consultation on implementing Chubb's recommendations and towards establishing the new Carbon Abatement Integrity Committee that will oversee ACCU method development and integrity.
Nature spending focused on legal administrative infrastructure, national parks
In a Budget that needed to tackle the twin crises of climate change and biodiversity loss, nature clearly comes off second-best.
The focus is on getting the legal and administrative systems right, as previously flagged by Minister Tanya Plibersek, and one of the headline nature spending packages is $214.1 million over four years "to deliver the Nature Positive Plan".
About 80% of that will be dedicated to establishing Environment Protection Australia and Environment Information Australia.
Of the remainder, $34 million is earmarked for the development of legislative reforms and national environment standards, and further work on a Nature Repair Market will receive $7.7 million in FY24.
In addition to the Nature Positive Plan funding, the Government will provide $355.1 million over the next four years (and $68.0 million annually after that) to protect Commonwealth national parks and marine reserves.
Clarity on Powering the Regions expenditure
The Budget also provides clarity on how its $1.9 billion Powering the Regions fund will be spent, with the funds to be used for a grab bag of measures including industry support, investigation of a Carbon Border Adjustment Mechanism (CBAM), and the purchase of carbon credits.
A total of $450.3 million over four years from FY24 (and a further $149.7 million over three years from FY28) will go towards the new Safeguard Transformation Stream to support decarbonisation investments at trade-exposed industrial facilities covered by the Safeguard Mechanism.
A total of $400 million over four years from FY24 will go to the new Industrial Transformation Stream to support reduction of direct and indirect emissions at existing industrial facilities, or clean energy development, in regional Australia.
A further $400 million over the next three years will be used to establish the Critical Inputs to Clean Energy Industries Stream that will support industries such as steel, cement and lime, alumina and aluminium that provide essential inputs for the development of Australia’s clean energy industries.
Another $14.5 million over the next four years will accelerate the development of the offshore renewable energy industry growth strategy and related regulatory compliance activities.
A total of $8.6 million over the next four years will support the implementation and review of the Safeguard Mechanism reforms, and $3.9 million over two years will go to a review of policy options to reduce carbon leakage, including a potential Australian CBAM.
Funding of $89.0 million has also been provided through the Powering the Regions Fund to support energy transition investments important to regional Australia, including the 2023–24 Budget measures titled Capacity Investment Scheme and Ensuring the Supply of Reliable, Secure and Affordable Energy.
The Budget confirms Powering the Regions Fund will continue to support Government purchase of Australian Carbon Credit Units, although no specific amount is allocated.
Tentative steps on transport, battery recycling, and EVs for apartments
The Budget provides $20.9 million over five years (including this financial year) for initiatives to decarbonise the transport and infrastructure sectors.
This includes Funding includes $7.8 million over four years to develop a Transport and Infrastructure Net Zero Roadmap and Action Plan, and $7.4 million over four years to develop fuel efficiency standards.
It also includes $5.2 million over four years that will support various measures, including the development of a national charging infrastructure mapping tool, evaluation of requirements for retrofitting existing multi-residential buildings with electric vehicle charging infrastructure, and preliminary work on a "large format" battery recycling stewardship initiative.
The Budget also notes that the Heavy Vehicle Road User Charge is already slated to gradually increase from 27.2 cents per litre of diesel to 32.4 cents per litre in FY26, which it says will "decrease expenditure on the fuel tax credit by $1.1 billion over four years".
Critical minerals and gas
The Budget provides $80.5 million over four years to support the critical minerals sector, with most of it ($57.1 million) allocated for international engagement and the development of supply chains with international partners.
Another $23.4 million over four years will showcase Australia’s environmental, social and governance credentials to international markets.
The Budget also includes support for abatement action in the fossil fuel industry, though some projects are described in very vague terms.
A total of $14.3 million over three years will be used to establish a partnership with the Queensland government to support technology projects "that reduce emissions and enhance energy security".
Another $12 million over three years will be used to review the environmental management regime for offshore petroleum and greenhouse gas storage activities "to ensure it is fit-for-purpose for a decarbonising economy".
The review "will also examine opportunities to provide regulatory and administrative certainty for offshore carbon capture and storage projects to enable Australian industry to meet net zero targets", while delivering energy security.
Another $6.7 million over four years will deliver "a Future Gas Strategy to support Australia’s energy system to become cleaner, cheaper and more reliable while maintaining our international reputation as a trusted energy supplier to the region".
Strengthening national greenhouse gas accounts
The Budget allocates $21.8 million over three years "to maintain and enhance" Australia's national greenhouse gas accounts.
The Budget also includes:
* $28.0 million over two years to develop Australia’s first National Climate Risk Assessment and a National Adaptation Plan, and conduct an independent review of the Australian Climate Service that was established in response to the Natural Disasters Royal Commission.
* $600,000 to be spent this year on the development of a maritime emissions reduction national plan.
* $14.8 million over four years to establish the new Powering Australia Industry Growth Centre to help Australian businesses manufacture renewable technologies.
Signs of the times
The Budget includes two miniscule amounts of funding that are symbolic of the direction that the world is headed.
In acknowledgement of the fact that rapidly developing a clean energy industry is an urgent competitive priority, it allocates $5.6 million to analyse intensifying global competition for clean energy industry, and to identify actions before the end of 2023 that will ensure Australian competitiveness and shore up its capacity to attract capital investment.
And in a small recognition that planning the phase-down of fossil fuels is now crucial, it also includes $4.5 million in FY24 to develop a roadmap "to grow an offshore petroleum decommissioning industry in Australia".
Several of the climate and sustainability measures in the Budget will be funded at least partly through the re-allocation of funding from other programs.