national Policy update

Energy briefing update – June 2022

• Federal election 2022 – climate policy takes centre stage

• Energy and climate policies of the new federal government

The federal election held in May 2022 saw an unprecedented number of candidates elected to the House of Representatives from outside the major parties. Many of these candidates campaigned strongly on increasing the ambition of Australia’s climate commitments – in particular, lifting the level of the 2030 target for emissions reductions.

In particular, this election has seen the rise of two movements. The Australian Greens go from one lower house seat to four, and from ten Senators to twelve. And six new ‘teal’ independents have taken previously safe inner-city Coalition seats. The name ‘teal’ arises from the candidates being considered ‘blue-green’, meaning that they are aligned with liberal values, but seek stronger commitments on combating climate change.

Although both major parties – and all states and territories – have committed to a goal of reaching net zero emissions by 2050, the level of Australia’s 2030 emissions reduction target remains a matter of difference between the parties:

• Australia’s current target made under the Paris Climate Agreement, is to reduce greenhouse gas emissions by 26-28 per cent by 2030, compared with 2005 levels; this is the position of the Liberal-National Coalition;

• The Australian Labor Party (ALP), and new federal Government, has a policy of reducing emissions of 43 per cent by 2030;

• The ‘teal’ independents campaigned on reduction commitments of between 50 and 60 per cent by 2030; and

• The Greens have a policy of reducing emissions by 75 per cent by 2030.

The ALP’s target is broadly consistent with achieving net zero by 2050, while the other parties’ targets are more ambitious. Labor has indicated it will seek to legislate its targets, but has so far indicated it will not be open to negotiating a higher target with independents and the Greens.

Nonetheless, the election is considered to give a strong mandate for increased action to combat climate change, which will require a step-up in efforts to reduce emissions.

So there’s a new federal government with new climate and energy policies. What will this mean in practice? We step through each of the policies that the ALP took to the election:

Reducing greenhouse gas emissions by 43% by 2030 compared to 2005 levels, and net zero by 2050

Labor’s emissions reduction commitments are a substantial increase over the previous government’s commitment, and are broadly consistent with achieving net zero by 2050, although some refinement may need to occur. While Australia will need to pick up the pace on emissions reductions, the increased action needed to realise these targets should be achievable, with realistic policy settings.

Increasing the share of renewable energy in the National Electricity Market to 82 per cent by 2030.

Increasing the share of renewable energy will allow the grid to do more of the heavy lifting in decarbonisation, and allow homes, businesses and industry to harness electrical technology to decarbonise their operations. This target is broadly consistent with the Australian Energy Market Operator’s predictions in the ‘Step Change’ scenario in the draft 2022 Integrated System Plan, which experts think is the most likely scenario.

Investing $20 billion to re-wire and modernise the electricity grid

Targeted investments in the grid will allow easier integration of renewable energy and storage, supporting the goal of 82 per cent renewables by 2030.

Enhancing the Safeguard Mechanism

The Safeguard Mechanism is an existing policy that requires the largest greenhouse gas emitters in Australia to not increase their emissions, through not exceeding ‘baseline emissions’. The new Government proposes to change the mechanism to require large emitters to steadily reduce their emissions over time by reducing their baseline.

This policy has generally been supported by industry groups like the Business Council of Australia and Ai Group as a realistic way to begin decarbonisation of the industrial sector.

The new Minister for Climate and Energy, the Hon. Chris Bowen MP, has indicated that development of the details of the policy will take place in consultation with industry, and the new policy will commence on 1 July 2023.

Decreasing taxes and tariffs on electric vehicles

A key policy of the government is to reduce import taxes and tariffs on electric vehicles (EV) to make them more affordable – including by removing the fringe benefits tax on EV models below the luxury car tax threshold. This could make it easier and more attractive for businesses to invest in EVs, or to provide them to employees as part of a remuneration package.

Slated to begin from 1 July – although details are not yet available – this could be a timely response to skyrocketing oil prices.

Investing in renewable manufacturing and low-emissions technology

Up to $3 billion of Labor’s National Reconstruction Fund will support renewable manufacturing, and the deployment of low-emissions technology in industry. The Fund will offer loans, guarantees and equity investments similar to the existing Clean Energy Finance Corporation. Energy-intensive businesses could be expected to benefit from supported upgrades to more efficient technology.

Skills package

The ALP has committed to 10,000 ‘New Energy Apprenticeships’, to be supported by a skills and training package. Details of this initiative are not yet clear, however a skills shortage is currently gripping many parts of the economy, so support to train up workers will be welcome for many businesses.

Supplementary FY23 budget

The new government is expected to release a supplementary Budget in October this year, at which time we would expect the details of many of these initiatives to become clearer.

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