Climate change and the transition to a net-zero economy will profoundly impact “all aspects” of the economy in the coming decades, creating enormous challenges and opportunities, analysis in the Federal Budget said.
On Tuesday, the Budget strategy and outlook identified climate change as one of three structural shifts likely to have significant, long-term implications for society, policy and public finances.
“Harnessing the opportunities that come with these transitions, while effectively managing the challenges, is critical to our future economic performance and prosperity,” the analysis said.
The challenge for Australia was to manage the impact of more than 150 countries committing to net-zero and transitioning away from fossil fuels towards cleaner sources of energy.
According to the Intergovernmental Panel on Climate Change, the planet has already warmed 1.1C over pre-industrial levels, with insignificant action on climate change likely to damage the economy, lead to higher fiscal costs and affect how we live and work.
On the upside, the net-zero transformation would create new opportunities for Australia in emerging green industries.
The nation’s endowment of critical minerals and cheap, clean energy could position Australia as a key supplier of low-emissions technology across the supply chain.
For example, production of green hydrogen at scale could become more commercially viable than in many other countries due to the nation’s abundance of renewable energy resources.
Green hydrogen has been identified as crucial in making products which currently rely on fossil fuels, such as steel and aluminium.
To take advantage of the opportunity, the Budget allocated $2bn for a new program called Hydrogen Headstart to provide revenue support for large-scale renewable hydrogen products through competitive hydrogen production contracts.
Supporting a net-zero economy
- $2b Hydrogen Headstart
- $1.3b Houshold Energy Upgrade Fund
- $314m Small Business Energy Incentive
- $83.2 to establish Net Zero Authority
The intention is to help bridge the commercial gap for two to three flagship projects and put Australia on course for up to 1GW of electrolyser capacity by 2030.
Andrew Forrest’s Fortescue Future Industries (FFI), which is developing a portfolio of renewable energy and green hydrogen projects and is likely to benefit from Hydrogen Headstart, welcomed the initiative as a “great first step”.
“Green hydrogen will lower emissions, create energy security for Australia and create new jobs,” FFI said in a statement.
“Fortescue has the green hydrogen projects in the pipeline ready to go to help drive the Australian industry forward.
“Green energy will create significant economic growth and prosperity for Australia in the years ahead.”
The Government also announced $314m in tax relief through the small business energy incentive to provide businesses with annual turnover of less than $50m with an additional 20 per cent deduction on spending which supports electrification and more efficient use of energy.
The bonus tax deduction will be available for up to $100,000 of total eligible expenditure, with 3.8m small to medium-sized businesses able to access the new tax incentive from July 1.
Late last week, the Government said it would legislate for a national Net Zero Authority to help ensure the load of the transition is spread evenly between workers and communities. In the Budget the Government also committed $83.2m to establish the new Authority.
NAB group executive business and private banking Andrew Irvine said the Budget measures would help SMEs to reduce costs and contribute to the transition to net zero.
“Transforming Australia to a low-emissions economy is complex,” Mr Irvine said.
“The opportunities through decarbonisation will be immense if we get it right together.”
Recent NAB data revealed one in five small and medium-sized business owners “strongly intended” to improve the sustainability of their business in the next two years.
Many had invested in energy efficient assets to reduce operating costs, support the transition to net zero and create more sustainable businesses.
NAB launched its Agri Green Loan and green equipment finance products last December.
The bank has funded more than $56m of green loans for customers investing in practices and technologies to reduce emissions and build climate resilience.
An example was green equipment financing for Logan Group Investments to instal solar power across the company’s manufacturing facilities in NSW.
Logan Group Investments director Michelle Hendriks said the project would significantly reduce the company’s energy costs while helping to narrow its carbon footprint.
“Our manufacturing operations are based here in Australia, which means energy costs for the business have increased significantly over time, putting pressure on our cost base and profitability,” Ms Hendriks said.
“We’re always looking at where we can become more efficient.
“Moving to renewable energy will help us bring down operating costs while reducing our carbon impact on the environment, creating a sustainable future for generations to come.”
A further Budget initiative was the $1.3bn investment in the Household Energy Upgrades Fund, enabling the Clean Energy Finance Corp to partner with banks and other lenders in financing household energy upgrades.
The initiative is expected to help more than 110,000 households lower their energy bills.