01 JULY 2025

Welcome to our news round-up. See previous issues here.

POTENTIAL DISRUPTION TO OIL MARKET SIGNALS AGAIN AUSTRALIA MUST KICK OIL HABIT

June saw a seismic escalation in the Middle East conflict, with US airstrikes on key Iranian uranium enrichment sites following Israel’s military campaign aimed at halting Iran’s nuclear ambitions. The situation signalled a dramatic rise in geopolitical instability in a region central to global fossil fuel exports—posing grave energy security risks to world energy markets and oil import-reliant economies like Australia.

Iran’s parliament voted at the time to close the Strait of Hormuz, the vital shipping channel for 20% of the world’s daily oil. Brent crude prices surged, with potential to exceed the US$130 highs of the Ukraine war. Although the Strait remains open, a shaky ceasefire is in place and oil prices have fallen for now, the backdrop of extreme volatility remains.

Australia imports over 90% of all its refined oil products, e.g. diesel, petrol and aviation fuels, as well as crude oil feedstocks for refineries, leaving us dangerously exposed to supply shocks.

Our main imports come via Singapore, but those supply chains rely heavily on resources extracted in the Middle East. Energy import data underscores this vulnerability: as of April 2025, Australia had just 26 days of diesel, 31 days of petrol, and 32 days total coverage for oil products. 

This echoes the last energy crisis, as fossil fuel prices world-wide skyrocketed off the back of Russia’s 2022 invasion of Ukraine. Oil import prices rose 244% between October 2020 and June 2022. While prices have eased, they remain elevated—leaving little buffer against another shock.

Energy prices were a flashpoint in the 2025 Federal election and remain central to Australia’s cost-of-living crisis. The lesson is clear: fossil fuels are volatile, expensive, and risky. So is the solution: we must decarbonise and electrify transport, slash our imported oil dependence, and scaling up domestic renewables, grid-firming tech, and EV uptake.

Our world-leading mining sector — Australia’s biggest diesel user — is also exposed. Capping and phasing down our largest fossil fuel subsidy, the Fuel Tax Credit Scheme, which is currently set to cost the economy $185bn in foregone tax receipts in the 24 years to 2030, is essential to incentivise the electrification drive of diesel-based mining machinery. 

The current instability is a warning. Energy independence must be a top-tier priority if Australia is to thrive in a decarbonised global economy and that means ending our addiction to imported oil.

>>> See our full opinion piece in the Australian Financial Review.

>>> Matt Pollard’s updated report on the Fuel Tax Credit Scheme is forthcoming, building on our September 2023 report on this topic. This report called for a $50m cap per company on fuel tax credits, a call echoed last month by Fortescue.

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CHINA HITS 1,000GW SOLAR MILESTONE – HALF THE WORLD’S SOLAR

China’s clean energy transformation delivered major milestones in May 2025:

• 🔋Solar Dominance: China’s total installed solar capacity surpassed 1,000GW – nearly half of the world’s total. In May alone, China added 93GW of solar capacity, more than double Australia’s total solar fleet.

• 💨Wind Growth: China added 26GW of wind capacity in May. Wind and solar together accounted for 93% of new power capacity additions in 2025 to date.

• ⚡Renewables Surpass Hydro: For the first time ever, solar power generation overtook hydropower in China. Zero-emissions sources made up 41% of all power generation between January and May, with solar output rising 39% year-on-year.

• 💡Grid Investment Soars: Power grid investment reached US$28 billion from January to May 2025, up nearly 20% year-on-year, enabling transmission of increasingly distributed clean power.

• 🚗EV Sales Surge: China sold 4.4 million EVs in the first five months of 2025 (+34% YoY). BYD overtook Tesla in European EV sales in April, cementing China’s leadership in global EV markets.

🌍 Global Footprint

• 🇫🇷AESC in France: In a major milestone for China-France collaboration, Chinese battery firm AESC began production at its EV gigafactory in France, supplying Renault with advanced batteries for up to 200,000 EVs annually. The project has already created 650 jobs and will scale to 1,000 – with French President Macron lauding China’s technology leadership.

• 🚗BYD’s New Moves: BYD announced new R&D and production investments in Hungary and Cambodia, reinforcing its role as a global EV and battery giant. It now exports 200,000 vehicles monthly, with nearly half going to Europe.

• 📊IEA Investment Outlook: As we noted in our last edition, the IEA’s 2025 World Energy Investment report confirms China as the largest global energy investor, accounting for one-third of global clean energy investment (US$627bn). Clean energy is now central to China’s economic growth and structural decoupling from emissions, and energy independence.

For further insights, read CEF China analyst Caroline Wang’s full China Monthly Energy Update here.

Caroline recently visited Shanghai as part of the flagship Australia-China Empowering Emerging Leaders in Clean Energy (ELICE) program, led by UNSW and funded by the National Foundation for Australia-China Relations.

>>> Caroline shared her reflections on the trip in an opinion piece published by the Australian Institute of International Affairs, and a longer version in Renew Economy.

>>> Tim wrote an op ed for CGTN on Global Chances to Improve Energy Security and Drive Sustainable Growth, detailing China’s leadership, and was quoted in this article in Renew Economy reporting China’s staggering progress. 

>>> See Tim’s presentation to the Noose Energy Conference on China’s leadership in zero emissions industries of the future - opportunities for regional Australia

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PIVOT OR DECLINE: PROJECTED $30bn+ SLUMP IN RESOURCES EXPORTS A WAKE UP CALL

The Office of the Chief Economist’s latest data out this week forecasts that Australia's resource and energy export revenues will slump $33bn from $385bn in 2024-25 to $352bn in 2026-27:

• This is driven primarily by a 17% drop in iron ore revenues from $116bn to $97bn and a 20% drop in LNG from $67bn to $53bn from 2024-25 to 2026-27. From 2022-23, where Australia’s energy exports spiked, LNG revenues are forecast to fall 42% to 2026-27, whereas iron ore revenues are expected to drop 22%. 

• Thermal coal is forecast to drop >60% from highs of $66bn in 2022-23 to $26bn in 2026-27. 

• Metallurgical coal revenues are forecast to fall ~34% from highs in 2022-23 to $42bn in 2026-27. 

The projected deflation of Australia’s export earnings is a lens to threats to our future economic resilience and security – a stark reminder of the need to increase our economic complexity, to diversify from fossil fuels, which face inevitable structural decline as our key trading partners accelerate their economic decarbonisation, and to prioritise value adding our resources. The projections underscore the case, for example, to pivot to green iron production rather than shipping rocks of ore. 

CEF has stressed the risks and opportunities that emerge from an accelerated global transition. We should be leveraging our comparative advantages in renewable energy to process our commodities onshore, embodying decarbonisation in value-added exports and scaling a green commodities industry here. 

Developing a green iron industry in Australia is a clear path to replace lost GDP from our terminal fossil fuel exports, given the scale at which we compete in the global steel value chain as world #1 exporter of iron ore. However, currently commercialised technologies to produce steel without coal and gas are not suitable to the vast majority of Australia’s iron ores. Failure to actively facilitate research, develop and demonstrate enabling technologies, in partnership with key allies across East Asia, risks the erosion of Australia’s iron ore industry as steel supply chains restructure to regions with high-quality, low-impurity iron ores – at the same time as our fossil fuel industry declines. 

The OCE forecasts are a critical reminder of the importance of the Future Made in Australia re-industrialisation package and the Capacity Investment Scheme to accelerate renewables deployment. Progress made in Labor’s first term is commendable, but to safeguard our future economic resilience and security, we must now see a step-change in ambition to structurally pivot away from dying industries.  

>>> See our full op ed.

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NSW BUDGET: ECONOMIC IMPACT OF CLIMATE CHANGE RELATED DISASTERS UP 1000% IN 6 YEARS 

As climate change increases the intensity and frequency of extreme weather related events, the NSW Budget released in June revealed natural disasters cost $9.5bn in the 6 years since the 2029-20 bushfires. That averages $1.6bn per year – a more than 1,000% increase on $154m per year in the prior six years.

As Treasurer Daniel Mookhey noted, the state has been experiencing a run of the most devastating natural disasters in its history. This Budget also outlines a further $4.2 billion of disaster relief across the forward estimates, a figure that is likely to increase in response to both previous and potentially new natural disasters. Since coming to office in 2023, the Premier Chris Minns' government has approved an additional $8.2 billion in expenditure to support recovery from natural disasters.

A new Climate Change Authority report details the epic scale of the impost externalised by the fossil fuel industry onto the community:  "Extreme weather disasters will cost Australians $8.7 billion a year by 2050 without strong action to address climate risks, underlining the need for national leadership on adaptation."

It is beyond time we internalised back onto polluters the cost of fossil fuels both domestically and internationally – this is key to driving investment into decarbonising our energy and economic systems and mitigating the growing catastrophic impacts of the climate crisis. 

We need to expand the excellent momentum of the Safeguard Mechanism by lowering the threshold to 25ktpa, and driving up the ACCU price. We need to bring on a cap to the diesel fuel rebate (see item #1 above) and, just as importantly, in international trade, Trade Minister Don Farrell needs to get talking to our key North Asia trade partners about an Asian CBAM, as we argued in our most recent report.

In the meantime, as we deal with the momentum baked-in by our historic dependence on fossil fuels, it is past time for a permanent annual climate disaster line item every year in all State and Federal budgets.

>>> See Tim’s presentation to a South Asian Delegation hosted by DFAT and Griffith University on Integrating Climate Adaptation and Disaster Risk Reduction.

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POWER PRICE INFLATION PROMPTS REVIEW OF ENERGY REGULATOR BENCHMARK

Climate and Energy Minister Chris Bowen has announced a review of the Australian Energy Regulator's default market offer (DMO) system to ensure the overriding public interest to lower the cost of energy for Australian consumers is served.

Minister Bowen aims for the reforms to “be designed to get the best deal for consumers” and bring the system more in line with that used in Victoria, where households will be hit with only ~1% hikes to their power bills, while in NSW electricity bills will rise 8-10% from 1 July 2025, as we noted in our last edition.

As Minister Bowen commented, the DMO was intended to act as a benchmark price to stop the worst forms of price gouging, while leaving the job of putting downward pressure on prices to competition between energy companies. However, it’s not working that way and reform is needed.

Retailers get to pass on a range of costs without any regard to the cost of living crisis, their profit margins being protected by the AER regulations as they currently stand. 

>>> Listen to Tim on this topic on ABC Radio.

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A VERY BAD DEAL: ABU DHABI STATE-OWNED OIL COMPANY BIDS FOR FOR SANTOS

How is the $36.4bn bid in June by state owned Abu Dhabi National Oil Company to takeover Santos, Australia's second largest methane gas producer and exporter, remotely in Australia's national interest?

Treasurer Chalmers and the FIRB will have to decide if foreign state owned enterprises that are massive direct competitors to Australia are permitted to buy key strategic monopolistic assets in Australia. Santos controls material critical gas infrastructure on the east and west coast. Australian domestic energy users are already being gouged daily by the multinational gas cartel, and further foreign state ownership will further undermine our energy sovereignty and security, plus add to domestic consumer and industry gouging.

South Australia is signalling that it would intervene in the state’s interests to keep Santos headquartered there, and would leverage recently passed legislation that requires the state’s consent for change of licence ownership in the resources sector.    

The biggest loser from the proposed takeover of Santos by ADNOC? Beyond eroding Australia's national security and energy independence, that would be the ATO and all taxpayers.

How much corporate tax will Australia lose permanently from this proposed foreign takeover, funded by $36 billion of debt? The tax deductible interest resulting from this takeover is ~$2 billion annually, forever. We can look forward to 100% domestic corporate tax loss permanently from Santos – that should be a key starting point when considering this very bad proposal. This takeover best serves the Santos CEO’s interests, as he extracts a once-only fat takeover premium and sails off into retirement.

With massively unstable geopolitical dynamics impacting energy markets, approval would be a huge strategic and fiscal misstep. We urge the Treasurer/FIRB to apply the blowtorch of scrutiny to this play.

>>> See our commentary in Energy News Bulletin.

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WESFARMERS' MEGA-RETAILERS TO INTRODUCE SOLAR, BATTERIES & EV CHARGING WITH CEFC BOOST

Wesfarmers, which includes mega-retail chains Officeworks, Bunnings and Kmart, has announced that it will finance rooftop battery storage, an electric vehicle smart charging pilot and other efficiency initiatives across stores, accelerating electrification and decarbonisation.

Great to see a $100m supportive debt funding commitment from the Clean Energy Finance Corporation.

Wesfarmers is one of Australia's largest commercial landlords with many hundreds of sites, including massive warehouses and associated outdoor urban carparks, ideal for rapid deployment of C&I solar, solar carpark canopies and associated EV charging to lure even more store traffic whilst reducing range anxiety. Wesfarmers already has deployed 50MW rooftop solar capacity across 232 systems, but this should be doubled, and doubled again.

As of April 2025, WesCEF has already delivered on the majority of its target to reduce emissions ~60% by 2030 to 669ktpa -CO2-e, on its path to net zero by 2050. Beyond time Wesfarmers used their enormously strong balance sheet and consumer brands to accelerate capital deployment into distributed energy resources to best leverage our existing grid transmission and distribution for all Australians.

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CCF’s 10-PART ROADMAP TO GROW OUR PRODUCTIVITY

The Climate Capital Forum – an alliance of leading policy makers and investors addressing critical issues on decarbonisation, founded by Blair Palese, a Top 100 Green Power Player in The Australian’s annual list – is finalising its new public policy roadmap: Ten Ideas to Grow Australia's Productivity.

The strategic document will be released in early July and readers are invited to be in touch with Blair to receive a copy at b.palese@ethinvest.com.au

Key topics covered are:

1. Get Committed Funds Out the Door 

2. Early-Stage Cleantech Funding 

3. Expand Future Made in Australia Production Credits to Green Iron 

4. Superannuation Reform: Align Performance Tests with Climate Risk 

5. Mandate Australia’s Sustainable Finance Taxonomy

6. Diesel Fuel Rebate: Phase Out a Counterproductive Subsidy

7. Environmental Law Reform: Clear the Path for Clean Energy Projects 

8. Local Content Requirements: Build with Communities, Not Just in Them 

9. Social Infrastructure Bottlenecks: Build the Basics to Unlock Private Investment 

10. Workforce Shortages: Build the Human Capital for Net Zero

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AJ for Tim, Matt, Caroline and Fatima at CEF.

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This newsletter is not intended to provide, and should not be relied on for, tax, legal, investment or accounting advice, nor is it an offer or solicitation of an offer to buy or sell, a recommendation, endorsement, or sponsorship of any security, company, or fund. CEF is not responsible for any investment decision made by you. Unless attributed to others, any opinions expressed are our current opinions only. Certain information presented may have been provided by third parties. CEF believes that such third- party information is reliable, and has checked public records to verify it wherever possible, but does not guarantee its accuracy, timeliness or completeness; and it is subject to change without notice.