12 MAY 2023

__A MEASURED BUDGET, BUT MORE DECARBONISATION AMBITION NEEDED |

The Albanese Government’s 2023 budget overall was sensible and measured, took considered steps towards restoring social equity, and included some highly laudable decarbonisation measures as it left room for more ambition. A key downside was the damp squib on long overdue reforms of the failed PRRT, which leaves the multinational gas cartel off the hook for anything remotely resembling a fair return to Australians on superprofits extracted and privatised from our sovereign public assets.

A wonderful surprise was a $4.2bn 2022/23 surplus, a staggering $40bn turnaround in just six months, and a massive fiscal balance improvement that carries forward to deliver a huge $200bn reduction in federal government peak net debt over the forward estimates of $703bn by FY2027 (24.1% of GDP). The Albanese government has been the beneficiary of both a stronger than expected domestic economy and temporarily surging commodity prices, but the scale of the inherited budget repair task it has now successfully commenced should not be underestimated given the structural headwinds it faces including normalisation of the terms of trade.

Importantly, Treasurer Jim Chalmers’ 2023/24 budget invests in the capacity-building and policy architecture that underpins good government and helps enable the energy transition, such as its support for ACCU integrity, emissions measurement and the NaTHERS home energy ratings scheme; the new Environment Protection Australia watchdog and Net Zero Authority; and financing for the ACCC to combat greenwash, amongst other measures.

There was $4bn in new funding to establish Australia as a renewables superpower, which we detail in our full budget analysis.

This takes total funding to $40bn including previously announced flagship programs, such as Rewiring the Nation, Powering the Regions and the National Reconstruction Fund.

CEF considers this well below the cumulative $100bn of public national interest-focused capital investment needed to crowd-in the $200-300bn of private capital required to definitively position Australia as a global new energy economy leader.

The scale and pace of the transition challenge is escalating domestically and globally, signalling that a monumental, epochal shift is already well underway. The government's 82% renewables by 2030 target is looming, the climate crisis is mounting, energy security is a defining economic and social equity issue, and internationally, game-changing decarbonisation initiatives like the trillion dollar US Inflation Reduction Act (IRA) and the EU Net Zero Industry Act (NZIA) are supercharging the global energy transformation landscape before our eyes. 

We must move faster than the pace set in budget 23/24 to to secure our energy independence and leverage our once-in-a-century opportunity for global leadership in zero emissions trade and investment – including as a valued-added critical minerals superpower, exporting embodied decarbonisation to the world by processing our energy transition materials onshore using our abundant firmed renewables. The opportunity cost of not doing so is unthinkable. We await Resources Minister Madeleine King’s Critical Minerals Strategy; this might materially up the ambition.

Since the budget was handed down, the WA government has stepped in to upstage its federal counterparts with plans to build 50GW of wind, solar and storage over 20 years, a good indicator of the scale of effort required nationally. This will trigger a massive electrification of heavy industry there, decarbonising the production of ammonia and lithium hydroxide.

The challenge now facing the federal government calls for fiscal policy clarity and courage, including on the revenue side, to fund the level of investment in economy-wide decarbonisation that effectively responds to the scope and impetus of the IRA and other key developments, and attracts large-scale private capital.

New multibillion dollar investments into the US are being announced weekly – our loss. Albemarle and Tesla both announced huge new lithium hydroxide factories, and Nel Hydrogen of Norway announced the world’s largest electrolyser factory, again in the US – 4GW or 4 times Twiggy’s Gladstone factory.

When 2022/23 gross profits of LNG exporters exceeded a staggering $63bn, the PRRT changes, which will pull forward just an extra $600m annually, totalling $2.4bn – a pull forward, not an increase in expected PRRT receipts over the long term – are a missed opportunity. 

This misstep was compounded by zero effort to cap the completely unsustainable $9bnpa imported diesel fuel rebate undermining both Australian energy security and climate ambitions – an impost which is bigger than all the renewables support in the budget put together – and failure to ensure multinational corporations operating in Australia pay any corporate tax here, particularly those global fossil fuel global giants who have contributed precisely zero in the last decade as they exploit our public assets. Tax reform on these fronts should be a federal priority.

The election of the Albanese government in May 2022 was a defining moment for climate and energy policy that dealt Australia back into the game after a devastating decade of LNP failure and chaos, and the government is to be applauded for wasting no time in putting in place landmark initiatives to restore decarbonisation momentum. 

We encourage the government to now back Australia, and lock in this momentum with increased fiscal policy ambition.

>>Read our full budget analysis in Renew Economy.

>>See our other budget media coverage: ABC NewsRadio, AusBiz, AAP, Guardian, Stockhead, Crikey, PV Magazine, Upstream Online, Sky News and more. 

__CHINA RENEWABLES SURGE |

China continues to lead the world by a very significant margin on decarbonisation, having added 149GW of renewable energy capacity in 2022.

To meet increasing electricity demand, China is deploying both more coal power plants and more renewables. However, it is important to note that renewables are entirely leading China’s newly added power capacity. 

During the first quarter of 2023, China’s decarbonisation trajectory saw a huge uptick with a record 50 GW of renewable energy capacity added, 84% of total newly installed. Newly added coal power was 8.1 GW, just a 14% share, according to the National Bureau of Statistics (NBS). 

Simultaneously, China has accelerated its push into electric vehicles with its new record high 29% EV share of passenger vehicle sales in 1QCY2023, with EV sales up 26% even as total sales fell 7% yoy.

This transformation is taking place in the context of major policy developments designed to drive transition including the US IRA,  and the EU’s NZIA and Critical Raw Materials Act (CRMA). The IRA has elevated the US investment in both deployments and manufacturing capacity, resulting in increased global ambition commensurate with the climate science. Yet BNEF estimates China invested four times as much as the US in zero emissions technologies in total in 2022. 

This global race to the top is starting to put the world on the trajectory solely needed.

>> Read the full analysis by CEF’s China energy policy analyst, Xuyang Dong

__PENNY WONG RESTORES AUSTRALIAN DIPLOMACY ON WORLD STAGE |

In a piece published in 9DashLine, CEF’s Xuyang Dong examines the efforts of Australian Foreign Minister Penny Wong in restoring international relations and positioning Australian as an effective middle power on the world stage:

“Her diplomacy works with nuances. She has moved Australia away from the central US orbit and back to the region where Australia is rooted geographically, culturally and in terms of our trade flows, toward balancing power relations in the Indo-Pacific with an Australia-based lens. During her Press Club address, she called for a ‘greater self-reliance and a more active’  foreign policy, while advocating for ‘making more things here, responding to climate change and making Australia a renewable energy superpower’.“

>> Read the full analysis.

__SUBMISSION TO FEDERAL CONSULTATION ON NATIONAL GREENHOUSE & ENERGY REPORTING (NGER) SCHEME |

In this submission, we argue that the currently patently redundant and inadequate methodology for assessing methane emissions from coal mines, which dramatically understates the level of emissions and therefore their impacts, be modernised to incorporate the latest science and new methods, including real time public disclosure of monitoring, reporting and verification at each of the 219 safeguard facilities, and shift to a GWP20 basis (i.e. global warming potential on a 20 year time frame), given the climate science very clearly dictates urgent action this decade and next, not in a century’s time!

>>Read our full submission.

__REPORT: INDIA’S NATIONAL ELECTRICITY POLICY MAY PROPOSE END TO NEW COAL POWER BUILDS |

A potentially groundbreaking development emerged this week, with a report that India’s draft new National Electricity Policy (NEP) has proposed India stop building of new coal-fired power plants beyond the 28GW already under construction. This proposal complements another recent report that the Government of India is looking to tender out 250GW of new renewable energy  projects by FY2028 as part of its 450GW of renewables by 2030 policy focus, and an influx of global investment capital into renewables development in the country. 

If formalised, this strategic shift is potentially a globally significant milestone in decarbonisation, highlighting the accelerating global investment and technology race to build out the zero emissions industries of the future, put into overdrive by President Biden’s IRA.

Implementation of a policy change to no new coal has implications not only nationally but globally for the existential challenge of the climate crisis. It would accelerate India well beyond its admittedly conservative COP26 pledge of net zero emissions by 2070. Given India is the world’s third largest emitter, responsible for 7% of global emissions, and has a rapidly burgeoning economy and population, it can arguably make or break 1.5 degrees C in its own right.

>> Read our full analysis. 

OUR WORK |

We remain active in analysis of a range of key issues – see Our Work.

MEDIA |

See our latest media including on the closure of the Liddell coal power station in NSW’s Hunter Valley, Gautam Adani’s enigmatic older brother Vinod and his role in the family conglomerate, why the Science Based Targets Initiative has dropped Adani Green Energy, the latest delays to Snowy 2.0, and more.

PREVIOUS NEWS UPDATES |

Our previous newsletters covering major energy news can be accessed here.

Our highlights tracking decarbonisation progress in 2022, and our 2023 wishlist, are here.

__

Feel free to get in touch anytime at the email below, and enjoy your weekend! 

Tim, Annemarie, Nishtha, Matt, Xuyang (see more on our team here).

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.