26 SEPTEMBER 2025

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

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APOCALYPTIC PREDICTIONS  & A NEW 2035 TARGET FOR AUSTRALIA

The Albanese government last week released its new 2035 emissions reduction target of 62–70% on 2005 levels by 2035.

Clearly the government has gone more for practical deliverability than ambition and alignment with the climate science. 

Australia’s 43% by 2030 target requires an annual 1.7% cut nationally since 2005, but a better benchmark is the 29% delivered so far over 2005-2025, equating to 1.5% annually. The new 62-70% by 2035 target is at the lower end of the 65-75% range initially recommended by the Climate Change Authority (CCA), but it does require more than doubling the annual reduction rate to 3.4–4.2% over this coming next decade.

To support this higher ambition, new funding measures were announced: $1.1 billion for renewable diesel and sustainable aviation fuel (SAF), $2 billion new equity for the Clean Energy Finance Corporation (CEFC), $5 billion reallocated into a dedicated Net Zero Fund in the National Reconstruction Fund (NRF), plus $40m for kerbside charging, $85m for energy performance frameworks, and $50m to help sports clubs decarbonise. All logical, these strategic investments underpin the new target range, but with a lot more still needed.

The government is right that Australia’s prosperity depends on an orderly transition and that the costs of delay will be catastrophic. Under a 65% scenario, Treasury forecasts our Australian economy will be $2.2 trillion larger by 2050, with 80% more investment and 5 million extra jobs. Meanwhile, the Opposition remains mired in climate denial, creating the sovereign risk of policy backsliding for investors, though pleasingly their return to power looks increasingly unlikely.

The government’s National Climate Risk Assessment released last week, ahead of the climate target, underscores the dire economic, health, defence, and security threats of escalating climate change. As climate hazards increase in frequency and severity, we will experience  “cascading, compounding and concurrent” climate hazards (heatwaves, bushfires, floods, storms) sparing no Australian community, and spelling “significant potential for loss of life and strain on health systems”. These concurrent events amplify damage to infrastructure and communities, weaken national security and carry an onerous and compounding economic cost.

For example, even if warming is held to 1.5°C the government’s modelling shows the direct economic cost of floods, bushfires, storms and cyclones would reach $40bn a year in 2050. However, this is a vastly understated economic cost risk assessment. The CCA says based on current global commitments, the world is on track to see 2.9°C of warming.

It has never been more obvious that the costs of inaction are greater than the costs of action. 

Under existing policy settings, Australia is projected to reach emissions cuts of just over 50% by 2035, meaning this additional emissions reduction target requires deeper cuts nationally across all sectors. 

This means moving beyond electricity and heavy industry to whole-of-economy decarbonisation, guided by the CCA’s new sector plans. The Net Zero Economic Agency (NZEA), Single Investor Front Door and National Reconstruction Fund (NRF) have been central to this, as have state organisations like the NSW Net Zero Commission. The new term of the Albanese Government has also importantly moved towards a whole-of-government approach, including Foreign affairs and international trade.

An accelerated transition will also require significantly more upfront capital investment, much of which must be led by the government to catalyse an influx of private capital in the absence of a credible carbon price. 

We estimate that since the start of 2023, $70bn of federal government funding and capital allocations have been made towards decarbonisation, electrification and the associated Future Made in Australia (FMIA) program, with another $6bn of State allocations. CEF sees a top priority on getting these fund allocations ‘off the table’ and out the door this term of government. 

CEF has tracked over $16bn of new deployments since December 2024, a significant step up in pace. This needs to be maintained and built on to deliver on target, with more funding added. 

Minister Bowen’s stunningly successful $3.5bn two-phase national Cheaper Home Battery Rebate deployments of >60k systems shows the speed and scale that can be delivered with the right enabling policies.

>>> See the AFR feature on CEF’s tracking of government capital commitments to decarbonisation

Ultimately, Australia must overcome the climate wars and implement a systemic price on carbon pollution. With its May 2025 supermajority mandate, the Albanese Government should embrace “China Speed, China Scale” thinking – fast-tracking approvals, mobilising capital, and seizing opportunities in zero-emissions industries in partnership with key trade allies. This is a race Australia can and must win, but first we must start. And deprioritise approvals and construction of yet more fossil fuel projects, let's get the human, political and financial capital of Australia focussed on industries of the future first! 

Progress on carbon pricing is encouraging. The 2026 Safeguard Mechanism Review could lower the 100,000tpa threshold to 25,000tpa, effectively expanding coverage, while adding Scope 2 electricity emissions from 2030 would send a clear signal for coal phase-out.

Diesel fuel tax reform is also overdue. Imported diesel and oil account for 17% of national emissions. As we detailed in a recent report, capping the billions of dollars in taxpayer-funded diesel subsidies at $50 million annually would affect just 15 mining and rail firms (although CEF would not be adverse to a rail carveout given the Fortescue setbacks here show it can't be done at speed without undue disruption (as Boiling Cold detailed). This could critically pivot $2–3 billion a year to mine electrification and decarbonisation, massively improving Australia’s trade deficit and national energy security profile in the process, and potentially building FOAK domestic OEM supply chains and recycling capacities in mining equipment and batteries.

Our exported emissions dwarf domestic ones, so international collaboration is essential – bilateral and trilateral deals on carbon pricing and joint decarbonisation, starting with heavy industries like steel, cement, aluminum, and fertilizers, which together account for more than 20% of global emissions. 

Here, contradictions remain: Australia talks up green export superpower status while still enabling new methane gas export capacity for decades beyond 2050, despite dire forecasts of LNG oversupply and weakening demand from decarbonisation leaders like China. 

Positive signs include Thyssenkrupp’s offtake agreement for 100% of Progressive Green Solutions’ planned world-leading green iron project in WA, leveraging 8Mtpa of existing magnetite exports by China’s Karara Mining and the associated enabling public infrastructure already in place. State and federal governments’ support to match the German Government Export Credit Agency’s support will be key, as will the value of being able to leverage the EU ETS and Carbon Border Adjustment (CBAM) to give an explicit progressively rising price on embodied decarbonisation in our exports.

Now is the time for DFAT to pursue “Green Energy Statecraft”: landing Korea–Japan–Australia and China–Australia agreements and a Clean Commodity Trading Initiative. Hopefully, as COP31 President, we may see Minister Bowen announcing final investment decisions (FID) on the three largest green steel supply chain decarbonisation projects in the Southern Hemisphere. 

See our media commentary:

>>> AFR story on CEF’s decarbonisation capital tracking

>>> Op eds in Pearls & Irritations and Renew Economy 1 and Renew Economy 2 and a story in The Energy

>>> Tim on Sky News Newsday with Kieran Gilbert and Sky Breakfast with Jaynie Seal

>>> Tim on ABC TV’s Close of Business with Alicia Barry (at 12 minutes); ABC NewsRadio; ABC Newcastle; and 2SM

>>> Tim on AusBiz 

…AGAINST THIS BACKDROP, WOODSIDE NORTHWEST SHELF APPROVAL A TRAVESTY

In a stunning feat of cognitive dissonance, Australia in 2025 continues to approve massive methane gas project extensions.

Ignoring the climate science and the devastating cost of inaction, the government of PM Anthony Albanese and Environment Minister Murray Watt has approved Woodside’s bid to extend the life of its massive North West Shelf gas bomb till 2070, ending years of complex approvals processes and cementing the role of planet-destroying methane exports from Australia for many decades to come.

Under chair Rampaging Richard Goyder and CEO Methane Meg O’Neill, Woodside continues to destroy shareholder value even faster than it is destroying our planet – quite a feat. Woodside has been a dog of an investment for the last decade, even as it corrupts and controls the WA and Federal government in a crystal clear case of regulatory capture.

Woodside contrives to limit its contribution to the domestic methane gas supply, ensuring our domestic downstream industries remain uncompetitive and consumers also take the brunt thanks to rising WA domestic energy prices moving to align with export price parity and beyond, as seen in eastern Australia. All thanks to the foreign tax haven based fossil fuel cartel gouging everybody and laughing all the way to the bank.

Minister Watt said he was only required to consider significant impacts on matters protected by federal environmental law – in this case the UNESCO-listed Murujuga rock art dating back 50,000 years. The approval has been condemned by First Nations and conservation groups, citing damage done to this irreplaceable heritage by acidic pollution from the gas megafacilities. If that is not bad enough, not considered was the globally significant climate impact of the project’s massive exported scope 3 carbon emissions, 10x larger than scope 1. 

Those fossil fuel donations are really doing the trick. 

The Gas Gamble continues, with all Australians and the global climate on the losing side.

Gas is stupidly expensive, thanks to regulatory capture by the cartel.

Gas is corrupting our democracy.

And just as the Australian government’s first National Climate Risk Assessment warns of climate apocalypse, this approval should not have happened.

Marian Wilkinson's Quarterly Essay "Woodside vs the Planet: How a Company Captured a Country” should be compulsory reading.

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CHINA’S NEW 2035 CLIMATE TARGET LIKELY TO BE SURPASSED; MONTHLY UPDATE SHOWS CONTINUED TRANSITION ACCELERATION

Chinese President Xi Jinping today in an address to the UN General Assembly announced China’s target to reduce carbon emissions by 7-10% from their peak by 2035, with the goal of achieving even higher levels.

China lead at independent public interest think tank Climate Energy Finance (CEF), Caroline Wang, said: “This sends a strong signal to the international community about China’s sustained commitment to addressing climate change in line with the Paris Agreement. China has not only built the largest and fastest growing renewable energy system in the world, but through its clean technology exports and investments in zero emissions energy infrastructure is helping other nations especially in the Global South to cut emissions and bolster energy security. 

>>> See our media release on China’s new target and CEF commentary in The Australian and the AFR

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CHINA TO STEP UP ACTION TO ADDRESS CHRONIC OVERCAPACITY AND ACCELERATE GREEN TRANSFORMATION IN THE STEEL SECTOR WITH LATEST INDUSTRY WORK PLAN

On Monday, China’s Ministry of Industry and Information Technology, in partnership with the Ministry of Commerce and State Administration for Market Regulation, published the Steel Industry Growth Stabilisation Work Plan (2025-2026), introducing targeted intervention measures in the world’s largest steel industry to address neijuan – the excess downward pressures from overcapacity that have pushed prices below sustainable and profitable levels both domestically and in export markets. 

Despite producing more than half of the world’s steel, China’s listed steel companies registered an annual profit margin of -0.26% in the previous year, driven by structural overcapacity and weaker steel demand across the built environment. The new Work Plan outlines targeted measures to prohibit new capacity additions and implement output reductions to curb overall production, shift focus to high-end specialised steel and quality improvements in bulk products, and accelerate the transformation to green production. 

The directive outlines differentiated support for reduced replacement ratios to projects aligned with industrial development directions, such as the development of low-carbon iron and steelmaking, including the deployment of EAFs and hydrogen metallurgy. The directive shows China’s strategic action in supporting the competitiveness of low-carbon iron and steelmaking, including RD&D breakthrough support in hydrogen reduction in iron, as China expands its national emissions trading scheme to cover emitters in steel, aluminium and cement. 

For Australia’s ambition to maintain sovereign manufacturing capacity across the steel sector and to scale the green iron opportunity in-line with the federal government’s landmark Future Made in Australia re-industrialisation package, this is a critical and welcome step forward to stabilising the global steel market and reduce the cost gap between market prices for carbon-intensive products and green iron and steel. Sustainable steel market prices, supported by the Work Plan’s management of steel exports, is a vital component to deploying capital into the green iron opportunity in Australia with our key trading partners, significantly reducing the support mechanisms required absent a price on carbon in international trade.

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DESPITE BHP’S BLEATING, DEMAND DESTRUCTION & AGING OPERATIONS ARE DRIVING QLD COAL CLOSURES & JOB CUTS – NOT PROGRESSIVE ROYALTIES

Last week, BHP announced the axing of 750 jobs across its Queensland coking coal operations, including the mothballing of its Saraji South mine in the Bowen Basin and the strategic review of its FutureFit skills and training academy in Mackay as part of its efforts to alleviate cost pressures. This was the start of a chain reaction, with Anglo American announcing plans to cut nearly 300 jobs across its Queensland coal division, followed by QCOAL’s announcement of the closure of one of its two sites at the Cook Colliery mine in the days following.

These closures shared a common self-serving media framing, claiming QLD’s coal industry was at risk due to ‘unsustainable’ changes to the state’s coal royalty regime made in 2022 by former state Treasurer Cameron Dick, which scaled the established progressive royalty structure in a time when fossil fuel majors reaped windfall profits from a global negative supply shock, amplified by Russia’s invasion of Ukraine, ensuring a reasonable return to the people of the state from the extraction and export of their resources. 

This is not the first time BHP has clashed with state and federal governments. In 2010, along with a couple of self-serving billionaires, BHP co-financed a 7-week media campaign fiercely lobbying against the introduction of the 40% Resource Super Profits Tax, a campaign that was a major factor in the rolling of Prime Minister Kevin Rudd, the architect of the tax reform. In 2017, BHP campaigned against WA Nationals leader MP Brendon Grylls on the proposal to lift iron ore mine lease fees for BHP and Rio Tinto, leading to the loss of his seat in the state election. 

Now, BHP has spearheaded a new campaign, blaming excessive and ‘unsustainable’ royalties and market conditions for its decision to mothball its Saraji South mine. Dig a little deeper, and it is clear the campaign is obfuscating the real drivers of the investment and operational reviews. Gradual demand destruction for coking coal and a total ongoing failure to reign in rapidly rising unit costs are the factors driving these investment and operating decisions, not Queensland’s nation-leading progressive royalty scheme.

In reality, rising costs in mining, freight and depreciation have made old mines uneconomic. Simply, extracting coal from the Bowen Basin is becoming increasingly expensive. From 2019 to 2024, unit costs for coking coal majors in the Bowen almost doubled, with BHP’s unit costs rising 89% to US$128/t, Anglo American’s rising 97% to US$124/t, Glencore’s rising 49% to US$121 and Peabody Energy’s rising 11% to US$123/t (from a base near double that of BHP and Anglo American in 2019).

The global energy transformation will continue to accelerate declining fossil fuel market conditions, and aging legacy operations will continue to see production cost inflation as labour, energy and equipment intensity continue to rise. Queensland cannot afford to capitulate once more to the fossil fuel industry to safeguard private and foreign multinational profits at the expense of taxpayers and workers to offset the changing economics of an industry in terminal decline. 

Australia’s coking coal exports have been declining for a decade, with no growth markets emerging. 

The baseline scenario in Treasury’s latest net zero modelling for Australia’s coal industry lays bare the grim future, forecasting output to decline 47% by 2035, and 72% by 2050. 

This is the market signal Australia must recognise to pivot dependence from legacy petrostate industries to value-added, future-facing resources and industries of green iron, green aluminium, ammonia and critical minerals. These commodities will be critical in a decarbonised global economy that puts a price for producers on embodied emissions – a global transformation the impacts of which Australia’s legacy industries are now confronting and must come to terms with.  

>>> See Matt Pollard’s full oped on this in Renew Economy.
>>> See commentary in The Guardian.

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BHP RENEGS ON PILBARA RENEWABLES, WITHDRAWS DECARBONISATION DOLLARS

Speaking of BHP, the big backsliding Australian has shelved plans to spend US$2bn building more than 500MW of large-scale wind, solar and battery projects to decarbonise and electrify its iron ore business in the Pilbara, WA, including a 50MW solar farm at Jimblebar mine and a 40MWh battery in Newman. The company previously said the projects would slash emissions from its iron ore division 15% by 2030.

As ABC’s Daniel Mercer reported, “internal BHP documents seen by the ABC show the miner binned the plans last year because of budget cuts.”

The resources giant’s annual report reveals that it has reduced its capital commitment to 2030 for decarbonisation here from US$4 billion to $500m previously. This is pathetically weak given that in just the 12 months to the end of June 2025, BHP spent US$10bn on capital projects around the world, including US$2.6bn in its iron ore business.

As Tim Buckley said in the ABC story: "It is incredibly disappointing that Australia's biggest company refuses to act in alignment with the climate science."

Apparently, BHP's ambitious target is for its global emissions to rise from FY2025 to FY2030, directionally opposed to the imperatives of the climate science and to the stunning acceleration in electrified mining technology development.

Central to the reduction was BHP's decision to defer investing in electric truck and train haulage technology that could slash the company's diesel use. This comes at a time when EV technologies in China are developing at an unimaginable speed, as is takeup. CATL expects 50% of heavy duty truck sales in China to be EVs as soon as 2028. 

BHP has new knowledge-sharing MoUs with China’s XCMG, CATL, and BYD, so it must be entirely clear to BHP's leadership that all their EV expectations are being exceeded, and as per BNEF, China now leads the world by a country mile in heavy vehicle manufacturing and adoption. Yet BHP is embracing the climate lethargy of incumbent Western original equipment manufacturers (OEMs) like Caterpillar, who are ignoring both the climate science and technology leadership as they go slow.

Time for Treasurer Jim Chalmers to introduce a cap of $50m per group annually to the $12bn annual diesel fuel subsidy paid by taxpayers primarily to major mining companies. BHP pocketed a tidy $627m in diesel fuel tax credits in 2024. We need to convert this handout into a Transition Tax Incentive to drive behaviour change inside the likes of BHP, and align their investment strategies with the climate science and Australia's national interest in decarbonising our world-leading resources industry. 

Capping the rebate at $50m per company and requiring recipients to direct any rebates above that threshold into decarbonisation and electrification, such as electric haulage trucks and renewables infrastructure, would incentivise exactly the kind of projects BHP has just dumped. See Matt Pollard's report on this topic. On the positive front for the Pilbara, it is great to see the Clean Energy Finance Corporation (CEFC) advocating for Common User Infrastructure to drive electrification and decarbonisation. 

And, as reported in Renew Economy, the decarbonisation picture for BHP’s copper assets at least appears better. BHP announced it has signed a baseload renewable supply deal with Neoen equating to 100 megawatts (MW) of renewable power for its massive copper mining province in South Australia, including the Olympic Dam mine, smelter and refinery, and operations at Carrapateena and Prominent Hill, underpinned by Neoen’s new Goyder North wind project and a new big battery.

We need to see a lot more of this kind of initiative from BHP for it to be truly pulling its weight in industrial decarbonisation.

>>> Tim’s commentary on ABC online and on ABC Radio National’s AM program.

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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.