13 MAY 2026

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

SPECIAL 2026 BUDGET EDITION: “F” ON FOSSIL FUEL TAX REFORM, NO NEW BIG-TICKET WINS FOR ENERGY TRANSITION BUT SOME GOOD NEWS BURIED IN THE FINE PRINT

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OUR KEY TAKEOUTS:

• After substantial recent investment in accelerating Australia’s renewable energy transition and green industrialisation – principally via the Albanese Government’s flagship Future Made in Australia (FMIA) program – the 2026 Federal Budget released last night lacked any big-ticket new commitments to grow our national ambition to become a renewables superpower and zero-emissions trade and investment leader, and featured some reduction of previously announced funding. The Budget saves $1.3bn over 10 years from redirecting part of the $19.7bn 2024–25 Budget measure for FMIA, and $1.9bn is rightly cut from Hydrogen Headstart.

• In the “fine print”, however, when the December 2025 MYEFO and 2026 Budget are put together, there is an extra $12.3bn over the forward estimates for net zero transformation, building on a previous ~$60bn in FMIA commitments since the Albanese Government’s October 2022 Budget. While this is substantial and the momentum directionally correct, Australia still needs to accelerate the speed and scale of capital investments, allocations and deployments to align with the climate science and leverage the massive investment, employment and export opportunities of the net zero economy. The economic risks of not doing so are huge. (This $12.3bn is gross additions, cuts of ~$2.5bn to emissions programs are not reflected here, which is deceptive.)

• A  key missed opportunity, in the context of escalating climate change and a cost of living crisis driven by the global fossil fuel supply shock, was reform of fossil fuel taxes and subsidies. The government declined to introduce a proposed 25% gas exports levy at a moment when prices are hyperinflated by Trump's war in the Middle East, a reform which could have delivered $17bn annually to the Budget and funded cost of living relief. There was no change to the PRRT, projected to deliver a measly $1.6bn pa over 4 years to 2029. The $11bn annual cost of the diesel Fuel Tax Credit Scheme remained untouched, leaving taxpayers out of pocket and disincentivising mining majors – its key beneficiaries – from investing in decarbonisation (e.g. electric trucks), as it keeps them addicted to imported diesel. The government’s temporary cuts to petrol and diesel excises sustain this national dependency.

• Inaction on fossil fuel tax reform fails to deliver a fair return to Australians from multinational gas giants’ exploitation of our sovereign assets. And it does not strategically decouple our economy at speed and scale from expensive, volatile imported oil so as to permanently ensure our energy security and insulate us from future threats. The new $7.5bn Fossil Fuel and Fertiliser Security Facility and a $3.2bn Fuel Reserve are needed but actually lock in our addiction, undermining the capital needed to underpin the serious long-term work of structural reform.

Tim commented:

“This budget reflects the many competing needs facing Australians, and the challenge of addressing decades of systemic privilege that has locked in intergenerational inequity into our tax system. I applaud the move to tax discretionary trusts at 30%, a hard reform to ensure the most wealthy cant profit shift and disperse without accountability. The need for greater spending is clear, as is the conflicting objective of reining in government spending to ensure we don't leave an excessive indebtedness for future generations to deal with.

In this context, it is pleasing to see new budget funding across MYEFO in December 2025 and this 2026 budget of some $10bn (net of cuts) over the forward estimates (~$16bn net over the coming decade) for lowering emissions across our economy and enabling structural reform to address inevitable and overdue energy system transformation. Whilst the $7.2bn home battery scheme is the majority of this, there were also funding boosts for the Clean Energy Finance Corporation (CEFC), National Reconstruction Fund Corporation (NRFC) and Net Zero Fund (NZF) – the alphabet soup of Specialist Investment Vehicles (SIV) now building capacity to enable the whole of economy transformation needed. This builds on the $60bn of decarbonisation and FMIA funding initiatives already put in place over the last four Chalmers budgets.

A good start, but we need to be more ambitious yet, the cost of climate inaction is simply too extreme to allow.

A glaring omission in this budget was the failure yet again to reform fossil fuel taxes and subsidies. Against the backdrop of the global fossil fuel shock and cost of living crisis, the government had the opportunity to introduce a 25% levy on gas exports to ensure a fair return to Australians as the war hyperinflates gas prices. Instead, it buckled to appease the war-profiteering gas industry. Likewise, the failed PRRT, which will deliver just $1.6bn pa over the next four years, was untouched. And the unsustainable impost of the $11bn pa diesel Fuel Tax Credit Scheme, the key beneficiaries of which are mining majors, sailed through unscathed. This inaction maintains our addiction to imported diesel when a key imperative of this budget should have been structural reform to urgently decouple from expensive, volatile imported oil and secure energy independence ahead of inevitable future threats.”

Our partner BLAIR PALESE, founder of Climate Capital Forum, Director of Philanthropy at Ethinvest, and previously named as one of The Australian’s Top 100 Green Energy Players, commented:

“In the midst of an energy crisis, this is a budget that has cut $1.3bn from Future Made in Australia, provides nothing to help electrify the freight and transport sectors, creates a cloud of uncertainty with flagged changes to CGT regime for investment in the renewables sector.

“For a world in transition, this budget sends a message that Australia is still stuck in the past - it has missed the opportunity to send a strong signal to clean energy investors that Australia is growing its clean energy commitments and setting the conditions for them to invest in renewable energy projects, jobs and green industrial capability.”

>>> For further details of Budget announcements see Tim and Blair’s op ed in Pearls & Irritations, and commentary including on AusBiz, in the Canberra Times and 100+ mastheads via AAP, Renew Economy, The Energy, The Energy newsletter, and Tim on ABC Radio National AM tomorrow, Thursday 14th, and forthcoming on Renew Economy’s Energy Insiders podcast with Giles Parkinson and David Leitch.

Meanwhile, more on China…

BHP’s recent landmark iron ore pricing agreement with Beijing is expected to have far-reaching implications for Australia’s biggest export industry, iron ore.

As former Australian ambassador to China Geoff Raby said: “BHP has basically accepted China as an alternative benchmark price maker and that is big. China is putting in all the building blocks of a world order where it sits at the centre… This is what happens when a country of China’s scale continues with economic growth and increases its weight in the world.”

The chairman of Fenix Resources – partnering with Baowu on its Weld Range Midwest Green Iron Project in WA, a relationship that opens doors to Chinese financiers – talks about a key aspect of Prof. Elizabeth Thurbon’s Green Energy Statecraft: leveraging our world leading iron ore export industry to build co-investment, collaboration, off-take and financial relations with our #1 trade partner: “We would be very enthusiastic if low-cost Chinese debt, denominated in renminbi (RMB), was then matched against a renminbi-priced commodity because that would make logical sense,” describing a future where Australia’s biggest export may no longer be priced in US dollars.

RMB denominated iron ore sales allows Australian miners to access low cost RMB denominated debt (China's inflation rate is 0-1% pa, 2-3% pa lower than here), lowering the cost of capital and making value-add project proposals like Warradarge Energy, Athena Resources and the Fenix Green Iron Project more viable, particularly if they bring in a Chinese equity partner in return for long term offtake, underwriting revenue certainty to crowd-in bank debt by proposal derisking.

Fortescue is leading the way in RMB denominated debt, buying XCMG Group mining EVs, LONGi Solar, and CATL batteries.

The Iran war highlights the value of Australia's political stability. Australia should work constructively with all our key trade partners where there is mutual benefit, leveraging our natural resources, including infinite sun and wind, to offer supply chain diversity and assurance, embodying decarbonisation by value-adding pre-export to help our key trade partners deliver their decarbonisation objectives.

>>> See CEF quoted on this topic in SCMP.

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AJ for Tim, Matt and Fatima

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