Federal Budget 2023-24: ESG initiatives
By Meg Lee
While the cost of living was a clear focus in the 2023-24 Federal Budget, this was also an energy-focused Budget, with numerous ESG initiatives being announced. We outline the key announcements.
The energy transition is being spruiked as ‘Australia’s biggest opportunity for growth and prosperity’. The Government is seeking to position Australia as a ‘renewable energy superpower’. For the renewable energy sector, there were lots of great announcements to stimulate and support the transition to clean energy technologies. The headline number announced in the Budget is $40 billion to support the transition.
The biggest focus was on the Hydrogen Headstart program, with $2 billion announced to support this new industry to bridge the gap between market price and the cost of production.
- Funding isn’t expected to flow to developers until 2026, as the first three years will be spent undertaking design of the program.
- It appears that the intention is to run a competitive application process to select only two or three green hydrogen projects that will be supported by the program.
- It is also not clear how exactly the price gap will be bridged and whether the Government is intending to subsidise production such that the effective production cost is $2 per kilogram (which is effectively what the US Inflation Reduction Act does for the US hydrogen industry).
- A big part of the program is the $38.2 million for the Guarantee of Origin Scheme, which will fund the Clean Energy Regulator to certify and track emissions to ensure the integrity of the program.
$5.6 million was also allocated to the Federal Department of Climate Change to analyse and leverage Australia’s competitive strengths in all renewable energy sectors.
Another important focus was on the National Reconstruction Fund Corporation, which will be set up to administer the $15 billion fund being established to support renewable energy and grid upgrades. The NRF will partner with the private sector to invest in priority areas including:
- $14.8 million for the Powering Australia battery technology and skills program.
- $1 billion in Tasmania’s ‘Battery of the Nation’ projects.
- $1.5 billion towards the Renewable Energy Zones and offshore wind in Victoria.
- $4.7 billion for transmission projects in NSW.
Announced last week ahead of the Budget, and funded to the tune of $1.9 million, a new Net Zero Authority will be established under legislation (in addition to the existing Climate Change Authority) to help manage the transition from fossil fuels to renewable energy. This Authority is proposed to have three key roles:
- Provision of support for works in fossil fuel sectors, with a focus on key regional towns that are heavily reliant on these sectors.
- Coordination of policy across all levels of government to work on ways to attract new industries to the regions previously dependent on fossil fuel industries.
- Assistance to investors to take up such opportunities to invest in new renewables opportunities in the regions.
$600 million was announced from the Powering the Regions Fund to assist emissions intensive industries that have obligations under the new Safeguard Mechanism legislation to assist them to improve their global competitiveness and encourage investment in emissions reduction technologies to help them meet their legislated targets of almost 5% reduction each year to 2030.
Energy transition costs and rising energy prices obviously are intrinsically related to costs of living. So, in addition to the focus on support for renewable energy projects and green hydrogen, there were significant announcements of:
- $1.6 billion support for households and businesses to support electrification and energy efficiency investments; and
- rebate for some 5.5 million eligible households for energy bills (variable depending upon the State).
Important funding was announced to support the sustainable finance agenda, including:
- $8.3 million for a Sovereign Green Bonds initiative to be managed by the Australian Office of Financial Management who will work with superfunds and other big investors to finance public projects that assist with Net Zero targets.
- $1.6 million to develop a sustainable finance taxonomy (similar to that being developed in Europe) to assist industry to standardise definitions and give investors greater confidence; and
- $4.3 million for ASIC to continue its focus on cracking down on greenwashing practices in the financial markets to ensure investors can be confident in the green products markets.
What didn’t receive as much focus was funding for resilience and climate change adaptation projects. What was included was $200 million for the Disaster Ready Fund to support levee upgrades, seawalls and bushfire reduction projects and $236 million for flood warning systems. This adds to what was included in announcements last October being:
- $231 million for emergency response capability; and
- $15.9 million to engage with First Nations people on climate adaptation programs
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