Federal Budget October 2022: How will Labor deal with renewable energy and climate change?

Anyone who has noticed the upsurge in wild weather events and record high temperatures, and also groaned at the size of their power bill, must be aware of four interlinked issues: climate change, fossil fuel emissions, the energy crisis, and the need for renewable energy sources. It’s crucial for Australia to not only adopt a suitable plan to mitigate these problems, but also to set aside sufficient funding for it in the federal budget.

A backward glance at previous renewable energy policies

The Morrison Coalition government had committed Australia to an emissions reduction target of 26%-28% below 2005 levels by 2030, and net zero emissions by 2050. This was well below the commitments of our international peers and many Australian state and territory governments.

The previous federal government did have a number of low-emission policies, including funding for clean hydrogen, green steel, and carbon capture and storage, but it did not have a detailed plan for exploiting Australia’s significant renewable energy resources in the form of solar and wind potential and rare earth metals, together used in producing renewable energy, clean hydrogen and ammonia, and lithium metal batteries.

Towards the end of its tenure, the Morrison government also changed the regulations governing the Australian Renewable Energy Agency (ARENA) so that it would be able to fund non-renewable (i.e. fossil fuel) energy technologies.

A new Labor government and a major shift

Australia’s official emissions and renewables policy changed radically with the election of the Albanese Labor government in May 2022. Labor has pledged Australia to a 43% emissions reduction by 2030, aligned to its Powering Australia plan which it says will spur $76 million of investment, boost renewable energy, reduce power bills and create 604,000 jobs, more than 80% of them in regional Australia.

Specific details of the plan include:

Increasing the share of renewables in the National Electricity Market to 82% by 2030
$20 billion for upgrading the electricity grid to integrate renewable energy and keep power prices low
$3 billion investment in green metals, clean energy component manufacturing, hydrogen electrolysers and fuel switching, agricultural methane reduction and waste reduction
$100 million co-investment for 85 solar banks around Australia so that more households can benefit from rooftop solar
$200 million for 400 community batteries across the country
10,000 New Energy Apprentices and a $10 million New Energy Skills Program

Additionally, Chris Bowen, Federal Minister for Climate Change and Energy, has released new regulations to return ARENA’s focus to funding renewable energy projects.

Renewable energy policy challenges

However, the government does face a number of challenges in implementing its renewables policies. The Clean Energy Australia Report 2022 indicates that the share of electricity generation from renewable resources in 2021 was 32.5% – a 92% increase over 2017. But it would need to rise by a huge additional 150% to reach an 82% share by 2030.

Perhaps the most critical challenge is the labour shortage currently hindering all sectors of the economy, but particularly the construction industry. Even without the current low unemployment rate, the government’s plan will require significant workforce upskilling.

As well as having a labour and skills shortage, the government will be competing for increasingly scarce steel and aluminium supplies with other new transmission projects around the world. It will also need to negotiate with regional and indigenous landholders who will accommodate the infrastructure on their land, as well as facing possible opposition from environmental lobbyists if ecologically sensitive areas are involved.

Looking ahead to the October budget

Treasurer Jim Chalmers has warned Australians not to expect too much good news in the upcoming federal budget, given the continuing existence of the almost trillion-dollar government debt and the rising costs of NDIS, health, aged care and defence. However, in order to maintain its credibility, Labor will have to at least begin to deliver on its renewable energy and climate change promises.

So, it’s fairly safe to anticipate that the October budget will provide at least a part of the funding for the Powering Australia plan and the commitments to grid upgrades, green and clean energy, solar banks, community batteries, New Energy Apprenticeships and the New Energy Skills Program. It should lay the foundations for a major upsurge in renewable energy generation, even though it may take many years to bring all of Labor’s ambitious plans to fruition.

To stay up-to-date on Federal Budget October 2022, keep watching this space. Bentleys’ Australia-wide expert team will be following closely and providing updates as the Federal Budget unfolds. If you’d like to discuss what this Budget might mean for your business, contact us today. We can help you get where you want to be.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.