Budget Review 2022–23 Index
The Government has outlined spending measures consistent
with its broad approach to energy and emissions reduction, as detailed in its Long-Term
Emissions Reduction Plan and Low
Emissions Technology Statement 2021. The Minister
for Industry, Energy and Emissions Reduction announced $1.3 billion of new
investment on 29 March 2022 under two separate spending measures. The
Budget provides $446.1 million, over 5 years from 2021–22, under an Energy
and Emissions Reduction measure (Budget
measures: budget paper no. 2: 2022–23, pp. 125–6). The balance of
the $1.3 billion is a share of the funding for the Energy Security and
Regional Development Plan measure, under which the Government has committed
to provide a further $7.1 billion over 11 years from 2022–23 (Budget
paper no. 2, p. 133). Energy-related components of this measure
are noted below.
There are several components to the Energy and Emissions
Reduction measure (Budget
paper no. 2 , pp. 125–6).
- Spending of $247.1 million over 5 years from 2021–22 (and $0.3
million per year ongoing) is intended to support a mix of activities: ‘private
sector investment in low emissions technologies including hydrogen, development
of a hydrogen Guarantee of Origin scheme and the development of a Biodiversity
Stewardship Trading Platform’. Legislation to establish a framework to support
a national voluntary agricultural biodiversity stewardship market, including an
online trading platform, was introduced into Parliament in February 2022 (see the
Digest for further information).
- The measure also includes $148.6 million over 5 years from 2022–23
to support the development of community microgrid projects in regional and
rural Australia. This was welcomed by several commentators, including the Grattan
Institute and the Clean
Energy Council. However, the Climate
Council viewed the spending as meagre, saying ‘the Federal Government has
used tonight’s Budget to toss mere pennies at genuine emissions reduction
initiatives, such as the regional renewable microgrids’.
- The measure also provides $50.3 million over 2 years from
2022–23 to accelerate the development of priority gas infrastructure projects,
and support investment in carbon capture and storage pipeline infrastructure. The
Minister for Industry, Energy and Emissions Reduction announced
7 projects to be supported by this investment on 22 March 2022.
Budget also contains two additional components under this measure. Firstly, changes
to the Emissions Reduction Fund were announced
by the Minister for Industry, Energy and Emissions Reduction on 4 March
2022. These changes will make it easier for some project proponents to sell
Australian Carbon Credit Units on the voluntary market. Secondly, the release
of Australian crude oil stocks held in the United States Strategic Petroleum
Reserve in response to an International Energy Agency declared collective
action, was also announced
by the Minister for Industry, Energy and Emissions Reduction on 2 March
2022. The Budget states that the financial implications for these measures
are not for publication due to commercial sensitivities (Budget
paper no. 2: 2022–23 (pp. 125–6).
The second measure, the Energy Security and Regional
Development Plan in the Infrastructure, Transport, Regional Development and
Communications Portfolio, includes a range of investments aimed at low
emissions Liquefied Natural Gas (LNG), clean hydrogen production and carbon
capture and storage infrastructure, particularly in Darwin and the Pilbara (Budget
2022–23: regional ministerial budget statement 2022–23—A secure future for regional
Australia, pp. 194–96).
These investments include:
- $300 million to support low emissions Liquefied Natural Gas (LNG)
and clean hydrogen production at Darwin, together with associated carbon
capture and storage infrastructure
- $200 million to increase onshore processing and value-add of iron
ore exports, to support low emissions steel production in Indo-Pacific customer
countries like Japan and Korea
- $200 million to enhance Australia’s supply chain security through
new low emissions manufacturing facilities (using hydrogen and
hydrogen-derivatives like ammonia, as well as carbon capture utilisation and
storage) in the Pilbara region
- $100 million to de-risk private sector investment in firm
generation and grid infrastructure to increase system strength and capacity in
the Pilbara region
- $100 million to support pre-Final Investment Decision activities
and early works to make the Port of Newcastle ‘hydrogen ready’
While some of these investments appear targeted to specific
projects, the Government has provided little detail on the types of program it
will use to implement all of this spending beyond the statement that ‘these
investments are subject to the completion of business cases that demonstrate
net benefits, and co-investment by the private sector and relevant state and
territory governments’ (Regional ministerial budget statement, p. 195).
A range of factors make it difficult to assess the impact of
these measures. Despite significant domestic and international effort, the nascent hydrogen market will take
time to develop further and any preference between green hydrogen or
hydrogen derived from fossil fuels is yet to be tested. Other uncertainties in
the gas market include the net
zero emissions pledges of some of Australia’s most significant export
destinations and the longer-term
implications of recent energy supply crunches in some regions.
The Government’s new energy-related spending builds on the
2021–22 budget measures Emissions Reduction and New Investments under the
Technology Investment Roadmap and Advancing Australia’s Gas Fired
Recovery, which supported the development of carbon capture technologies, hydrogen
hubs and increasing the gas supply (Budget
measures: budget paper no. 2: 2021–22, pp. 138–9 and p. 135).
It is also consistent with the
Government’s expressed view that gas has a central role in the economic
recovery from COVID-19 and in reducing emissions. The Prime Minister has
previously described the Government’s approach as a ‘technology-first
approach’ that ‘will see Australia achieve its emissions reduction goals while
continuing to grow our export industries and also supporting our trading
partners’ efforts to decarbonise.’ The Government has since outlined Australia’s
technology-driven, long term emissions reduction plan in its updated
Nationally Determined Contribution submission to the United Nations Framework Convention on Climate
Executive of the Australian Petroleum Production & Exploration Association,
Andrew McConville, stated ‘the Budget has reaffirmed the long-term role of the
oil and gas industry in Australia’s economy and lower emissions future.’ The
Grattan Institute welcomed
support in the Budget for the development and deployment of low-emission
technologies but also argued that ‘funding the net-zero transition from
government coffers is not sustainable.’
Commentators expressed a range of other views about the energy
measures in the Budget. The Climate
Council said ‘significant funds are being spent on so-called “low emissions
hydrogen” and the costly and unproven carbon capture and storage. And a further
$50 million dollars is being directed to accelerate polluting gas projects.’ The
Clean Energy Council criticised
a lack of electricity transmission investment and long-term workforce
planning, saying ‘support is lacking for engineers and specialist trades to
support new infrastructure. The construction of key transmission infrastructure
over the next five to 10 years relies on those skills, without which there
can be no growth, let alone energy transition.’
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