Chapter 2The objectives and policy design of
Future Made in Australia
Introduction
2.1This chapter examines stakeholder views on the provisions of the Future Made in Australia Bill 2024 (the FMIA bill) and the Future Made in Australia (Omnibus Amendments No. 1) Bill 2024 (the Omnibus bill).
2.2In particular, this chapter outlines evidence addressing the broad objectives and policy design of the Future Made in Australia agenda.
2.3The third and final chapter of this report considers more specific aspects of the legislative framework created by the bills—namely, the National Interest Framework, Sector Assessments, and the Community Benefit Principles. Overall support for the bills
2.4Submissions to the inquiry were broadly positive about the aims of the government’s Future Made in Australia (FMIA) policy and expressed support for the bills facilitating its implementation.
Supporting Australia’s energy transition to net-zero
2.5Several inquiry participants submitted that the FMIA policy would support Australia’s energy transition to net-zero. A broad range of submitters noted that government support for investment in green technologies and cleaner energy would allow Australia to take advantage of the economic opportunities created by the global energy transition.
2.6Inquiry participants from the mining and minerals exploration industry expressed support for the bills on the grounds that they would facilitate Australia’s transition to net-zero. For example, Fortescue submitted that the Future Made in Australia policy would help unlock investment in Australia in green technologies and clean energy, while enhancing economic and national security. Fortescue, noting its own role as a significant investor in mining infrastructure, green metals, green energy and green technologies, submitted that additional government support will be required to develop additional industries such as green hydrogen and green iron.
2.7The Chamber for Minerals and Energy Western Australia (CMEWA) submitted that the FMIA agenda would strategically unlock private investment at scale in the national interest. The CMEWA argued that the global clean energy transition will provide unique economic opportunities for the resources sector to expand and diversify, particularly in Western Australia. They also noted that Australia has a significant opportunity to diversify and entrench itself in the world’s transition to net-zero.
2.8Mr Warren Pearce, the CEO of the Association of Minerals and Exploration Companies (AMEC) made the point that, globally, there are over 1500 interventions being offered by other countries to attract investment in the critical minerals supply chain and they have seen this investment move overseas. Mr Pearce stated the FMIA bills represent:
…a great opportunity for us to make the leap from being a very successful upstream raw materials provider to diversifying that industry, realising greater value from our minerals and taking the opportunity to create those jobs and economic opportunities here in Australia. So we strongly support the initiative and are pleased to be part of a group of companies and industry representatives advocating for this initiative.
2.9In its submission, AMEC expressed support for the bills, noting that Australia has the mineral resources and established mining industry needed to create ‘an expanded downstream value-add resources industry’ and take advantage of the economic opportunities created by the global transition to net-zero. The AMEC urged the government to act quickly to capture a significant market share of decarbonised minerals and metals processing before capital moves to other emerging markets.
2.10Similarly, BHP suggested the bills would provide new opportunities to build new globally competitive industries in renewable energy and critical minerals processing.
2.11The Australian Industry (AI) Group welcomed the bills’ focus on encouraging private investment to support Australia’s economic resilience in the net-zero energy transition. AI Group submitted that the private sector possesses the skills, capital, market knowledge, flexibility and other important skills to develop Australia’s future industries, while acknowledging that the private sector is not always able by itself to make the investments fundamental to economic resilience. Accordingly, AI Group stated that targeted and proportionate government support has a role to play in fostering economic resilience by developing new industries in the national interest.
2.12These views were echoed by climate change advocacy groups, thinktanks and research bodies which expressed support for the bills on the grounds that they would support the transition to net-zero.
2.13For example, the Investor Group on Climate Change (IGCC) submitted that by unlocking private capital via public financing mechanisms, the measures in the bills would support the growth of Australia’s vital industries accelerate decarbonisation.
2.14Similarly, the Australian Council of Trade Unions (ACTU) submitted that Australia is well placed to become the world’s ’green forge‘, producing decarbonised metal products for domestic use and export to global markets, where demand for green metals is expected to grow. The ACTU characterised the Future Made in Australia agenda as an historic opportunity for the Commonwealth to undertake a step change in policy and investment support for the green metals sector to seize this opportunity. This organisation also noted the Commonwealth’s estimate of a green metals sector worth $120 billion by 2040 is close to the current value of Australia’s entire manufacturing sector and observed that any growth approaching that scale would translate to hundreds of thousands of new jobs across the industry.
2.15The Clean Energy Council (CEC) commended the bills, stating that they had the potential to establish Australia as a renewable energy superpower. The CEC submitted that there is a clear and essential role for government to address market failures resulting from the externalisation of carbon emissions. The CEC stated that the Future Made in Australia agenda would accelerate Australia’s transition to net-zero, develop renewable energy export industries which promote global decarbonisation and secure Australia’s sovereignty in global decarbonisation supply chains.
2.16Further, the Climate Council of Australia (the Climate Council) submitted that Australia is well-placed to take advantage of the economic opportunities created by the net-zero transition, noting Australia’s significant mineral deposits, renewable energy resources and strong manufacturing industry. The Climate Council submitted that growing these new industries would allow Australia to establish itself as an integral part of the global decarbonisation supply chain, charactering this as urgent and essential to securing Australia’s future prosperity.
2.17Similarly, the University of New South Wales (UNSW) Energy Institute stated that reestablishing a high-performing manufacturing sector in Australia would enhance Australia’s global competitiveness and create a strong national workforce. The UNSW Energy Institute pointed to the opportunity for Australia to assist in diversifying the global supply chain for critical technologies related to the net-zero transformation. It also acknowledged the importance of ensuring adequate funding support and investment in developing domestic capabilities in green industries and capturing a significant share of the global market for green products.
2.18The Australian Academy of Science (the Academy) submitted that the Future Made in Australia framework has the potential to be a crucial roadmap for Australia. The Academy suggested that the success of Future Made in Australia will depend on how well it integrates and uses science to inform public investments.
2.19The Environmental Defenders Office (EDO) expressed support for the inclusion of emissions reduction considerations and growth of the renewable energy industry in the bills. Similarly, the Climate Council submitted that the Future Made in Australia agenda represents the leadership Australia needs to address climate change.
2.20Mr Steven Murphy, National Secretary of the Australian Manufacturing Workers’ Union (AMWU), was strongly supportive of the bills, describing them as ‘the biggest industrial and economic policy shift that we will see in our lifetimes.’ He noted Australia’s relatively low level of economic complexity and that policies like FMIA were needed to allow Australia the ‘opportunity to be a trusted neighbour, a trusted partner and a leader in our region's response.’
2.21The Australian Workers’ Union (AWU) was similarly positive with Mr Thomas Mortimer, National Policy Director, noting the possibilities of the FMIA plan for both the net zero transformation and for jobs:
How good can this be for workers? Along with the tens of thousands of workers at current sites, it can deliver tens of thousands more new roles. We estimate that shifting just 13 per cent of our iron ore exports to Australian green iron making facilities would deliver 14,000 direct jobs as well as 11,000 more in renewable energy. For the planet, it's hard to conceive of a bigger single contribution to decarbonisation. Processing of Australian iron ore accounts for around 3.6 per cent of global emissions, so onshoring just some of that work in Australian green iron sites will meaningfully help the global effort to meet the Paris Agreement.
2.22Mr Steven Murphy of the AMWU also stated:
The Future Made in Australia Act is an opportunity that will not only build social licence domestically by giving workers some reassurance that their future is going to be looked after for the hard labour and sacrifices they've made to power our economy and homes for generations but also find Australia its natural place in the world. As the EU moves to introduce carbon border adjustment mechanisms and our region tries to grabble with how we are going to negotiate through those, Australia is well positioned with renewable energy, as well as shifting to green metals and new industries, to supply to our region and trading partners decarbonised steel, decarbonised metals and decarbonised products that they can use in their supply chains.
2.23Mr Tony Wood, Program Director, Energy and Climate Change at the Grattan Institute made note of Australia’s ‘unusual’ and wide range of mineral resources, which, if industry is properly funded, have the opportunity to not only replace fossil fuel industries but could also add ongoing industrial and manufacturing jobs.
2.24Mrs Lucy Nation of BP Australia pointed out that energy transition investments are risky, especially considering the alignment required between ‘suppliers, customers, financiers, infrastructure providers, equipment manufacturers, education providers, government policy and others.’ She said that early government support was highly valuable, particularly in helping to attract and enable private investment and to reduce the risk associated with project development before financing is available.
2.25Other evidence to the inquiry noted that the FMIA plan could have a positive impact on other industries. Mr Scott McGrath, Director of Government and Media Relations at the Australian Food and Grocery Council (AFGC) pointed out that energy transition and move towards a circular economy for packaging for the food and grocery industry could provide to be expensive and capital intensive but support from the FMIA policy could be very helpful for this industry if done right.
2.26This view was echoed by Ms Stephanie Saliba, Director of Corporate and Government Affairs of Mondelez International, who recommended that the FMIA bills include support funding for manufacturing infrastructure for sustainable farming and circular economy projects.
Australia as an international climate leader
2.27Several inquiry participants argued the Future Made in Australia policy would help position Australia as an international climate leader.
2.28For example, the ACTU stated that the bills would help establish Australia as a climate leader globally. The ACTU contended that by maximising growth in new green industries, Australia can drive up to eight per cent of global decarbonisation, despite only representing 0.1 per cent of the global population. The ACTU also argued that Australia has a responsibility to protect its Pacific neighbours from the threat posed by climate change and that these reforms are consistent with that responsibility.
2.29The Smart Energy Council, writing in support of Future Made in Australia, stated that Australia’s minerals and renewable energy resources leave it well-placed to be a world-leader on decarbonisation and smart energy. Similarly, Beyond Zero Emissions submitted that the FMIA agenda represents an ‘inflection point’ for Australia to position itself in global clean energy supply chains and play a pivotal role in bringing down emissions worldwide while simultaneously growing Australia’s economic prosperity. Beyond Zero Emissions further characterised the Future Made in Australia agenda as a ‘step off the sidelines’ in the global clean energy race.
2.30Inquiry participants also stressed the importance of Australia developing a response to international efforts in the global energy transition, such as the Inflation Reduction Act of 2022 (IRA) in the United States and the European Green Deal in the European Union. These submitters argued that Australia could not afford to fall behind the rest of the world in transitioning to a net-zero economy, and stressed the importance of the Future Made in Australia agenda to these efforts.
2.31The Business Council of Australia (BCA) submitted that, in order to remain a competitive investment destination, Australia could not sit still while other countries are enhancing their competitiveness in the net-zero economy by increasing their incentives for the production of green materials and renewable energy resources. The BCA suggested that the Future Made in Australia agenda ‘reflects the intent of the Government to craft an Australian response to the US [IRA], as called for by the BCA’.
2.32Ms Michele O’Neil, President of the ACTU, also spoke about the potential of the FMIA bill to help cut global carbon emissions. Australian exports from FMIA supported industries could cut eight per cent of global carbon pollution, in addition to securing next generation wealth creating industries within Australia.
2.33Ms Alison Reeve of the Grattan Institute gave evidence about the opportunity for assisting industries as they transition to net-zero global economy:
The sorts of businesses that we are talking about own very large assets—not just physically large but worth a lot of money, with very high economic value. When those turn over for replacement, that's a very big decision for that company to make. The thing is that governments are around for three years at the federal level and four years at the state level. Assets are around for 40 to 50 years. That means that between now and 2050, for those big industrial players, we get one chance to turn those assets over.
Creating secure and well-paying jobs for Australians into the future
2.34Several inquiry participants told the committee that the FMIA agenda would create secure and well-paying jobs for Australian workers into the future. These submitters argued that the reforms would align Australian industry policy with other jurisdictions such as the United States and the European Union, and would ensure the economic resilience of Australia’s manufacturing sector.
2.35The ACTU submitted that the Future Made in Australia agenda could play an important role in unlocking decades of jobs and national prosperity while supercharging Australia’s transition to clean energy. The ACTU declared that the bills will ensure strong investment in growing clean industries that are already generating tens of thousands of jobs for Australian workers. The ACTU noted that these industries are expected to grow exponentially through strategic investments in the FMIA agenda.
2.36The ACTU cited research indicating that the transition to net zero in Australia could create as many as 1 to 2 million new direct jobs by 2050, with reports indicating that 400 000 new jobs could be created by 2040 in clean exports alone. Further, the ACTU noted that the Future Made in Australia agenda would protect Australia’s trade sovereignty, noting that several of Australia’s major trading partners have implemented a carbon border adjustment mechanism (CBAM) to price carbon emissions into key imports such as steel and aluminium.
2.37The Qantas Group (Qantas) submitted that the Future Made in Australia agenda could create a significant number of secure well-paying jobs in new green fuel industries. Qantas claimed that public investment in a new sustainable aviation fuel (SAF) industry could create 18 000 new direct jobs alone and add $13 billion to Australia’s Gross Domestic Product (GDP). Further, SunDrive Solar submitted that public investment in cost-effective, efficient and environmentally friendly solar panels could create thousands of high-skilled jobs, particularly in regional areas transitioning to the net-zero economy.
Role of hydrogen in Australia’s net-zero transition
2.38Several inquiry participants expressed support for the role of the hydrogen industry in the government’s Future Made in Australia agenda. These submitters argued that hydrogen has a crucial role to play in ensuring a strong and successful energy transition to net-zero and expressed support for further public investment in the sector.
2.39The Australian Hydrogen Council (AHC) expressed support for the FMIA agenda, and in particular, the government’s Hydrogen Production Tax Incentive (HPTI) measure. The AHC submitted that enhanced public investment in hydrogen will contribute to the decarbonisation of parts of the Australian economy which are difficult to electrify, and could be used to refine Australia’s deposits of iron ore and aluminium. The AHC argued that public investment in hydrogen would diversify Australia’s export base for energy and expand Australia’s manufacturing capabilities. The AHC stated that the HPTI demonstrated that Australia is ‘back in the race for hydrogen developments’ and is crucial in Australia’s efforts to meet its emissions objectives and enhance energy security. The AHC suggested the growth of Australia’s hydrogen industry:
…not only supports domestic decarbonisation but also provides Australia with an opportunity to add value to existing raw exports and creating new export opportunities.
2.40In its submission, Fortescue reiterated its commitment to the development of a green hydrogen industry in Australia and expressed strong support for the Commonwealth’s green energy ambitions, particularly the HPTI. Fortescue submitted that the HPTI will play a critical role in incentivising the production of green hydrogen as a decarbonised alternative to oil and gas, and is crucial to Australia’s net-zero transition. Fortescue noted that as global demand for steel changes, the steel industries of Australia’s main trading partners will move to decarbonise and import decarbonised raw materials such as green iron. Fortescue stated that the development of a domestic green hydrogen industry would position Australia to take advantage of this shift in global demand by producing the world’s supply of green iron and other metals.
2.41Similarly, the Climate Capital Forum (CCF) expressed support for public investment in hydrogen production and welcomed the $6.7 billion in support for the HTPI and an additional $1.3 billion for Hydrogen Head Start funding. The CCF argued that investment in green hydrogen as a decarbonised alternative to fossil fuels would allow Australia to develop decarbonised metals such as green steel and aluminium. The CCF stated that the development of these manufacturing and refinement capabilities would allow Australia to value-add to its exports and take advantage of new opportunities in a decarbonised global economy.
2.42Other submitters claimed that the development of a domestic hydrogen industry would create a significant number of new jobs, particularly across regional Australia. The ACTU argued that industries such as green metals and green hydrogen are well placed to best leverage Australia’s advantages and have great potential to create direct employment in regional areas. The ACTU cited research provided by the Department of Industry, Science and Resources suggesting that the current hydrogen project pipeline can create up to 168491 jobs while the current critical minerals project pipeline can create up to 42743 jobs.
2.43Some submitters argued that the role of hydrogen in the Future Made in Australia agenda should be expanded to incorporate additional fuels. INPEX argued that the scope of the government’s supports for hydrogen production should be expanded to incorporate non-renewable fuels. INPEX argued that public investment should also be directed to the production of natural gas derived hydrogen using carbon capture and storage, otherwise known as ‘blue hydrogen’. Accordingly, INPEX submitted that the HPTI should be broadened to include blue hydrogen and that this would increase hydrogen production and the reduction in carbon emissions for the same amount of public investment.
Concerns raised
2.44Despite receiving broad support from a variety of stakeholders, some inquiry participants expressed concerns with several aspects of the Future Made in Australia agenda. These concerns are summarised in brief below:
the importance of ensuring that government support for private investment is targeted, informed and flexible and does not encourage wasteful or uncompetitive behaviour;
the importance of ensuring that Future Made in Australia support does not amount to a form of trade protectionism and damage Australia’s international competitiveness;
whether fossil fuel projects should be eligible for support under the Future Made in Australia framework and the role of natural gas in the energy transition to net-zero;
whether the need to take action on climate change and reduce emissions should be included as one of the objectives of the bills; and
the overall clarity of the legislation.
2.45Some inquiry participants also expressed concerns about the scope of the NIF, sector assessments completed under this framework and the CBPs. These matters are discussed in chapter three of this report.
Importance of targeted, informed and flexible support
2.46Several inquiry participants expressed concerns about the risks associated with public investment in private sector projects, warning that poorly designed and inefficient investments could hurt the federal budget, damage Australia’s international competitiveness, and distort private markets. Accordingly, these inquiry participants emphasised the importance of ensuring that public investments made under the FMIA agenda are targeted, flexible, and carefully designed to ensure that these risks are avoided and deliver the greatest value for money.
2.47In its submission, the Productivity Commission stated that careful policy design will be critical to the management of key risks, noting that the bills are proposed in the context of major shifts in the global economy. It warned that, if poorly designed, industry policies such as the FMIA agenda can be costly for governments, act as a form of trade protection, and distort the allocation of Australia’s scarce resources in a way that runs counter to the national interest. The Productivity Commission expressed support for the NIF outlined in the bills, stating that the inclusion of a clear framework to guide these public investments will help ensure that support is targeted to policy goals and more likely to be an effective use of public money.
2.48However, the Productivity Commission stated that the NIF could be enhanced to better direct government interventions under FMIA towards their most valuable use. The Commission recommended that the NIF be amended to limit public investments to projects that pass sector assessments, and that programs already announced under the NIF should also be subject to these assessments. Further, the Productivity Commission recommended that the data and reasoning behind sector assessments should be made public and that these assessments should be periodically evaluated and reviewed in an independent process.
2.49Similarly, while expressing support for a modern industry policy in Australia, the Grattan Institute expressed concerns that the FMIA agenda risked falling into known industry policy traps, such as overreaching for a competitive advantage, picking losers, and short-term policy thinking. To avoid these risks, it recommended that the ‘Improving the net-zero transition’ stream be amended to more clearly articulate the reasons industry policy is needed. Further, the Grattan Institute recommended that the ‘Improving the economic resilience and security stream’ be amended to include more strident descriptions of the circumstances that would justify government support for an investment under this stream. It expanded on this point in its submission:
Governments need to be much better informed about which facilities have a future and which don’t, and clear-eyed about whether facilities in distress are worth saving. As well, governments should apply stricter funding criteria, to ensure funding reaches the industrial facilities with the most potential to contribute to a resilient net-zero economy. In particular, governments should not assist companies that aren’t prepared to make the same commitment that they have.
2.50Dr Jeffrey Wilson, Director of Research and Economics at the AI Group pointed out that one of the challenges of the FMIA framework is that, while there is guidance on who will receive support, there is less guidance on what kind of support will be received.
2.51The BCA also recommended that guardrails should be built into the legislative framework of the Future Made in Australia agenda to ensure that public investment in the private sector was judicious, sustainable and effective.
2.52The Institute of Public Affairs (IPA) claimed the Future Made in Australia agenda would put Australia’s most competitive industries at risk and gradually remove Australia’s comparative advantage in the export of minerals and raw materials. The IPA also claimed that Australia is unlikely to develop a comparative advantage in the manufacture of green technologies, arguing that the market for renewable manufacturing is already too concentrated for Australia to compete globally.
2.53BP Australia submitted that the incorporation of ‘guardrails’ in the legislative framework could ensure efficient and effective use of public funds. BP Australia recommended the inclusion in the legislation of the following:
Clear and transparent selection criteria for sector inclusion, with a key focus on ‘sustainable comparative advantage’ or (security based) ‘critical needs’.
Clear and transparent project selection criteria to ensure funding is driven toward initiatives that deliver the best returns.
For each program - a requirement to demonstrate how a project’s commerciality is constrained by the current and near-term operating environment, and how this will change over time to ensure ‘offramps’ are established to end government support.
Program administration, including selection, to be conducted by subject matter experts.
Subject matter experts being able to operate at arm’s length from government, addressing the recently reported concerns from the OECD.
2.54The Minerals Council of Australia (MCA) stressed the importance of ensuring that the Future Made in Australia framework was clear and unambiguous, and able to provide an effective assessment and assurance mechanism for policy initiatives still under development, and that the application of these policy measures. The MCA recommended that the Productivity Commission conduct a comprehensive cost benefit analysis of the framework, including the level of risk within three years of the enactment of the legislation, arguing that this would provide a baseline for evaluating new government liabilities as well as fostering trust in fiscal decisions made under the framework.
2.55Similarly, the CMEWA expressed in-principle support for the bills, but stated that the framework must be well-designed, well-administered and provide a significant degree of flexibility to ensure that public investments are targeted and deliver a sustained comparative advantage for Australia at an efficient cost. The CMEWA expressed concerns that a narrow focus on providing financial support is unlikely to enhance Australia’s international competitiveness in the net-zero economy and called for coordinated, substantive and long-term support from all levels of government to achieve the policy objectives of the Future Made in Australia agenda. To this end, the CMEWA recommended that policy settings be informed by consultation with industry to enhance the effectiveness of public investments.
2.56Similarly, the Australian Chamber of Commerce and Industry (ACCI) expressed concerns that public money would be allocated to projects which have no reasonable long-run prospects, resulting in a poor allocation of government resources. The ACCI noted that the United States and the European Union are investing heavily in their own net-zero industry policies and warned that Australia cannot expect to compete with the high level of public funds invested in programs such as the IRA and the European Union Green Deal. Accordingly, the ACCI submitted that Future Made in Australia investments must be targeted and focused in sectors where Australia has a comparative advantage. The ACCI also called on the Government to demonstrate that projects already announced are internationally competitive and that any government support represents an effective use of taxpayers’ money.
2.57In response to this, Ms Mohita Zaheed, First Assistant Secretary at Treasury, pointed out that Treasury is undertaking consultation on proposed tax incentives that would come into effect in relation to the FMIA plan and the legislation that comes out of that consultation will provide clarity in relation to these incentives. She also stated that Treasury had studied the US’s IRA in drafting these bills and there are fundamental differences between the US and Australia’s economies which had led to the creation of a very different bill from the US’s equivalent Act.
2.58Ms Zaheed was aware of the needs of industry for transparency and certainty when it came to, in particular long term investment, but emphasised that the FMIA bills would establish an assessments framework and the legislation providing the support framework was still to come. She noted the support required for different industries will differ depending on sector and that consultations are currently ongoing:
Once government determines what the appropriate supports are for a sector, that will then need to be transparent. If it's a production tax incentive or is another vehicle that needs legislation, that is the point at which that transparency is really critical in that market. In some senses, that's currently under development in a number of these sectors.
Role of natural gas and other fossil fuel projects
2.59Several inquiry participants expressed concerns about the role of natural gas and other fossil fuels in the FMIA agenda. Some inquiry participants argued that the scope of the policy should be expanded to allow for public investments to be made in natural gas projects, claiming that investments in natural gas would support the net-zero transition.
2.60For example, Australian Energy Producers (AEP) recommended that the Future Made in Australia agenda adopt a least-cost, technology neutral approach to the decarbonisation of the economy and accommodate the direct and indirect use of natural gas and carbon capture and storage. AEP argued that natural gas will play a crucial role in supporting Australia’s future manufacturing, critical minerals processing, and other green technologies, enhancing Australia’s transition to the net-zero economy. Accordingly, AEP recommended that the agenda be used to leverage Australia’s comparative advantage in the natural gas sector to support the economic viability of the net-zero transition.
2.61Mr David Fallon, General Manager, Energy Transition, of Chevron Australia echoed this, stating that gas will continue to play a role in Australia’s energy usage for some years:
A stable and predictable energy transition framework will provide us with the certainty that's needed to enable ongoing investment in projects to ensure energy security both for Australia and the region as, collectively, governments and industries work towards a lower carbon future.
2.62Similarly, the ACCI expressed concerns that the bills would not provide the Australian Renewable Energy Agency (ARENA) with the ability to provide financial assistance to natural gas projects. The ACCI stated that natural gas will have a role to play in the transition to net-zero and submitted that Future Made in Australia support should be available to projects which use a combination of renewable energy sources and natural gas.
2.63The CMEWA submitted that the liquefied natural gas (LNG) industry could support global decarbonisation as a replacement interim fuel source for coal or provide energy security and affordability for Australia’s key trading partners. The CMEWA argued that until other firming and storage technologies with sufficient duration length and lower costs become commercially viable at scale, natural gas could provide firming capacity to support the expansion of renewable power generation and Australia’s energy-intensive, value-adding opportunities. The CMEWA also claimed that regional cooperation on carbon capture and storage would also be an opportunity for Australia to strengthen its trading relationships.[77]
2.64Ms Mia Schlicht, Research Fellow at the IPA was firm in noting that Australia should focus on its competitive advantage in coal and gas, noting that attempting to compete with China on the processing of critical minerals like lithium and cobalt and the production of renewable energy sectors would not be economically viable.
2.65However, other inquiry participants expressed strong opposition to public investments being made in the natural gas or fossil fuel industry under the FMIA agenda.
2.66For example, the Environmental Defenders Office (EDO) expressed strong support for the bills but argued that the Future Made in Australia framework must not be used to provide public investment for fossil fuel projects. The EDO submitted that supporting renewables while continuing to finance new fossil fuel projects fuel projects will not result in the emissions reductions needed to mitigate the effects of climate change. The EDO acknowledged that the bills prevent ARENA from providing finance to fossil fuel projects but noted that this prohibition does not extend to the Board of Export Finance Australia.
2.67The Smart Energy Council (SEC) recommended that the bills should be amended to add a ‘prohibited sectors’ clause which would ensure that Future Made in Australian funding is not used to support fossil fuel projects. The SEC argued that this prohibition should be extended to other energy sources, such as nuclear power and carbon capture and storage technology.
2.68The Australian Conservation Fund (ACF) also recommended that the bills be amended to include a ‘prohibited sectors’ clause to the same effect.
2.69The IGCC recommended that the bills be amended to include safeguards protecting against public funds allocated under the National Interest Framework from being used to support projects in legacy industries such as fossil fuels, warning that investments in these industries would be uneconomic and costly.
2.70Similarly, Fortescue submitted that no funds allocated under the National Interest Framework should be given to projects in fossil fuel industries. Fortescue argued that this prohibition must include technologies for carbon capture and storage and hydrogen production using other than renewable energy. Fortescue submitted that this prohibition should apply as a matter of principle even where projects purport to fall within the net zero transition principles or the economic security and resilience stream.[84]
2.71Still other submitters made the point that, while there may be a desire within their industry to make the switch to renewable energy sources, the technology is not available at this time. Ms Saliba of Mondelez Internation elaborated on the chocolate-making process, which requires the use of gas boilers for which there is currently no renewable energy equivalent, and which have a 40 to 50 year lifespan. When there are opportunities for switching these boilers to a renewable energy equivalent, this will require significant investment costs. Ms Saliba pointed out that some financing instruments, such as instant asset tax write-offs, may be more appropriate for encouraging businesses to make these kinds of switches.
2.72Ms Zaheed of Treasury made the point that the FMIA plan and the National Interest Framework were only one tool in the government’s toolkit for achieving Australia’s global and domestic decarbonisation goals and should be looked as one aspect of a broader set of policies and frameworks to achieve net zero.
2.73Ms Zaheed went on to say that the current period is one of transition to renewables and there are various sectors where the technology to operate entirely on a fully renewable energy load is not feasible. She said that while that technology is being developed (which is one the areas the FMIA plan is intended to provide support for) there would continue to be a need for fossil fuels as part of the Australian energy mix.
Action on climate change as an objective of the bill
2.74Several submitters expressed concerns that action on climate change is not included as one of the official Objects of the legislation.
2.75For example, the Climate Council submitted that the Objects should clearly address the need to reduce greenhouse gas pollution and decrease carbon emissions. The Climate Council recommended that the bills be amended to make it explicit that public investments made under the FMIA agenda be directed towards achieving the twin objectives of taking action on climate change and enhancing Australia’s economic resilience. The Climate Council submitted:
If policy-makers must choose between supporting two sectors or industries, one which would create additional greenhouse gas emissions and the other which would have a neutral impact on domestic emissions or reduce these, it would clearly be to the community’s benefit for public funds to flow to the lowest-emitting option, all else being equal. It is important that the Future Made in Australia Bill explicitly acknowledges this point, to help direct future public investments to the cleanest emerging sectors or industries.
2.76Similarly, the ACF submitted that the bills be amended to more explicitly centre the need to decarbonise Australia’s energy and industrial systems as a key objective of the Future Made in Australia agenda.
2.77As an alternative, or in addition to, including action on climate change within the Objects of the bill, several submitters expressed support for including a direct reference to action on climate change within the community benefit principles.
Importance of positive outcomes for First Nations peoples
2.78A number of inquiry participants called on the government to ensure that that the benefits of public investments made under FMIA translate into improved outcomes for First Nations communities.
2.79For example, the First Nations Clean Energy Network (FNCEN) submitted that the FMIA agenda provides a valuable opportunity to deliver positive outcomes for First Nations communities. FNCEN noted that similar industry policies in comparative jurisdictions such as the IRA and the Green Deal have incorporated First Nations consent, partnerships, and ownerships and have recognised the value of First Nations participation in these programs.
2.80Similarly, the Australian Council of Social Service (ACOSS) expressed support for putting in place systems and structures to ensure that First Nations peoples could participate and benefit from Australia’s transition to clean energy. ACOSS noted that climate change directly threatens the human rights of First Nations peoples and communities, including the right to water, food, health, housing, employment and cultural practice. ACOSS called on the government to support and resource First Nations peoples’ decision-making, self-determination, and free, prior and informed consent rights in climate change mitigation and adaptation, and environmental management.
2.81The National Native Title Council (NNTC) noted that the scale of the Future Made in Australia agenda calls for deep consultation with First Nations communities. The NNTC cited research indicating that 57.8 per cent of critical minerals projects will be located in areas where First Nations communities have a legal right to negotiate, with this figure increasing to 79.2 per cent if native title claims are included.
2.82The NNTC stated that the Future Made in Australia agenda presents a unique opportunity to set benchmark for First Nations leadership of and participation in the economic benefits of decarbonisation and recommended that Traditional Owners be provided with funding to engage directly with project proponents:
Resourcing Traditional Owners, through their representative institutions, is crucial for the investment certainty needed for the myriad renewable energy and critical minerals projects Australia needs to achieve its net zero targets. Proponents and investors currently face considerable delays and various legal, financial and reputational risks due to Traditional Owners’ inability to meaningfully engage. This includes risks to cultural heritage and environmental destruction and a project’s social licence to operate.
2.83Inquiry participants expressed support for an additional CBP to enhance the inclusion of First Nations communities in the establishment, operation and benefits of the FMIA agenda.
Importance of developing strategic trade partnerships
2.84Several inquiry participants stressed the importance of developing strategic trade partnerships with like-minded governments alongside the Future Made in Australia agenda.
2.85For example, the MCA noted that in addition to global economic uncertainty, the world is experiencing an escalation of geopolitical instability. It argued that countries like Australia must act insulate themselves from the risks of increased geopolitical tension, and that this must include developing strategic international partnerships to deliver end-to-end supply chain security.
2.86Similarly, the ACCI submitted that Australia should continue to develop strong trading partnerships to benefit from low-cost technologies manufactured in other countries with highly competitive manufacturing bases. The ACCI noted that the United States, EU and China have invested heavily in the production of solar panels, and that rather than attempting to compete with these jurisdictions, Australia should strengthen its trade agreements with these countries to guarantee supply of these products. The ACCI claimed that enhanced strategic trading partnerships would reduce the cost of renewable energy in Australia and free up public money for investment in other areas where Australia may have a greater comparative advantage.
2.87Professor Alex Robson, Deputy Chair of the Productivity Commission, warned that one of the secondary risks of this kind of industry policy is that it can distort trade and foreign investment. He pointed out that Australia, as a small and open economy, should take this kind of risk seriously.
Funding consistency and the ‘single front door’
2.88Several submissions also provided input on the implementation of the FMIA plans, in particular around funding consistency and accessibility for investors. Although not contained within the bills, a ‘single front door’ or single point of contact for major investors in the FMIA plan has been proposed by the government as part of the FMIA package.
2.89Both the IGCC and the Centre for Policy Development made recommendations that the FMIA bills be aligned with the Australian Sustainable Finance Taxonomy, with the IGCC noting:
This would provide a sophisticated and standardised approach to which technologies should be prioritised, and ensure consistency with finance industry expectations.
2.90The Centre for Policy Development stated that the Sustainable Finance Taxonomy has done significant work to define which economic activities are capable of decarbonising the economy, and the FMIA bill should be clear that eligibility for funding should align with the final version of the Taxonomy when it becomes available.
2.91In relation to the ‘single front door’ proposal, the IGCC was also supportive of this proposal being extended to all project proponents, rather than those worth over $100 million, stating:
Ensuring that capital appropriately flows to all parts of the capital stack, from R&D to commercialisation, is critical for a pipeline of investible opportunities to emerge. Government will be better able to see gaps within sectors when all nodes of innovation ecosystems are accounted for within the one platform. Embedding linkages from ARENA, EFA and others such as the Clean Energy Finance Corporation (CEFC) will result in better supports for industry to incubate and deploy innovation.
2.92The Centre for Policy Development was also supportive of the ‘single front door’, noting that this kind of mechanism would, over time, help coordinate investment for investments of different sizes and at differing stages of industry development. They advocated for ‘different divisions within the door’ to assist these different sizes and scales of project.
2.93Ms Zaheed of Treasury provided an update on the ‘single front door,’ stating that Treasury will be undertaking consultation soon. She went on to say that the purpose of the ‘single front door’ will be to provide a transparent and concrete point of entry into government and that a lot of the processes needed for the ‘single front door’ currently already exist but need to be made more efficient and coherent.
Omnibus bill
2.94Some submissions did provide comment on the Omnibus bill, particularly in relation to the expansion of ARENA’s role.
2.95The ACCI was supportive of the amendments in the Omnibus bill expanding the role of EFA but stressed that EFA’s existing role should not be rolled back or diluted by its expanded role in providing FMIA project funding. The ACCI also noted the significant expansion of ARENA’s existing role to support the FMIA Innovation Fund and emphasised the need to provide adequate funding and resourcing to ARENA in order to properly administer this new role. They suggested that, although ARENA is an independent agency, there could be value in allowing the Finance Minister to have oversight of some of ARENA’s governance arrangements in order to ensure governance integrity.
2.96Similarly, the Grattan Institute recommended that the Joint Committee of Public Accounts and Audit request that the Auditor-General undertake a performance audit of ARENA in order to ensure its readiness for this larger, and more commercially oriented role.
2.97The National Native Title Council made a different recommendation, suggesting that the Omnibus bill be amended to include statutory requirements that both EFA and ARENA include First Nations representations on their respective boards. They made note of existing structures where First Nations presence was required as part of the governance structure of organisations, such as the Australian Heritage Council, the Murray Darling Basin Authority and the Wet Tropics Management Authority.
2.98The ACTU and the Community and Public Sector Union (CPSU) also expressed concerns about the changes to the ARENA Act proposed by the Omnibus bill which would allow ARENA to engage consultants. The CPSU questioned the need for this specific change to the ARENA Act, noting that the Act already allowed for the engagement of consultants if they provide specialist expertise.
2.99Mr Chris Faris, the Chief Operating Officer of ARENA reassured the committee that the Omnibus bill wouldn’t change the way ARENA employs consultants, and he was hopeful that the passage of the FMIA bills would reduce the number of consultants employed by ARENA substantially. He made the point that ‘the material change for [ARENA] in the legislation is to grant ARENA, for the first time, the general right to employ.’
2.100Mr Darren Miller, CEO of ARENA, was highly supportive of the changes to the ARENA proposed by the Omnibus bill and stated that ARENA ‘remains focused on accelerating the energy transition to assist Australia’s emissions reduction and renewable energy targets. He further said that ARENA is looking forward to collaborating with other government agencies as the FMIA plan is operationalised.