Australia needs more stunning successes like its home battery rebate to beat its climate targets

The target range for Australia’s 2035 emissions reduction target has today been set at 62-70% below 2005 levels. Clearly, the government has gone more for practical deliverability than ambition and alignment with the climate science. 

Australia’s 43% emissions reduction by 2030 target requires an annual 1.7% cut nationally since 2005.

The new 62-70% by 2035 target range is at the bottom end of the 65-75% range advocated for by the Climate Change Authority (CCA) but does moves us closer to climate science alignment in requiring a more than doubling of our run rate to 3.4 to 4.2% annually for the next decade.

New Treasury modelling forecasts our economy will be $2.2 trillion larger by 2050, with 80% more investment and an additional 5 million jobs as a result.

Meanwhile, the ‘opposition’ is daily tearing itself part over climate science denialism and our Net Zero by 2050 commitment, which does create sovereign risk from policy backsliding for investors, should they ever get back into government, fortunately an increasingly remote prospect.

As we wrote in Renew Economy earlier this week, the National Climate Risk Assessment sets the scene, highlighting the economic cost Australia faces as climate hazards increase in frequency and increase in severity, and the associated cascading defence and national security, risks, in addition to the health and trade threats.

Annual disaster costs could average $A40 billion by 2050, with compounding impacts on infrastructure, agriculture, and energy. Heat-related losses could cut labour productivity 0.2-0.8% annually by 2050.

Under existing policy settings, Australia is projected to reach emissions cuts of just over 50% by 2035, meaning this additional emissions reduction target requires deeper cuts nationally across all sectors.

As such, Australia will need significantly enhanced policies, leveraging the CCA’s six sector pathways work to put us on a path to a whole of economy decarbonisation effort, moving beyond the current focus on electricity decarbonisation and heavy industry. 

The good news is much of the enabling infrastructure and authorities have been developed to lead this effort, with the Net Zero Economic Agency (NZEA), Single Investor Front Door and National Reconstruction Fund (NRF) central to this, as have state organisations like the NSW Net Zero Commission.

The first term of the Albanese Government has also seen a move away from massive over-reliance on external consultants to restaff our public service, as well as reorientation of government departments like Treasury and the Department of Foreign Affairs and Trade (DFAT) to bring a whole of government approach.

This will require significantly more upfront capital investments, much of which must be led by Government.

Climate Energy Finance (CEF) estimates that since the start of 2023, $75 billion of Federal Government funding and capital allocations have been made towards decarbonisation, electrification and the associated Future Made in Australia (FMIA) program, with another $6 billion of State allocations.

This week an additional $1.1 billion of funding allocated in the Cleaner Fuels Program to incentivise renewable diesel and sustainable aviation fuel (SAF), and today another $2 billion funding for the Clean Energy Finance Corporation (CEFC) and $5 billion extra for the NRF.

CEF sees a top priority on getting these fund allocations ‘off the table’ and out the door. To this extent, CEF has tracked over $16 billion of new deployments since December 2024, a much needed significant step up in pace that needs to be at least maintained, with more funding added. 

Minister Bowen’s stunningly successful $3.5 billion two-phase national Cheaper Home Battery Rebate shows the speed and scale that can be delivered with the right enabling policies.

Ultimately to drive whole-of-economy change at the speed required, Australia is going to have to overcome the climate wars and implement a systemic price on carbon pollution in Australia.

Constructively, CEF sees good progress here, and expects the Government to use its 2026 Safeguard Mechanism Review to mandate the progressive expansion of the scheme (a price on carbon in all but name) by phasing in a lowering of the 100,00tpa threshold towards 25,000tpa, as Renew Economy reported has been mandated in NSW.

Further, adding in the Scope 2 emissions of the electricity sector to the Safeguard Mechanism from 2030 would provide a clear financial signal to underpin certainty around the coal-power plant phase out.

As CEF has long argued, we also need diesel fuel tax reform, given diesel and oil represents 17% of our national emissions profile.

A $50 million annual cap on diesel fuel subsidies would only impact 15 globally significant Australian mining firms, but would pivot $2-3bn annually of imported diesel subsidies to underpinning investment in mine electrification and decarbonisation, massively improving Australia’s trade deficit and national energy security profile in the process.

We also need to understand our exported emissions (Scope 3) dwarf our domestic emissions, so we need international collaboration, starting with bilateral agreements to raise ambition and drive joint decarbonisation investments.

Australia needs to work with aligned countries to cooperate on carbon pricing and trade — starting with heavy industries like steel, cement, aluminum, and fertilizers, which together account for more than 20% of global emissions.

As Professor Frank Jotzo and Annette Zou controversially argued, Australia could become the world’s first net-zero exporter of fossil fuels.

On the export front, the Albanese government continues to walk both sides of the street, talking about the massive export opportunities ahead for Australia as a Green Exports Superpower whilst also enabling even more scarce capital and labour resources to be subverted into enabling methane gas exports for many decades to come.

This is despite dire predictions of excess global LNG supply and reduced demand from decarbonisation leaders like China become increasingly clear.

In this light, it is brilliant to see the memorandum of understanding by Thyssenkrupp for long term offtake of 100% of Progressive Green Solutions (PGS)’s proposed renewable energy and green hydrogen powered Green Iron development in Midwest WA, leveraging the 8Mtpa magnetite iron ore exports of China’s Karara Mining.

It’s great to see West Australian Premier Roger Cook overseeing the official signing; State and Federal Governments’ support to match the German Government Export Credit Agency support will be key, as the EU ETS and Carbon Border Adjustment CBAM to put an explicit price on embodied decarbonisation in our exports. 

It is time for DFAT to work now to land a Korea-Japan-Australia trilateral and a China-Australia bilateral agreement so hopefully as President of COP31Minister Bowen can announce Final Investment Decisions (FID) on the three largest green steel supply chain decarbonisation projects in the Southern Hemisphere.

This Green Energy Statecraft has long been advocated for by Professor Elizabeth Thurbon of University of NSW, and underpins the Clean Commodity Trading Initiative that she has developed in collaboration with Oliver Yates, the founding CEO of the CEFC.

Australia has long talked about becoming a renewable energy export superpower.

With the clear silent majority mandate of their May 2025 election supermajority locked in, the Albanese Government needs to embrace “China Speed, China Scale: thinking, accelerating approval processes so we can deploy capital at speed and scale to seize the massive employment, investment and net export opportunities.

This is a race Australia can and must win.