Is Australia finally catching up on clean energy benefits for First Nations?

The government is incorporating First Nations and community benefit as one of the key principles of the Future Made in Australia Act.

Announced this week by Federal Minister for Climate Change and Energy Chris Bowen at a launch recommending 12 initiatives government and industry can take now to turbocharge First Nations into clean energy jobs, the Minister told a government-cross sector audience First Nations ‘principles’ and ‘criteria’ will be ‘written into the Act’ which the Federal government is ‘taking through parliament shortly’.

Incorporating First Nations into the Future Made in Australia Act will finally bring Australia onto a more equal footing with the US and Canada.

US IRA

Similar to the intent of the US Inflation Reduction Act (IRA) and comparable initiatives in Canada, South Korea and Europe, Australia’s Future Made in Australia Act will drive new investment into renewable energy and cleantech manufacturing, regional and remote employment, and export opportunities.

The IRA and Canada’s response also drives a significant portion of that investment into Tribal and First Nations. 

The IRA introduced seismic shifts to Tribal Nations’ energy development landscape through grants and rebates, loans, guarantees and tax credits, and setting aside $720 million in grants specifically for Tribal Nations.

The 2022 legislation’s “uncapped” tax credits, meaning there is no explicit budget or limit written into the law – and the new set of rules administering them – are critical to Indigenous communities’ participation in energy development. 

The IRA now allows Tribal governments and Alaska Native Corporations to benefit from income tax credits even though they may not owe federal income taxes. Through Internal Revenue Code Section 6417, the IRA allows Tribal governments to build clean energy projects and then collect a direct payment in lieu of claiming the credit to offset any income taxes. 

In addition, the IRA also introduces two types of tax bonuses – the energy community tax credit bonus and environmental justice bonus. These bonuses incentivise clean energy projects in low-income communities, Tribal communities, and communities that used to host fossil fuel infrastructure. 

Furthermore, projects can stack certain credits and bonuses. For example, a 5 megawatt solar project owned by a Tribal government and meeting the requirements for various bonuses could stack bonuses of up to a 70% investment credit as a direct payment from the Treasury.

With more than two-thirds of the IRA’s benefits flowing through the tax code, the opportunities for Tribal Nations from these specific direct and indirect funding mechanisms in the US are immense. 

Canada

More recently, analysts described Budget 2023 as Canada’s response to the U.S. Inflation Reduction Act (IRA), while its Budget 2024 prioritised critical issues such as sustainable transportation initiatives, carbon rebates, Indigenous loan guarantees, and $351.2 million in 2025-26 to create 90,000 new youth job placements and enhance employment support opportunities.

While at the provincial level, several policies have been instrumental in catalysing Indigenous-led renewable energy development for many years – including Ontario’s “Aboriginal Price Adder,” essentially a guaranteed increased price for projects passing certain thresholds of Indigenous ownership.

Budget 2023 dedicated $60 billion in clean energy tax credits and $20 billion in sustainable infrastructure investments with $3 billion slated for various regional priorities and Indigenous-led projects. 

Similar to the Investment Tax Credit and Production Tax Credits employed in the US, Canada’s additional Clean Tech ITC is a refundable tax credit of up to 30% of the capital cost of “clean technology property.” 

For entities that do not pay Canadian federal taxes like municipal governments and Indigenous Nations, Budget 2023 introduced a separate credit, the Clean Electricity ITC, eligible to taxable and non-taxable entities like Crown corporations, publicly owned utilities, and corporations owned by Indigenous communities.

In Budget 2024, the proposed $5 billion Indigenous Loan Guarantee program represents a significant opportunity toward fostering economic growth and energy sovereignty in Indigenous and First Nations communities.

And further significant investment of $275 million over two years for Indigenous Governance and Capacity programs, $12.6 million over two years for advancing a New Fiscal Relationship with First Nations, $350 million over five years to support Indigenous Financial Institutions and economic opportunities, and $96.4 million over two years for advancing rights-based discussions and treaties, is taking the economic conversation forward in the right direction.

Back to Australia

Chief Ken Cameron of Saulteau First Nations, Moberly Lake recently said, “Ownership is the only type of reconciliation we understand. Ownership and partnership.”

Chris Bowen MP lent weight this week to the Chief’s sentiment.

In his speech, the Minister highlighted three areas of focus in his clean energy transition: jobs, First Nations benefit, and ownership and equity.

With currently around 2% of First Nations participating in Australia’s clean energy transition, the Minster lamented “I think we can do a lot better than that, and this report will help us do a lot better than that.”

His second concern addressed, by writing in First Nations benefit into the Future Made in Australia Act, follows previous positive initiatives.

The new Net Zero Economy Authority Bill 2024 establishing the Net Zero Economy Authority mandates supporting First Nations persons “to participate in, and benefit from, Australia’s transition to a net zero emissions economy.”

And the National Reconstruction Fund Corporation Act 2023 mandates not only that the Board “must have regard to the desirability of encouraging and improving economic participation by historically underrepresented groups, including… First Nations Australians,” but that it also “must formulate written policies … in relation to … the impact of investments of the Corporation on First Nations Australians’ to include ‘benchmarks and standards for assessing the performance of the investments of the Corporation’ and ‘risk management.”

These two existing examples stand as powerful precedent for similarly ensuring First Nations participation and benefit is specifically included in the Future Made in Australia Act.

The Minister’s third area of concern, ownership and equity, has been informed in part, he said, by Canada’s experience where about 20% of renewable energy projects have some form of First Nations ownership or equity in them, whereas in Australia “we are running a bit under 1%.”

“We can do much, much better. We know that First Nations people did not share in ownership and equity when it came to oil and gas for example, often and on First Nations land. 

“We can’t make that same mistake again. And we won’t make that mistake again.”

Jonathan Kneebone is the director of policy and engagement at the First Nations Clean Energy Network