This evening, Treasurer Jim Chalmers announced the 2024-2025 Australian Federal Budget (the Budget). The centrepiece of the Budget is the very significant support given to various energy transition measures, in particular tax incentives for hydrogen production, that is clearly a direct response to similar measures (such as the Inflation Reduction Act) in other jurisdictions.
The Budget seeks to encourage investment in the energy transition through several mechanisms, including:
- Investing $22.7b over the next decade to build a Future Made in Australia – a plan targeted at maximising the economic and industrial benefits of the net zero transformation and securing Australia's place in a changing global economic and strategic landscape;
- Establishing a Hydrogen Production Tax Incentive to incentivise greater investment in renewable hydrogen production of up to $6.7b. Additionally, the Hydrogen Headstart program will be expanded by $1.3b to support early movers to invest in the industry's development;
- Developing product standards for green products to facilitate businesses and trading partners sourcing low emissions products - the Budget provides $32.2m to fast track the initial phase of the Guarantee of Origin scheme (focused on renewable hydrogen), before expanding the scheme to accredit the emissions content of green metals and low carbon liquid fuels;
- Investing to establish Australia as a renewable energy superpower, including unlocking >$65b of investment in renewable generation and clean dispatchable capacity through the Capacity Investment Scheme;
- Establishing the $1.7b Future Made in Australia Innovation Fund, to support innovation, commercialisation, pilot and demonstration projects and early stage development in priority sectors, including renewable hydrogen, green metals, low carbon liquid fuels and clean energy technology manufacturing such as batteries;
- Scaling the supply of critical minerals to improve the resilience of global supply chains and support the global transition to net zero. The Government will also work with trade partners to support global rules on unfair trade practices and to negotiate benchmarks for trade in high-quality critical minerals; and
- Making it simpler to invest in Australia, by streamlining engagement with the Government, assisting with the navigation of approvals processes and fast-tracking major projects. However, whilst low risk investments will be processed faster, the Government has indicated that greater scrutiny will apply to high risk investments (for our more detailed comments, please see our article discussing the streamlining of ACCC and FIRB here).
The measures, while aimed at developing Australian capacity and industry, will create further opportunities for foreign investment, particularly from countries like Japan and Korea which are already at the forefront of investment in hydrogen and critical minerals. They will also go some way to providing a pathway to viability to those projects already in an early stage of development.
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