Net Zero Plan

1.1 The climate is already Slow-onset climate change impacts may also threaten our net zero transition if not well understood and managed. changing, with major Rising temperatures, extreme heat and heatwaves increase implications for Australia health risks, and heat-related mortality and make it harder to work outdoors. Australia is experiencing the profound and accelerating impacts of climate change. Australia’s average land Individuals and households already disadvantaged are the temperature has increased by approximately 1.5oC since most vulnerable to such impacts of a changing climate. 1910.1 Australians are already living with increasing impacts from climate change, and are witnessing more The risk of vector-borne diseases (e.g. malaria and dengue frequent and severe events, such as droughts, floods, fever) will rise with increased temperature, rainfall and bushfires and heatwaves.2 floods in some areas, putting pressure on the healthcare system. Crop yields will decrease with declining rainfall Many communities have experienced recent hazards (e.g. in southwest Western Australia). Many ecosystems, and disasters, such as ex-tropical cyclone Alfred in New which support clean water and air, food security and South Wales and Queensland, Tasmanian West Coast regulate the local climate, will be impacted or lost.7 bushfires in 2025, and drought conditions affecting large areas of Australia’s southern states. Climate change First Nations people will also continue to experience is also contributing to the emergence of new types of unique and increasing impacts from climate change, which adverse events, such as South Australia’s ongoing algal threatens the health of and access to Country, with flow-on bloom, which is partly driven by extended periods of warm detriments to social and physical health and wellbeing. ocean temperatures.3 Events like this underscore that new Disruptions to supply chains and telecommunications can impacts will emerge as climate change intensifies. also lead to enhanced security risks both in Australia and Australia’s National Climate Risk Assessment (NCRA) the region. provides the first comprehensive government-led assessment of the risks Australia faces as a result of climate change. It presents a sobering future, underscoring that climate-fuelled extreme weather events are increasing pressure on our natural ecosystems and the livelihoods and communities that rely on them. Climate disasters are impacting our infrastructure, including our transport networks, hospitals, schools and homes, and these costs are escalating over time. This is affecting our economic Climate change in Australia | 17 Adapting effectively to climate change and enhancing Every fraction of a degree increase in resilience will support Australia’s transition to net zero by temperature escalates the risks and improving infrastructure resilience, reducing costs and boosting productivity. impacts of climate change. Stabilising global temperatures through mitigation 1.2 Climate change is an urgent efforts will reduce some, but not all, climate impacts. global challenge Adaptation is needed regardless of how successful our emissions reduction policies are, with impacts such as Australia cannot – and is not – tackling climate change alone. sea level rise locked in for centuries to come. Australia’s National Adaptation Plan (NAP) establishes a framework Australia, as one of 195 signatories of the Paris Agreement, for adapting to the risks identified within the NCRA. is committed to holding the increase in the global average temperature to well below 2°C above pre-industrial levels The NAP sets the foundation for the Australian and pursuing efforts to limit the temperature increase Government to work collaboratively with state, territory to 1.5°C above pre-industrial levels.8 This commitment and local governments, communities, First Nations requires global emissions to fall rapidly and be at or below peoples, businesses, and non-government organisations net zero in the second half of this century.9 to build their adaptive capacity. It recognises the important roles a resilient environment and community play in supporting climate adaptation and sets out key priorities to build our capacity to manage climate extremes. Box 1.1: The cascading impacts of intense storms in Broken Hill On 17 October 2024, a short but intense storm destroyed 7, and damaged 2, transmission towers supplying power to the greater Broken Hill area in NSW. Over the following 2 weeks 12,700 properties experienced intermittent power outages as transmission infrastructure was repaired, and backup gas turbines experienced faults and underwent maintenance. These disruptions also caused telecommunication network outages that affected 3,930 fixed-line and NBN services. An inquiry by the NSW Parliament Committee on Environment and Planning found that, in addition to significant economic losses, these outages led to: • widespread health impacts – residents with chronic health conditions were at risk of being unable to operate required electronic medical devices • unstable power supply, voltage fluctuations and power spikes – which caused lasting damage to essential appliances like refrigerators and spoilage of food and medications • sewerage and water pump failures – causing a backup of untreated sewerage, and water sources running low • limited fuel availability – with some stations closed due to their reliance on telecommunications to operate their pumps and an increased demand for fuel to operate generators. This led to extensive queues to obtain fuel. Source: Parliament of NSW, Legislative Assembly Committee on Environment and Planning, The electricity outages affecting Far West NSW in October 2024, Report 2/58 – June 2025 (The electricity outages affecting Far West NSW in October 2024). 18 | Australia’s Net Zero Plan Figure 1.1: Global emissions trajectories. Source: Treasury analysis of Byers et. al. 2022; IPCC 2022. 90 75 -32% from pre–paris policies to current policies in 2035 60 Gt CO2-e 2030 NDCs 45 -34% from current policies to well below 2ºC in 2035 30 15 -59% from current policies to 1.5ºC in 2035 0 2015 2020 2025 2030 2035 2040 2045 2050 Pre Paris (4ºC) Current Policies (3ºC) Well below (2ºC) 1.5ºC Collective international efforts are showing significant The Climate Change Authority advised: progress. In 2015, prior to the Paris Agreement, global “The global transition is inevitable, already policies had the world on track to warm by 4°C above pre-industrial levels by 2100 (Figure 1.1).10 Current policies occurring, and accelerating—driven by are on track to cut global emissions by 32% compared to rising global incomes and energy demand, pre-Paris levels by 2035 and lead to just less than 3°C of falling clean energy costs and expanding warming above pre-industrial levels by 2100.11 There is still low-emissions technology options, and work to do, to align with a 2°C or 1.5°C trajectory.12 rising concerns about the risks and impacts Despite a shifting global environment, countries across of climate change.” the world continue to affirm their commitment to the 2035 Targets Advice, page 4 Paris Agreement and net zero goals. The Climate Change Authority (CCA) considered recent challenges Global energy intensity (energy use per unit of GDP) to multilateral cooperation, including the implications declined by an average of 2 per cent per year between of the United States’ planned withdrawal from the Paris 2010 and 2019 and 1.2 per cent per year from 2020 Agreement, and they concluded it is unlikely to materially to 2023.14 Similarly, carbon intensity (carbon dioxide hinder Australia’s decarbonisation efforts. Around 80% of emissions per unit of energy) fell on average by 0.3 per global GDP is covered by national net zero commitments, cent annually from 2010 to 2019.15 These trends reflect including Australia‘s major trading partners such as China, structural changes in the global energy system, including Japan and the Republic of Korea.13 This share rises to over improved energy efficiency, a shift away from coal and the 84% when subnational commitments growing role of renewable energy. are included.* * Including sub-national commitments from US states would raise coverage to at least 84%. Source: Net Zero Tracker, Energy and Climate Intelligence Unit, Data-Driven EnviroLab, NewClimate Institute, Oxford Net Zero, 2025 (Net Zero Tracker | Welcome). Climate change in Australia | 19 The plummeting costs of wind and solar have seen them In Australia, investors continue to prioritise climate action become the fastest growing sources of electricity,16 and to protect long-term returns, strengthening net zero clean energy investment and jobs now outnumber those commitments, establishing interim targets and developing in the fossil fuel industry.17 The IEA reports that global climate investment strategies in recognition of the clear investment in clean energy infrastructure, efficiency economic case for the global transition.21 and electrification are set to rise to USD2.2 trillion in 2025, double the investment in oil, coal and natural gas Regardless of geopolitical challenges, these economic (Figure 1.2).18 They project that renewables are set to meet fundamentals suggest the transition to net zero will around 90% of global electricity demand growth out to accelerate. Australia stands to gain from shaping 2027,19 and that demand for, and investment in, fossil fuels global efforts, building our influence and access to is set to decline over the next 10 years.20 emerging markets, while diversifying to better manage external shocks. The IEA attributes the clean energy investment surge to a combination of emissions reduction goals, technological gains, energy security imperatives, and countries seeking to establish stronger positions in emerging global markets. Figure 1.2: International investment in energy 2015–202522 2.5 2.0 1.5 Trillion USD 1.0 0.5 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Fossil fuels Low-emission fuels Grids and storage Energy effeciency and end-use Renewable power 20 | Australia’s Net Zero Plan

1.3 Australia’s opportunity in the Capital is flowing most readily into jurisdictions with clear transition plans, frameworks that support sustainable net zero transition finance, business and industry growth, and stable and consistent policy that enables long-term decision-making.24 Australia’s fossil fuel resources have contributed to our economy, regional employment and trade relationships Pursuing our comparative advantages and incentivising for decades. Resources and energy account for around efficient investment will also enhance productivity 11.4% of Australia’s GDP, with Australia being the world’s outcomes for Australia. This can be achieved by largest exporter of iron ore and alumina. Coal and natural accelerating energy performance, increasing investor gas were our second and third largest exports by value certainty, encouraging innovation, enhancing market respectively (after iron ore) in 2024.23 Over two-thirds of designs, and addressing barriers to infrastructure the total energy produced in Australia is now exported as deployment such as slow planning and approval processes. some form of raw or refined fossil fuel energy. The Government is focused on reforms that will enhance productivity and competitiveness across the economy, As global energy systems shift toward lower-emissions providing flow-on benefits for the transition. sources, including renewables, Australia must adapt to secure our ongoing prosperity and stability. Australia has world-leading renewable resources, rich metal and mineral deposits, a skilled workforce, strong trade partnerships and a stable investment environment. These advantages will enable Australia to sustain economic growth and remain competitive as the world transitions away from fossil fuels towards lower emissions goods and services. A lithium mine processing plant Western Australia, Australia. Climate change in Australia | 21

1.4 A clear pathway will help The transition will need to be navigated in a way that ensures fair and equitable outcomes for all Australians. communities, industry and This means working with regional and remote government successfully communities, including First Nations, to ensure everybody navigate the transition has a clear understanding of what the transition means for their local area and are supported to participate in How exactly the transition unfolds from here is uncertain, key decision-making processes. with both challenges and opportunities ahead for Australia. A long-term pathway to net zero builds confidence in Technology costs are hard to predict, community support the transition and helps to navigate through uncertainty. for solutions can accelerate or delay the deployment of Strong and stable policy drives investment, and predictable infrastructure, and international developments or new systems of review and improvement bring flexibility to breakthroughs can drive new market dynamics. adjust policies and approaches as things change. Coupled with unexpected economic and climate shocks, this means there are upside and downside risks for Australia’s transition. Swan Valley, Western Australia, Australia. 22 | Australia’s Net Zero Plan Over the last 3 years, significant progress has been made in The Climate Change Authority advised: building a stable policy framework to enable climate action, “Australia’s existing policies – anchored track progress and refine our efforts over time. by national emissions reduction This includes passing Australia’s Climate Change Act 2022 legislation, sectoral initiatives and funding in September 2022, which: programs – provide a strong platform for • legislated our 2030 target to reduce emissions progress… There are opportunities either by 43% on 2005 levels, and our long-term goal of net to expand their reach or introduce select zero by 2050 initiatives to address gaps and barriers to • expanded the role of Australia’s independent CCA to implementation.” provide independent advice on targets and progress 2035 Targets Advice, page 57 • enhanced accountability and transparency by requiring the Minister for Climate Change to table an Annual Climate Change Statement in parliament, reporting on The Net Zero Plan builds on this framework, providing a progress in our emissions reductions commitments. long-term pathway for Australia’s transition and priorities for further action. This provides a robust cycle to review and refine our policies and measures over time to ensure Australia remains on track to net zero (Figure 1.3). Figure 1.3: Set-do-review-refine framework Set our goal through emissions reductions targets based on 1 DO independent advice develop and implement policies, including through Ministerial Councils Set-do-review-refine 2 framework 4 Refine adjust policies through Review progress clearly signalled, public processes (for example the 2026-27 Safeguard through Australia’s annual Mechanism Review) and make inventory, projections, changes accordingly. reporting, advice from the CCA and our annual statement to parliament 3 Climate change in Australia | 23 2. The Net Zero Plan and sector plans A fair and orderly transition will: Key messages • Deliver affordable, clean and reliable energy • The Net Zero and the 6 sector plans set for all Australians, minimising cost of living and household pressures by leveraging Australia’s vast out a clear pathway and actions to ensure renewable energy potential. a fair and orderly transition for Australians and provide the private sector with greater • Revitalise Australia’s industrial competitiveness capitalising on our natural advantages in resources confidence to continue investing. and clean energy. • The plans are informed by extensive • Ensure opportunities and benefits flow equitably community and industry engagement as to communities, providing the supports needed for well as independent expert advice. transitioning regions. • Enable early, consistent action for an orderly and efficient transition to net zero.

2.1 Guiding Australia to net zero • Accelerate investment, innovation and knowledge-sharing by leveraging Australia’s emissions by 2050 strategic partnerships. The Net Zero Plan sets out how Australia can transition to The 6 sector emissions reductions plans cover all net zero emissions by 2050, and the steps the Australian major sources of emissions across the economy. They Government is taking to achieve this. It sets out Australia’s outline how each sector can contribute to Australia’s 2035 target, the next big milestone in our net zero journey. transition and provide detail on the emissions reduction opportunities and transition pathways for The Plan responds to calls from investors, business, each sector. industry, unions, farmers, community, First Nations peoples and conservation groups, who have all stressed the need for clear guidance on Australia’s pathway to net zero. Solar farm, South Australia, Australia. 24 | Australia’s Net Zero Plan

2.2 The plans and 2035 target 2.3 The plans and 2035 target are grounded in independent, have drawn on extensive expert advice consultation with the community The 2035 target and plans draw on independent expert and industry advice from the CCA and Commonwealth Scientific and The Net Zero Plan, 2035 target and Sector Plans were Industrial Research Organisation (CSIRO), and analysis informed by extensive community and stakeholder from across government. consultation. This included the CCA’s public consultations in 2023 and 2024 across 3 reports, which cumulatively Economic modelling by the Australian Treasury explores received 565 submissions. The CCA also conducted 3 scenarios for potential net zero pathways and their industry roundtables, meetings with unions and workforce economic impacts in the context of the global net zero representatives, regional community workshops, First transformation. This work, set out in the companion Nations engagement, ministerial and senior official council document ‘Australia’s Net Zero Transformation: Treasury meetings with state and territory governments, and Modelling and Analysis’, provides insights into how engagement with local government organisations. Australia can efficiently achieve emissions reductions over time, and how to maximise opportunities. The Australian Government also drew on a wealth of engagement, input and insights from industry and communities, collected through related policy work. This The government’s comprehensive included submissions and information provided during approach ensures the pathways development of the Future Gas Strategy, National Hydrogen Strategy, Capacity Investment Scheme and National outlined in the plans are robust, Electric Vehicle Strategy, the National Health and Climate credible and underpinned by the Strategy and others. This engagement has reinforced that all sectors and stakeholders play a role in the transition, best available evidence. and the importance of enabling and encouraging broad participation (Figure 2.1). As required under the Climate Change Act 2022, the Minister for Climate Change and Energy requested the CCA provide advice on a national 2035 emissions reduction target. This advice was received on 12 September 2025. In addition, parliament requested the CCA provide advice on sectoral pathways, as a Special Review under the Climate Change Authority Act 2011. The CCA’s advice has directly informed the Australian Government’s decision and this Net Zero Plan, and is referenced throughout. Climate change in Australia | 25 Figure 2.1: Key messages by stakeholder cohort Communities and regions: Business and investors: • Communities are leading work • Businesses are ready to invest in the net underway to chart the energy transition zero transition. A stable and navigable locally. They are eager to be involved, investment environment is essential for but are looking for assistance from facilitating capital flow to the transition. governments and collaboration with business. • Australia is competing globally for investment. An ambitious target will help • Upfront costs and access to to signal the appetite for investment, information remain challenges to taking and underpinning policies will make the action and will require government target achievable by accelerating capital assistance to overcome. attraction. • Regional communities already face specific place-based challenges, First Nations communities: including access to health and social • Net zero project proponents must seek services, housing, and the right training. free, prior and informed consent from Developing place-based solutions, Traditional Owners when operating on which fulfill these community needs Country. is key to accelerating the pace of the energy transition. • Indigenous businesses are eager to join the supply chains of renewable projects, • Communities support the helping to unlock prosperity for First mainstreaming of climate Nations communities. considerations across all areas of government policy and adopting • Climate change is a threat to Country and the linked cultural practices of First approaches that recognise the Nations peoples. Disruption of Country and interlinkages between government culture takes a significant toll on social and policy decisions in different areas (e.g. emotional wellbeing. Government should the health and wellbeing implications of work in partnership with Traditional Owners increased active transport). to understand how best to act to protect • Coordination is needed between levels Country and empower Traditional Owners of government, communities and to look after Country. business to deliver an orderly transition. Youth Workers and unions: • The best climate action will also protect the Many workers are interested in the oppor- environment for future generations. tunities of new industries and want to have the skills to take part. This training must • Support must be offered to the most disadvantaged through the transition, to be targeted at the right time and the right deliver climate justice. place. • A fair and orderly transition will deliver • Young people want to see resilient communities that can withstand climate high-wage and secure jobs in safe and impacts, and where they can support local inclusive environments. action. • Communities want a say in co-designing climate actions to ensure they work for people, especially regional and First Nations communities, and people with disabilities. 26 | Australia’s Net Zero Plan 3. Australia’s emissions and outlook Muswellbrook, New South Wales, Australia.

3.1 Australia’s current Key messages emissions profile • Australia’s emissions are coming down. Australia has a world-class system to track its greenhouse Our current policies and measures put us on gas emissions. This allows Australia to understand track to achieve our 2030 target of 43% if emissions sources, drivers and trends, monitor and we stay the course. evaluate the effectiveness our policies, and implement measures to reduce them. Our system enables • National emissions were 27% below 2005 transparency and accountability – Australia publishes levels in 2024. Our most recent data for comprehensive annual reports and data to fulfil Australia’s 2025 indicates emissions are now international reporting obligations under the United Nations down 29%. Framework Convention on Climate Change (UNFCCC) and the Paris Agreement. Australia also publishes quarterly • These are real reductions supported by emissions updates to ensure governments, industry and strong policies, including the 82% renewable investors have the latest information to support their electricity target and Safeguard Mechanism. decisions. This information is used to inform the Australian parliament and the public on progress toward national emissions targets. Emissions come from a range of economic activities. Australia’s emissions reduction targets and reporting framework cover carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and synthetic greenhouse gases such as hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).25 Australia’s largest source of greenhouse gas emissions is the burning of fossil fuels to generate electricity, followed by the combustion of fossil fuels to drive our transport and resources sectors. The Net Zero Plan considers emissions across 6 major emissions sources, representing key sectors of Australia’s economy (Figure 3.1). Climate change in Australia | 27 Figure 3.1: Australia’s emissions by sector, 2024 (note: totals may not sum due to rounding)26 Total net emissions 447 MtCO2-e 100 MtCO2-e, 22% Transport The transport sector covers light and heavy road transport, rail, maritime vessels, aviation, and the construction of transport infrastructure and support services. The sector directly contributes 22% of Australia’s annual emissions; the largest single source of emissions is light vehicle road transport. Indirectly, the transport sector accounts for emissions through the materials used for manufacture of vehicles and infrastructure such as roads. Built Environment 22 MtCO2-e, 5% The built environment sector covers residential, commercial, and public buildings as well as urban open spaces and water infrastructure. The sector directly accounts 150 MtCO2-e, 34% for around 5% of Australia’s emissions, mainly through combustion of fuels for space and water heating, cooking and construction, and leakage from refrigerants. Indirectly, it accounts for further emissions through the energy and materials used in construction and operation. For example, the built environment sector is indirectly responsible for almost half of the emissions from electricity use. Electricity and Energy The electricity and energy sector covers the generation of electricity, manufacture of petroleum products, the supply of gas, and other related services. These functions underpin Australia’s economy and are currently the largest source – approximately 34% – of Australia’s annual emissions. Resources 100 MtCO2-e, 22% The resources sector covers the exploration and production of minerals, oil and gas, and coal resources. Production includes resource extraction and, depending on the commodity, any additional on-site processing as well as limited minerals processing. The sector also covers mine closure, decommissioning and rehabilitation. The sector contributes significantly to Australia’s economy, especially through exports. It also contributes about 22% of Australia’s annual emissions. Industry 62 MtCO2-e, 14% The industry sector covers the manufacturing and processing of goods, for domestic use and as exports. It spans 9 priority subsectors including waste and resource recovery, manufacturing, iron and steel, cement and concrete, metals refining and smelting, and waste and resource recovery. The sector contributes significantly to Australia’s economy and employment and accounts for 14% of annual emissions. 87 MtCO2-e, 19% Agriculture The agriculture and land sector covers farming, land management, forestry, and fisheries. Agriculture emissions, primarily in the form of methane from livestock (particularly cattle and sheep) and manure, nitrous oxide from agricultural soils, and on-farm fuel use, contribute 19% of Australia’s annual greenhouse gas emissions. Land The land sector contains vegetation and soils that can both emit and sequester carbon dioxide; it is currently a net carbon sink (that is, it sequesters more than it -74 MtCO2-e, -16% emits) equivalent to 16% of Australia’s annual emissions 28 | Australia’s Net Zero Plan

3.2 Australia has already made Reduced electricity sector emissions resulting from the rapid growth in solar and wind deployment across the progress in reducing emissions country, replacing coal-fired generators as they retire. This growth reflects the combined impact of national, state Since 2005, domestic policy settings, technology and territory renewable energy policies and a significant advancements and the effects of global events have had reduction in renewable technology costs. In 2024, a record a major impact on Australia’s emissions. While emissions

7.5 GW of new renewable electricity capacity was added, of from transport and some energy subsectors (such as which over 3 GW was rooftop solar.29 LNG production) have grown since 2005, others, such as agriculture and electricity, have reduced.27 Strengthening of the Safeguard Mechanism and Australian Carbon Credit Unit (ACCU) Scheme which Australia’s national emissions were 447 million tonnes of provide clear, long-term policy signals and options to carbon dioxide equivalent (Mt CO2-e) in 2024, 27% below support emissions reductions across the economy. Some 2005 emissions. The latest preliminary data for 2025 of the more recent emissions reductions observed can shows a further reduction to 436 Mt CO2-e, which is 29% be attributed to these policies. Further details on these below 2005 emissions (Figure 3.2). policies can be found in Box 3.2 – Safeguard Mechanism Australia has seen emissions reductions due to: and Chapter 9 – Carbon Markets. Land sector becoming and remaining a net sink. The Australia’s climate action has resulted in a gradual sector contributed 13% of national emissions in 2005, decoupling of ongoing economic growth from national but now is a net sink equivalent to over 16% of national emissions. The emissions intensity of the Australian emissions in 2024.28 This is due to several factors including economy reduced by more than 55% between 2005 and state and territory policies to reduce land-clearing, declines 2024, and emissions per capita fell by more than 46%.30 in harvesting of native forests and expansion of forest cover including through plantation establishment. Figure 3.2: Percentage change in emissions by sector since June 2005 100 Change in emissions since June 2005 (%) 50 0 -50 -100 -150 -200 -250 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Industry Resources Electricity and energy Built environment Transport Agriculture Land Climate change in Australia | 29

3.3 Major policies since 2022 provide a strong foundation for further emissions reductions Over the past 3 years, Australia’s emissions outlook has improved substantially with the implementation of a robust set of national emissions reduction policies. The latest emissions projections show that with current policies, Australia is on track to meet the 2030 target on an emissions budget basis and is just shy of meeting the point-in-time target, reaching 42.6% below 2005 levels in 2030. Figure 3.3: Emissions projections by sector, 2005 to 2030 (Note: Inventory data used up to 2024, 2024 Emissions Projections data used from 2024–2030) 700 600 500 400 300 Emissions (Mt CO2-e) 200 100 0 -100 2005 2010 2015 2020 2025 2030 Land Electricity & Energy Built Environment Agriculture Industry Transport Resources 30 | Australia’s Net Zero Plan Box 3.1 Uncertainty in emissions projections Australia’s emissions reporting provides a basis for governments and industry to calibrate policy and investment over the long-term to achieve Australia’s emissions targets. Emissions projections use the best available data on production and activity levels, commodity prices and macroeconomic trends to help determine how Australia is progressing towards its targets. Emissions estimates are influenced by domestic policy settings, technology advancements, global markets and the continuous improvement of emissions data and methods. They are also impacted by events such as bushfires, drought, La Nina and El Nino weather events, and the COVID-19 pandemic. For these and other reasons, projections are inherently uncertain. They involve judgements about the future growth path of domestic and overseas economies, policies and measures, technology and human behaviour. This uncertainty increases the further into the future emissions are projected. Historically, Australia’s actual emissions have been substantially lower than projected. As new policies have been introduced, clean technology costs have fallen, public and consumer sentiment has shifted, and global action on climate change has strengthened, Australia has significantly out-performed projections made in previous years (Figure 3.4). Figure 3.4: Differences between emissions projections 10, 5, and 3 years in advance, compared to actuals for 2014-2024 0.2 0.1 10 years out: 8% increase 0 % Change on 2005 -0.1 5 years out: 17% reduction -0.2 3 years out: 23% reduction -0.3 Actual emissions: 27% reduction -0.4 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Climate change in Australia | 31 Since 2022, the Australian Government’s policy reforms for all new vehicles, on average, that they bring into have established legally binding policies calibrated to our Australia. Over time, the emissions target is lowered. The national targets for well over half of Australia’s emissions NVES is expected to reduce the emissions intensity of (Figure 3.5). new passenger vehicles by around 60% by 2030, and the emissions intensity of new light commercial vehicles by The Capacity Investment Scheme supports the half over the same period. The Standard is expected to expansion and decarbonisation of Australia’s electricity achieve 20 Mt* of cumulative abatement by 2030. grids with firmed renewables, to help achieve Australia’s target of 82% renewable generation on-grid by 2030. It The ACCU Scheme incentivises carbon abatement provides long-term revenue underwriting for projects, activities through projects ranging from reforestation to which decreases financial risk for investors. The CIS will energy efficiency. Proponents carry out registered projects support a total of 40 GW of projects with up to 26 GW to reduce emissions or sequester carbon and are issued of renewable generation capacity, and up to 14 GW of with one ACCU for each tonne of carbon dioxide equivalent clean dispatchable capacity.31 Achieving 82% renewable sequestered or avoided. ACCU crediting is subject to strict electricity generation is estimated to deliver 44 Mt* of eligibility criteria based on the Offset Integrity Standards to cumulative abatement from 2024 to 2030. ensure abatement is additional, measurable and evidence- based (see Chapter 9 for full description). Since 2011, the The NVES improves access to low- and zero-emissions ACCU Scheme has delivered over 169 Mt of abatement vehicles for Australian motorists by setting emissions across Australia.32 targets for new passenger cars and light commercial vehicles – like utes and vans – sold in Australia. Car Figure 3.5 illustrates the broad coverage of the Capacity manufacturers and suppliers must meet these targets Investment Scheme (CIS), the Safeguard Mechanism (Box 3.2) and the New Vehicle Efficiency Standard (NVES). Figure 3.5: Emission sources in 2024 covered by legally binding policy measures (Note: units refer to Mt CO2-e). Electricity and energy Transport 22 Mt Agriculture Land Trucks and buses 67 Mt -74 Mt 137 Mt 60 Mt Cattle and sheep On-grid electricity Cars and light commercial vehicles (net sink) Other agriculture Capacity Investment Scheme New Vehicle Efficiency Standard 12 Mt 10 Mt 8 Mt Large Other aviation, rail, sources Fuel marine Safegaurd 7 Mt combustion Resources Industry Built environment 86 Mt 14 Mt Fuel combustion and fugitive 34 Mt Fuel combustion and on-grid electricity fugitive emissions Capacity Investment Scheme Fuel 14 Mt combustion 14 Mt 14 Mt emissions non safeguard Fuel combustion Waste and industrial processes Synthetic Non Safeguard gases 8 Mt Other sources safeguard 5 Mt Other sources non safeguard 8 Mt HFC phase Emissions covered by policy Emissions not covered * Estimate is based on internal analysis 32 | Australia’s Net Zero Plan Rio Tinto Yarwun Alumina Refinery, Gladstone, Queensland, Australia. Credit: Rio Tinto. Box 3.2 The Safeguard Mechanism and its role in national emissions reductions The Safeguard Mechanism legislates an emissions reduction trajectory to net zero in 2050 for over 200 of Australia’s largest industrial facilities. Safeguard baselines decline annually in line with Australia’s emission reduction targets of 43% below 2005 levels by 2030 and net zero by 2050. This will deliver around 200 MtCO2-e of cumulative emissions reductions by 2030, with covered facilities collectively reducing their net emissions from 136 MtCO2-e in 2024 to less than 100 MtCO2-e in 2030, and continuing on a trajectory to net zero by 2050.33 The Safeguard Mechanism covers emissions across 4 of the 6 sectors:34 • Resources – 87% of sector emissions or 87 MtCO -e 2 • Industry– 56% of sector emissions or 35 MtCO -e 2 • Transport – 11% of sector emissions or 11 MtCO -e 2 • Electricity and energy – 3% of sector emissions or 4 MtCO -e 2 The Safeguard Mechanism is market-based and technology-neutral. It specifies the emissions outcome to be achieved, while leaving businesses to decide where their best opportunities for efficiency and transformation lie. This allows the cheapest emissions reductions to be accessed first, lowering the cost of compliance for facilities, and lowering the overall cost of reducing Australia’s emissions. • If a facility emits less greenhouse gas than allowed by their baseline it generates tradable credits (Safeguard Mechanism Credits or ‘SMCs’) for the difference between its emissions and baseline. • If a facility emits more greenhouse gas than allowed by their baseline it must take action to reduce them, or purchase credits from others. Facilities can surrender SMCs or ACCUs to complement on-site reductions. The Safeguard Mechanism is flexible and scalable. Its settings can be calibrated to align with any target. The decline rate of 4.9% annually to 2030 has been set so that Safeguard facilities deliver a proportional share of Australia’s 2030 target. The decline rate for the period to 2035 will be considered in the 2026-27 Review and ensure the scheme’s design is appropriately calibrated and effectively delivering emissions reductions in line with Australia’s targets (see further in Chapter 9 Carbon Markets). Climate change in Australia | 33 References 1 CSIRO, and Bureau of Meteorology, State of the Climate 19 International Energy Agency (IEA), Electricity 2025: 2024, Government of Australia, Canberra, October 2024 Analysis and forecast to 2027, IEA, Paris, France, February 2025 2 CSIRO, and Bureau of Meteorology, State of the Climate 2024, Government of Australia, Canberra, October 2024 20 International Energy Agency (IEA), World Energy Investment 2025, IEA, Paris, France, June 2025 3 Department for Environment and Water 2025, Algal bloom situation update, Government of South Australia, Adelaide, 21 Caripis L, et al., The State of Net Zero Investment 2025, August 2025 Investor Group on Climate Change, Sydney, April 2025 4 Insurance Council of Australia, Lismore shows resilience 22 International Energy Agency (IEA), World Energy three years on from devastating floods, Insurance Council Investment 2025, IEA, Paris, France, June 2025 of Australia, Sydney, February 2025 23 Department of Industry, Science and Resources (DISR), 5 Insurance Council of Australia, Future Proofing Australia’s Resources and Energy Quarterly: June 2025, Government Resilience Insurance Council of Australia Summary report, of Australia, Canberra, June 2025; Department of Foreign Insurance Council of Australia, October 2023 Affairs and Trade (DFAT), Australia’s top 25 exports, goods & services 2024, Government of Australia, Canberra, May 6 Department of Agriculture, Fisheries and Forestry (DAFF), 2025 Climate change impacts and adaptation on Australian farms, Government of Australia, Canberra, May 2022 24 International Energy Agency (IEA), World Energy Investment 2025, IEA, Paris, France, June 2025; Climate 7 Department of Climate Change, Energy, the Environment Change Authority (CCA), 2035 Targets Advice, Government and Water (DCCEEW), National Climate Risk Assessment of Australia, September 2025 Methodology, Government of Australia, Canberra, September 2023 25 Department of Climate Change, Energy, the Environment and Water, Emissions projections, Government of 8 United Nations, Paris Agreement, United Nations Treaty Australia, Website, October 2024 Series, vol. 3156, p. 79, United Nations, New York, United States, December 2015 26 Department of Climate Change, Energy, the Environment and Water (DCCEEW), Quarterly Update of Australia’s 9 United Nations, Paris Agreement, United Nations Treaty National Greenhouse Gas Inventory: December 2024, Series, vol. 3156, p. 79, United Nations, New York, United Government of Australia, May 2025 States, December 2015 27 Department of Climate Change, Energy, the Environment 10 Intergovernmental Panel on Climate Change (IPCC), and Water (DCCEEW), Quarterly Update of Australia’s Climate Change 2014: Synthesis Report, IPCC, Geneva, National Greenhouse Gas Inventory: March 2025, Switzerland, November 2014 Government of Australia, August 2025 11 United Nations Environment Programme (UNEP), 28 Department of Climate Change, Energy, the Environment Emissions Gap Report 2024 (third edition), UNEP, Nairobi, and Water (DCCEEW), Quarterly Update of Australia’s Kenya, April 2025 National Greenhouse Gas Inventory: December 2024, 12 United Nations Framework Convention on Climate Change Government of Australia, May 2025 (UNFCCC), Outcome of the first global stocktake, UNFCCC, 29 Clean Energy Regulator, Quarterly Carbon Market United Arab Emirates, December 2023 Report December Quarter 2024, Clean Energy Regulator, 13 Department of Climate Change, Energy, the Environment Government of Australia, Canberra, February 2025 and Water (DCCEEW), (based on internal analysis), 30 Department of Climate Change, Energy, the Environment Government of Australia, Canberra, 2024; Department and Water (DCCEEW), Quarterly Update of Australia’s of Foreign Affairs and Trade, Trade statistical pivot National Greenhouse Gas Inventory: December 2024, tables, Government of Australia, Canberra, April 2025; Government of Australia, May 2025 International Monetary Fund (IMF), GDP, current prices (International $, PPP) (2024 data), IMF, Washington, D.C., 31 Department of Climate Change, Energy, the Environment United States, April 2025 and Water (DCCEEW), Capacity Investment Scheme, Government of Australia, September 2025 14 International Energy Agency (IEA), Global Energy Review 2025, Paris, France, March 2025 32 Clean Energy Regulator, ACCU project and contract register, Government of Australia, September 2025 15 Intergovernmental Panel on Climate Change (IPCC), Climate Change 2023: Synthesis Report, IPCC, Geneva, 33 Clean Energy Regulator, 2023–24 safeguard data insights, Switzerland, March 2023 Government of Australia, April 2025 16 International Energy Agency (IEA), World Energy 34 Department of Climate Change, Energy, the Environment Investment 2025, IEA, Paris, France, June 2025 and Water (DCCEEW), Quarterly Update of Australia’s National Greenhouse Gas Inventory: December 2024, 17 International Renewable Energy Agency and International Government of Australia, May 2025; Clean Energy Labour Organization, Renewable Energy and Jobs: Regulator, 2023–24 baselines and emissions data, Annual Review 2024, IRENA, Abu Dhabi, October 2024; Government of Australia, August 2025 International Energy Agency, World Energy Employment 2024, IEA, Paris, November 2024 18 International Energy Agency (IEA), World Energy Investment 2025, IEA, Paris, France, June 2025 34 | Australia’s Net Zero Plan 2 Australia’s Net Zero Pathway 35 | Australia’s Net Zero Plan An orderly transition to net zero emissions will support economic growth, create jobs in new industries, and provide broad-based support for households, communities and industries. Part 2 of the Net Zero Plan sets out Australia’s pathway through its 2035 target of 62 - 70% to net zero by 2050. This is informed by analysis from the Treasury, the Climate Change Authority, and extensive engagement Chapter 4 with stakeholders. Sets out Australia’s 2035 target Chapter 5 Shows the opportunities for abatement across sectors and how Australia can achieve its targets and transition to net zero Chapter 6 Sets out 5 decarbonisation priorities for Australia to achieve net zero. It explains current policies within this framework and the Australian Government’s future directions Chapter 7 Sets out what the Australian Government is doing to reduce non-CO2 emissions like methane 4. Australia’s 2035 target Australia’s interim emissions reduction targets are important waypoints on the path to net zero emissions by 2050. They Key messages help keep our economy on a steady, predictable pathway and • Australia’s 2035 emissions reduction target provide confidence for investors to support Australia’s clean is 62-70% below 2005 levels. industries. In 2022, the Government increased Australia’s 2030 target to 43% below 2005 levels and legislated that • The target represents Australia’s highest commitment. In line with the Paris Agreement, Australia is possible ambition. It is a credible now determining its ambition for 2035. contribution to global action to keep 1.5˚C within reach, and positions Australia to seize Australia’s 2035 target is 62-70% below 2005 emissions levels, the opportunities from the global transition covering all sectors of the economy and all greenhouse gases to net zero. (GHGs) (Figure 4.1). • The target can be met while the economy This is an ambitious and achievable target for Australia. continues to grow, with technologies and It demonstrates Australia’s commitment to transform our practices we have today. economy by attracting investment in new, clean industries that help deliver on Future Made in Australia priorities. It is • The target and emissions budget provide also a responsible contribution to global efforts to address flexibility for Australia to navigate climate change. uncertainty, risk, and seize opportunities over the next 10 years. The Climate Change Authority advised: • In setting this target, the Government ‘Adopting a 2035 target that is, and is seen has considered and adopted the to be, ambitious is crucial for unlocking recommendation of the Climate Change national economic benefits, for creating Authority. good jobs in regions that have underpinned Australia’s economy for generations, and for delivering new opportunities for Australian farmers and First Nations communities.’ 2035 Targets Advice, page 9 Figure 4.1: Australia’s emissions reduction targets and progress1 600 2020 target: 5% below 2000 levels 500 400 2030 target: 43% below 2005 levels Emissions (Mt CO2-e) 300 200 2035 target: 62-70% by 2035 below 2005 levels 100 2050 target: net zero 0 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Actual emissions Straight line from current emissions to net zero Straight line between 2020, 2030 and 2035 targets, representing emissions budgets Straight line from 2035 target to net zero Australia’s Net Zero Pathway | 37

4.1 Independent advice informed 4.2 62-70% is ambitious Australia’s target The Climate Change Authority advised: The Climate Change Act 2022 enshrines a world-leading process for developing emissions reduction targets, ‘Our comprehensive analysis has led us to requiring the government to consider the independent conclude that 62-70% is an ambitious target advice of the Climate Change Authority (CCA) before for Australia to achieve by 2035. … It aligns setting a new target. with what the science demands: strong and On 21 July 2023, the Minister for Climate Change and urgent action.’ Energy wrote to the Climate Change Authority to request 2035 Target Advice, page 3 this advice for Australia’s 2035 target. The CCA’s advice is the culmination of two years’ work, A target of 62-70% by 2035 represents a substantial step-up informed by modelling from CSIRO, extensive scientific and in ambition for Australia, halving current emission levels policy analysis, and public consultation. The CCA’s 2035 and accelerating progress toward net zero by 2050. Over Targets Advice was also informed by its Sector Pathways the next 10 years, Australia aims to reduce emissions by Review2. This advice was provided on 12 September 2025 and more than it has over the past 20 years. The average rate of recommended a target of 62-70%. emissions reductions will need to accelerate from 16 MtCO2-e per year from now to 2030, to at least 23 MtCO2-e per year from 2031 to 2035. The Climate Change Authority advised: The global response to climate change is driving an ‘The Authority finds that an emissions irreversible transformation of energy systems and the global reduction target of 62–70% from 2005 economy; one of the largest structural changes since the levels represents Australia’s highest Industrial Revolution. Our world-class access to renewable possible ambition taking account of energy, critical mineral resources, skilled workforces, geographic position, and our reputation as a reliable trading the matters set out under the relevant partner positions us well to benefit and prosper from the legislation, is achievable, and is in global transition as a major renewable energy and green Australia’s national and economic interest.’ commodity exporter. As the CCA notes “an ambitious target 2035 Targets Advice, page 1 should position Australia for prosperity, realising opportunities to navigate the transition from an emissions-intensive economy to a prosperous future as a major exporter of low- The Government has adopted the CCA’s target emissions products” (2035 Targets Advice, page 9). recommendation. The Australian Government has set the target with this The Government considered the CCA’s advice alongside other international context in mind, recognising that despite important inputs, such as consultation on the Net Zero Plan geopolitical challenges and volatility, the economic fundamentals and sector plans, and Treasury’s modelling and analysis. remain and will continue to accelerate the transition to net These inputs informed the government’s understanding of: zero. Australia’s target enhances our competitiveness as • The economic benefits, costs, and opportunities global investors are looking for stable markets for renewable for Australia and how these may be shared across technologies and clean energy industries. households, industries and regions • Achieving the global temperature goals of the Paris The Climate Change Authority advised: Agreement ‘This continued momentum of global action • Australia’s position and role in the international reinforces the imperative for Australia to community and in global markets sustain strong action on climate change.’ • The policies and technologies required to achieve the 2035 Targets Advice, page 76 target. 38 | Australia’s Net Zero Plan This target is an important, but not our only, contribution to global mitigation efforts to meet the Paris Agreement 4.3 62-70% is achievable goals. Our investment in developing clean energy The purpose of the 2035 target is to drive stronger action technologies and industries will support other nations in over time. This is what is required nationally and globally if their decarbonisation pathways. we are to achieve the Paris temperature goals and avoid the worst impacts of climate change. A target of 62-70%, along with our international contributions, will help achieve the overarching goal of As the economic case for the net zero transition the Paris Agreement to keep global average warming well strengthens, targets play a crucial role in signalling our below 2°C and pursue efforts to limit warming to 1.5°C. national economic intentions, highlighting opportunities The CCA found that “a target of 62-70% … anchors and building investor confidence. The CCA advise that Australia’s commitment to the global goal of pursuing an ambitious target increases the likelihood of Australia efforts to limit warming to 1.5°C, the threshold beyond capturing the benefits of the global transition and the which multiple climate systems risk irreversible potential size of these benefits. breakdown.” The science shows us that every fraction of a degree matters, including for Australia, where the National The CSIRO’s modelling, which informed the CCA advice, Climate Risk Assessment shows the significantly increased shows that a 62-70% target can be achieved while the impacts for higher global warming levels.3 economy grows at an average rate of 2.7% each year. All major sectors increase the volumes and value of their The UN’s Global Stocktake of progress under the Paris output5. Agreement recognises that global emissions must reduce by 60% from 2019 levels to keep 1.5°C within reach, as The Climate Change Authority advised: found by the IPCC Sixth Assessment Report4. While this does not determine what national contributions should ‘The projected reductions in net emissions are be, it provides a useful point of comparison. This is well all achieved against a projected background of within Australia’s target range of 62-70% - for Australia a economic growth and rising national income. 60% reduction on 2019 levels is equal to a 68% reduction on 2005 levels. Much of the so-called ‘cost’ of achieving a target is actually investment to replace ageing assets like old coal plants, vehicles, The Climate Change Authority advised: appliances and industrial gear with cheaper- ‘Continuing to strive for 1.5 °C matters to-run technology – it’s investment that has to because the difference in risks and impacts happen regardless of the emissions reduction between a 1.5 °C and 2 °C outcome is stark.’ imperative.’ 2035 Targets Advice, page 15 2035 Targets Advice, page 8 These findings are reinforced by modelling undertaken by Treasury which shows that an orderly transition to net zero would support continued economic growth, higher living standards and employment. A disorderly transition will cost investment, jobs and the economy. This is further discussed in Chapter 5. The CCA concluded that a target of 62-70% below 2005 levels can be achieved with existing technologies and practices – achievement does not rely on new, unproven technology.6 This includes continuing to expand renewable energy generation, electrifying and improving the efficiency of transport and buildings, improving the efficiency and emissions intensity of industry, mining and agriculture and increasing land-sector carbon removals. Australia’s Net Zero Pathway | 39 Similarly, findings from the Treasury modelling show there Australia’s emissions outlook has consistently improved are cost-effective pathways that deploy current technologies faster than projected due to the combination of policy, to achieve the required emissions reductions. global, technological, market and other developments, (Box 3.1). Global projections have similarly improved Past experience shows that clean energy technologies and – in part because modelling of the energy transition capabilities often improve faster than projected, giving us consistently tends to overestimate costs and confidence that even the upper end of the target range could underestimate deployment rates for clean technologies.7 be achieved if technology and market innovation continues to surpass today’s expectations. Technology pathways are The Australian Government is not alone in addressing described in more detail in Chapter 5. climate change. As the CCA notes, the target “represents the total collective effort required across the economy; it is not The Climate Change Authority advised: the target for any individual sector, business, jurisdiction or household.” (2035 Targets Advice, page 32). The Australian ‘Right now, the priorities are to rapidly Government plays a leadership role in providing the right deploy and scale known technologies, and policies, regulatory settings, supports and standards. It also to set the foundations and mobilise capital works with state, territory and local governments, as well for the technologies needed after 2035.’ as industry and communities, as everyone invests in the transition and the social and environmental benefits it brings 2035 Targets Advice, page 7 (discussed further in Part 4). CCA and Treasury analysis shows Australia has extensive The Climate Change Authority advised: abatement opportunities, and our track record shows we have the means – and the commitment – to act. ‘Everyone has a role to play in reducing emissions, and the sum of those roles is The policies and reforms introduced by the Government since 2022 provide strong foundations and are making greater than the parts. When governments, progress towards the target. Australia’s emissions are major corporations, investors, small now 29% below 2005, and with today’s policy settings businesses, community groups and and market and global trends, we are projected to be households each commit to action, their 51% below 2005 by 2035. Compared to now, that is two efforts reinforce one another. Strong thirds of the way to 62%, and more than half of the way to targets or action enables and encourages 70%. Further policy effort will build on these foundations, including through scheduled reviews to recalibrate existing others to do the same, building momentum measures. across the economy.’ 2035 Targets Advice, page 33 The Climate Change Authority advised: ‘The foundational climate change policies for achieving this target are also now in place. These must be refined, extended and expanded to ensure the target is reached in a timely, efficient, and effective manner.’ 2035 Targets Advice, page 32 40 | Australia’s Net Zero Plan

4.4 Setting an achievable target, This budget approach helps to moderate the impacts of year-to-year variability. It also aligns with the science robust to uncertainty of climate change, as the extent of warming and other impacts depends on cumulative greenhouse gas emissions Achievement of any emissions reduction level within the over time, not on emissions in a single year. target range would be a strong contribution to global climate action; as the CCA states, “the future is always going to be uncertain but that is no cause to pause – Figure 4.2: 2035 target straight line trajectory and the stakes are too high and stalling creates other risks corresponding emissions budget and costs.” (2035 Targets Advice, page 10). Setting the target as a range allows Australia to manage risks and uncertainty while pursuing an ambitious target. -40% The global landscape is volatile. Shifts in global markets -45% will affect demand for our energy commodity exports. -50% Emissions reduction below 2005 levels Technology costs are often lower than predicted. Climatic -55% and weather patterns affect emissions from our land -60% -62% sector, such as elevated sequestration during La Nina periods and elevated emissions during droughts. For -65% -70% example, over the past 20 years, Australia’s land sector -70% emissions have seen year-to-year variations of around -75% 10 MtCO2-e, and in a few instances shifts of up to 30 emissions budget -80% 1248 -1395 Mt CO2- e MtCO2-e. These could lead to point-in-time variations in our -85% emissions of a few percent of national emissions. -90% -95% The Climate Change Authority advised: -100% ‘The Authority considers there are good 2030 2031 2032 2033 2034 2035 reasons for the Australian Government to emissions budget to 70% emissions budget to 62% adopt a target range, rather than a single trajectory to 70% trajectory to 62% point target…. A target range signals intent, while recognising a variety of uncertainties and delivery risks.’ 2035 Targets Advice, page 10 A target range factors in these risks and provides a more stable policy basis for planning against variable weather patterns and global market fluctuations. Target ranges are commonly used internationally by other countries to manage similar risks and factors. Australia’s target will be implemented as a multi-year budget – that is, a limit on total net emissions from 2031 to 2035. The emissions budget corresponding to the target is estimated to be 1248-1395 MtCO2-e. This is Australia’s official Nationally Determined Contribution (NDC) under the Paris Agreement. Australia’s Net Zero Pathway | 41 5. Australia’s pathway to net zero The CCA’s Sector Pathways Review confirms these features Key messages and highlights that:9 • Australia’s pathway to net zero emissions • Working to reduce emissions now using mature involves rapid deployment of renewable technologies, while developing and commercialising energy, accelerating electrification and emerging technologies, is the most efficient pathway. energy performance, switching to low- Delay increases risk, cost and sees Australia miss carbon fuels and other solutions, and opportunities. carbon removals to address residual • There is a need for a clear, stable policy environment emissions. underpinned by strong engagement and collaboration between policymakers, businesses, communities and • An orderly transition to net zero will support households. continued economic growth, higher living standards, jobs and investment. Using our • More opportunities to decarbonise will emerge over natural advantages to scale clean energy time. Technologies that are still experimental could be ‘game changers’ in coming decades, reducing the cost industries and exports means these benefits and increasing the pace of decarbonisation. can be greater, and our exports larger. • Delay will cost investment, jobs and the 5.2 Modelling provides insights on economy abatement opportunities The Treasury undertook modelling and analysis to provide This Chapter presents a consolidated picture of Australia’s insights into the potential economic opportunities from transition to net zero at a whole-of-economy and sectoral different pathways to net zero.* 3 level. It uses the best available information to chart an orderly and efficient pathway to meet Australia’s targets. Using scenario-based analysis, Treasury has drawn on It outlines the potential pattern and timing of abatement in the best available evidence to provide insights into how Australia over three phases – to 2030, 2035 and 2050. Australia can efficiently achieve emissions reductions over time.

5.1 A pathway informed by robust • Treasury modelled two scenarios that broadly reflect analysis this Plan – a ‘Baseline Scenario’ and a ‘Renewable Exports Upside Scenario’. These see Australia reach Independent analyses have consistently found that 43% emissions reductions by 2030, 65% reductions by an orderly net zero pathway will maximise benefits for 2035 (which is consistent with the target range), and Australia 8. Common features of an orderly and efficient net zero by 2050. They assume orderly and efficient transition include rapid deployment of mature renewable emissions reduction pathways reflecting the expected technologies to reduce electricity emissions; energy availability of technology, in the context of global efficiency improvements and electrification; investment climate action to keep warming well below 20C. in alternative fuels and new technologies to reduce costs and scale their adoption; and maintaining and expanding • Treasury also modelled a ‘Disorderly Transition Scenario’, in which Australia delays climate action, does carbon removals, including land-based abatement, to not set a credible 2035 target and does not undertake balance residual emissions. While all sectors contribute further climate policy action until 2040, before rapidly to reducing emissions to 2050, the role of each sector reducing emissions to achieve net zero by 2050. changes over time, driven by the availability and relative cost-effectiveness of abatement options. *Note: Treasury’s modelling differs from the analysis in Australia’s annual emissions projections (discussed in Chapter 3). The projections are prepared in accordance with international reporting requirements. They focus on the national emissions outlook to 2040, under current policy settings, and in the context of current global action (which falls short of the global temperature goals). 42 | Australia’s Net Zero Plan Treasury’s modelling provides insights into how Australia can efficiently achieve emissions reduction over time and the impact of different pathways to net zero on investment, Box 5.1 CSIRO modelling of sectoral pathways and economic growth, living standards, jobs and the structure of 2035 targets for CCA the economy. The actual mix of activity will be determined The CCA commissioned the CSIRO to undertake by the combination of abatement technology, market, policy modelling as one input to inform its advice on the and other drivers over the period to 2050. 2035 target and Sector Pathways Review10. The CSIRO modelled six net zero scenarios for Australia, in the context of two levels of global climate ambition (aligned with limiting warming to below 2oC and 1.5oC). The domestic emission pathways reach net zero between 2035 to 2050. CSIRO’s analysis explores different questions and uses different assumptions to Treasury, however, findings on the key abatement opportunities and sequencing of these to net zero emissions are largely aligned. Differences in the assumptions and results reflect that the future is uncertain, and remind us that the ultimate mix of abatement will only be known as the transition unfolds. This underscores the importance of flexible policies focused on emissions outcomes, and support for a diverse mix of technologies and other solutions. Kardinia Energy’s Printed Solar technology uses carbon-based semi-conducting polymers printed on recyclable PET plastics. Australia’s Net Zero Pathway | 43

5.3 Australia’s pathway to 2050 Treasury’s Baseline Scenario illustrates an efficient pathway consistent with existing policies, the expected availability of abatement technology, and a global economy that achieves emissions reductions consistent with keeping global average temperature increases to well below 2°C. The key opportunities for Australia – to 2030, 2035 and net zero in 2050 – are outlined on the following pages. Figure 5.1: Projected emissions under Treasury Baseline Scenario, by sector 600 500 400 Emissions (Mt CO2-e) 300 200 100 0 -100 -200 2025 2030 2035 2040 2045 2050 Agriculture Built Environment Electricity and Energy Industry Resources Transport Carbon removals Net emissions 44 | Australia’s Net Zero Plan

5.3.1 From now to 2030 Australia is well-positioned to meet its 2030 target with existing policies and measures. Figure 5.2: Indicative abatement and composition by sector, Treasury Baseline Scenario, 2025 to 2030 600 600 504 500 500 -65 -3 1 -2 -1 -21 413 400 400 Emissions (Mt CO2-e) 300 300 200 200 100 100 0 0 -74 12 -62 -100 -100 -200 -200 2025 Electricity Built Agriculture Industry Transport Resources Carbon 2030 and Energy Environment removals Resources Transport Industry Agriculture Built Environment Electricity and Energy Carbon removals To 2030, most abatement comes from accelerated Electrification arrests emissions growth in the transport deployment of firmed renewable electricity displacing sector – which peaks then starts to trend down – fossil fuel generation in the electricity and energy sector. and continues emissions reductions within the built Treasury’s modelling indicates firmed renewable capacity environment and industry sectors. meets growing electricity demand from transport, the built environment and some manufacturing processes. CSIRO’s The land sector sink moderates slightly after the elevated modelling similarly shows electricity decarbonisation is the levels of sequestration during the extended largest source of near-term abatement through increased La Nina weather event from 2020 to 2023. deployment of renewable sources. Energy efficiency In the next five years, it will be important to continue improvements support achievement of the 82% renewable building the foundations to enable future emissions target and the associated emission reductions. (Box 5.2) reductions across other sectors (see Chapter 7). The resources sector has the second largest contribution This includes infrastructure and enabling systems like to emissions reductions by 2030 in this scenario. This certification for low carbon liquid fuels and hydrogen, and reflects investment in cost-effective electrification, on-site investing in innovation in agriculture. renewable electricity generation, and a gradual decline in domestic and global demand for fossil fuels (particularly thermal coal). Liquified Natural Gas and gas facilities implement carbon capture and storage technology where it is cost effective (Box 5.2). Australia’s Net Zero Pathway | 45

5.3.2 From 2030 to 2035 Figure 5.3: Indicative abatement and composition by sector, Treasury Baseline Scenario, 2030 to 2035 600 600 500 500 413 -54 400 -4 -6 -10 400 Emissions (Mt CO2-e) -18 -25 296 300 300 200 200 100 100 0 0 -62 -18 -80 -100 -100 -200 -200 2030 Electricity Built Agriculture Industry Transport Resources Carbon 2035 and Energy Environment removals Resources Transport Industry Agriculture Built Environment Electricity and Energy Carbon removals From 2030 to 2035 there is further decarbonisation of the Under this scenario, emission reductions accelerate across energy system, growing contributions from other sectors both the resources sector, where emissions reduce by over as electrification accelerates, and clean fuels begin to be a third, and the industry sector where emissions reduce by deployed where electrification is not viable. over 15%. Declining global fossil fuel demand contributes to lower fossil fuel mining activity and related emissions. In the electricity and energy sector, electricity is mostly Technologies to reduce fugitive emissions - such as from decarbonised, with most coal exiting the electricity system ventilation air methane within coal mining - begin to be and electricity generation emissions falling by over 90% scaled up, and LNG facilities electrify. Mining and other below 2005 levels. Sustained rollout of firmed renewable industrial facilities continue to take up feasible and cost- electricity generation and transmission, alongside effective electrification for applications like transport and installation of well-integrated consumer energy resources low temperature heat processes, in addition to on-site (small-scale solar and batteries that are integrated to allow renewable electricity generation. Industrial facilities such consumers to manage their on-grid demand) replaces coal as iron, steel, and alumina manufacturing begin to reduce capacity. Liquid fossil fuel use declines as other sectors emissions through fuel switching to less emissions- take up electrification opportunities (Box 5.2). intensive fuels. Emissions from these manufacturing sectors reduce by around 30% between 2030 and 2035, Energy efficiency continues to support the energy from 17 MtCO2-e in 2030 to 12 MtCO2-e in 2035. (Figure 5.4) transition, with improvements in buildings, appliances and equipment helping balance increased electricity demand from accelerated electrification of vehicles and industry. 46 | Australia’s Net Zero Plan Figure 5.4: Projected emissions reduction for industrial sectors, Treasury Baseline Scenario, 2025 to 2050 14 12 10 Emissions (MtCO2-e) 8 6 4 2 0 25 30 35 40 45 50 20 20 20 20 20 20 Iron and Steel Manufacturing Alumina and Aluminium Manufacturing Broad-based electrification also drives emissions reduction Some electrification and fuel switching, and initial uptake of across other sectors. nitrification inhibitors and methane-reducing feed additives, begin to reduce agriculture sector emissions. Emissions in the built environment sector fall as the shift from gas use to electricity gains momentum in residential Net removals in the land sector increase over the period, buildings and commercial activity. Electrification also returning to the levels seen in the early 2020s. This is drives material reductions in the transport sector under this partially driven by increased demand for offsets from scenario, with emissions falling around 20% between 2030 Safeguard facilities. Reforestation, regeneration and and 2035. More drivers switch to electric vehicles, and improved fire management of savanna ecosystems offer less-efficient internal combustion engine (ICE) vehicles are the most cost-effective opportunities. retired and replaced with newer higher-efficiency models. Electrification of heavy vehicles is limited, but initial deployment of low carbon liquid fuels such as renewable diesel and sustainable aviation fuel begins in freight and aviation. Australia’s Net Zero Pathway | 47

5.3.3 To net zero in 2050 Figure 5.5: Indicative abatement and composition by sector, Treasury Baseline Scenario, 2035 to 2050 600 600 500 500 400 400 296 -12 Emissions (Mt CO2-e) -8 -17 300 -17 -46 300 -29 200 167 200 100 100 0 0 -80 -100 -167 -100 -87 -200 -200 2035 Electricity Built Agriculture Industry Transport Resources Carbon 2050 and Energy Environment removals Resources Transport Industry Agriculture Built Environment Electricity and Energy Carbon removals With the electricity and energy sector already largely The transport sector sees the largest absolute emissions decarbonised, abatement scales up in other sectors reductions over this period, falling by more than half. beyond 2035. Technology options, market trends and other Transition of the passenger vehicle fleet from ICE vehicles factors are more uncertain over the longer term, however to EVs accounts for most of this change. Abatement current analysis suggests significant further reductions scales up for heavy vehicles, maritime and aviation in emissions from transport, resources and industry are through a steady increase in uptake of LCLFs across the possible, with land-based carbon removals scaling up over period. time to balance remaining emissions. In Treasury’s Baseline Scenario renewable generation reaches 97% in the National Electricity Market in 2050. consistent with AEMO’s Integrated System Plan Step Change scenario, consequently, electricity emissions get to near zero. Off-grid renewable electricity generation expands to support renewable hydrogen production, to produce green metals and other commodity exports as well as some domestic decarbonisation. 48 | Australia’s Net Zero Plan Box 5.2 Australia’s fuel and energy mix is expected to change over time Electricity currently comprises approximately a quarter of Australia’s total final energy consumption+. Fossil fuels such as petrol, diesel, natural gas and aviation fuel comprise over half of Australia’s energy consumption and the emissions associated with their use contribute about a third of annual emissions. DCCEEW analysis of Treasury’s Baseline Scenario illustrates how the mix of energy supplied in Australia could change over time; and its impacts on associated emissions. Figure 5.6: Australia’s energy supply mix, 2025 to Figure 5.7: Australia’s emissions by fuel type, 2025 2050, DCCEEW analysis of Treasury to 2050, DCCEEW analysis of Treasury Baseline Scenario* Baseline Scenario 100% 400 90% 350 80% 70% 300 Share of energy Emissions (MtCO2-e) 60% 250 50% 200 40% 150 30% 100 20% 10% 50 0% 0 2025 2030 2035 2050 2025 2030 2035 2050 Total renewables Liquid fossil fuels Electricity Liquid fuels Gas Coal Natural gas Coal +Note: Energy consumption is the total energy consumed by end-users. It excludes fossil fuels used in electricity generation and electricity used in hydrogen production. Gas used as a chemical feedstock and coal used in iron and steelmaking is included. *Note: Total renewables refers to renewable electricity generation and low carbon liquid fuels Australia’s Net Zero Pathway | 49 Liquid fossil fuel supply sees an overall reduction of about one-third by 2050. This is driven in the early stages by declining demand for petrol (used mostly in passenger vehicles) as vehicle efficiency improves and electric vehicle uptake accelerates. From 2035 onwards, scaled up production of renewable hydrogen and low carbon liquid fuels displaces diesel and aviation fuel. Liquid fossil fuels emissions reduce by over two-thirds from 2025 to 2050. Gaseous fuels also see a transformation. Natural gas supply in 2050 reduces by about half compared to supply in 2025, and emissions fall by around 70% from 2025 to 2050 (Figure 5.10). Electrification across sectors sees electricity make up an increasing share of energy consumption, with demand doubling; but emissions declines to near zero by 2050. Energy demand growth at point of use is moderated by energy performance improvements over the transition. This allows Australia to get more out of our energy inputs and existing energy infrastructure. Under the Baseline Scenario, efficiency gains deliver energy savings at point of use of around 30% in 2050. Figure 5.8 Estimated energy demand savings from energy efficiency, DCCEEW analysis of Treasury Baseline Scenario, 2024 to 2050* 160 140 120 Index (2025 = 100) 100 80 60 40 20 0 Now 2030 2035 2050 Demand Efficiency gains *Note: Energy demand estimated by DCCEEW based on Treasury’s Baseline Scenario. Efficiency gains estimated by DCCEEW. 50 | Australia’s Net Zero Plan Decarbonisation of the resources and industry sectors continues at pace beyond 2035, with resource emissions falling by more than half and industry emissions by around Box 5.3 Australia’s industrial transition a third by 2050. Global fossil fuel demand continues to Clean energy industries are increasingly shaping the fall, leading to lower fugitive and energy-related emissions global economy. Australia will secure substantial from coal and gas production. Electrification at mining, economic returns by positioning itself as an integral and remaining LNG and gas facilities, supported by onsite part of those industries and supply chains. renewable electricity generation, scales up. Alumina and aluminium, and iron and steel manufacturing facilities As Australia pursues the Future Made in Australia continue to reduce their emissions, including by transitioning agenda and seeks to grow its manufacturing base, from fossil fuels to use electricity or hydrogen in production we are addressing existing pressures on our processes (Figure 5.4). industries to ensure our long-term energy security, industrial competitiveness, and economic resilience. The Australian Government is working in partnership with Australian industry as the world transitions to net zero. The Industry Sector Plan highlights action over the near term to improve energy efficiency, deploy existing technologies and transition to alternative fuels in as many businesses as possible. Ensuring there is sufficient supply of appropriately priced renewable energy is also a priority. In the medium term, new technologies are expected to be commercialised alongside widespread adoption of existing technologies. This paves the way for significant decarbonisation across the harder to abate industrial sectors in the longer term, such as iron, steel, alumina and aluminium. Iron ore mining, Australia. Australia’s Net Zero Pathway | 51 Annual emissions in the agriculture sector decline Land-based carbon removals roughly double over this modestly, with emissions in 2050 around a quarter lower period to balance residual emissions (Figure 5.9). Treasury than in 2035. This reflects a gradual uptake of abatement analysis suggests removals are likely to be primarily driven technologies including feed additives that reduce methane by reforestation activities, as engineered carbon removal emissions from livestock. Uptake of slow-release and technologies are not assumed to be cost-competitive over nitrification-inhibiting fertilisers lead to fewer nitrous oxide this timeframe. Technological breakthroughs may change emissions from crop production. this outlook. For example, engineered carbon removal technologies like direct air capture (DAC) may become Emissions in the built environment sector continue cheaper over time and innovations, such as livestock to decrease, supported by the decarbonisation of the methane reduction solutions, could drive faster declines in electricity grid. Continued household switching from gas to residual emissions. CSIRO modelling suggests DAC could electricity, and the associated increase in energy efficiency, augment land-based sequestration from 2035 onwards. drives most of this reduction. The rate of fuel-switching However, the path for such technologies remains highly away from gas, particularly at the individual household uncertain given current costs and lack of projects at scale. level, will be impacted by a range of factors, including social and behavioural preferences. Figure 5:9 Projected residual emissions in 2050, Treasury Baseline Scenario 70 60 Residual emissions (MtCO2 -e) 50 40 30 20 10 0 Agriculture Transport Industry Resources Built Electricity and Environment Energy 52 | Australia’s Net Zero Plan Using natural gas for its highest value uses • Industry: Natural gas plays a variety of roles. Low supports efficient decarbonisation temperature heat industrial applications are expected to electrify, whereas high heat applications may rely Natural gas remains an important contributor to Australia’s on gas for longer. Natural gas continues to be used as economy and energy security throughout the transition to net a feedstock for industrial products, such as fertilisers zero, but its role changes and overall use declines. and chemicals, until technically and commercially Natural gas users will transition at different times due to the viable alternatives are available. Out to 2035, natural relative cost of natural gas and electricity, the availability and gas consumption in industrial sub-sectors such as steel affordability of alternative technologies and fuels, and the and alumina manufacturers could grow, as they switch timing of asset turnover. Treasury’s Baseline Scenario shows from coal to gas to reduce their emissions-intensity. emissions from economy-wide natural gas use declining by Beyond 2035, some industrial users begin to transition 70% to 2050 (Figure 5.10) driven by: to renewable electricity and hydrogen. • Resources sector: Emissions from natural gas use • Residential and commercial applications: Steady decline as electrification increases in mining, and as declines in natural gas use out to 2050 as the cost demand for fossil fuels declines. advantages of electrification grow. Action to reduce natural gas demand will support • Electricity: Natural gas plays an enduring and critical decarbonisation over the long-term. However, the next role to firm renewable generation, however, total gas- few years is a critical period in which additional natural fired generation falls over time. Off-grid electricity gas supply, transport capacity and storage will be needed generation, particularly in the mining sector, shifts from to support domestic energy affordability, emissions gas to renewables. reductions and industrial capability – and to ensure Australia continues to meet export commitments. The Australian Government is currently undertaking a Gas Market Review to ensure sufficient affordable natural gas supply in the longer term. The Future Gas Strategy maps the government’s plan for managing these challenges, and the Electricity and Energy Sector Plan provides more detail on the role of natural gas through the transition. Figure 5:10 Emissions from domestic gas use by industry grouping, Treasury Baseline Scenario, 2025 to 2050. Note: ‘Other’ includes agriculture, built environment, and transport industries. 80 70 60 50 Emissions (MtCO2-e) 40 30 20 10 0 2025 2030 2035 2040 2045 2050 Electricity Mining Industrials and Other generation and extraction manufacturing Australia’s Net Zero Pathway | 53

5.4 Benefits for Australia The CCA’s advice is consistent with these findings, noting that acting early and boldly delivers better outcomes than a The transition to net zero represents a major economic late, incremental approach. opportunity for Australia – to diversify the economy, support growth, jobs and wages. These benefits are best realised The Climate Change Authority advised: through an orderly and efficient transition, and will increase if Australia scales new clean energy industries and exports. ‘The high capital cost of new technology (e.g. green hydrogen, zero-carbon

5.4.1 Action supports investment, growth, jobs industrial plant, electric heavy vehicles) and wages while delay is costly is best managed through certainty and Under Treasury’s Baseline Scenario Australia’s economy sequencing. Without it, businesses continues to grow, with higher living standards and more jobs, supported by credible and ambitious action. The economy is risk being forced to invest in long-lived, projected to be 28% larger by 2035 and 81% larger by 2050, emissions-intensive technologies that lock relative to current levels. In dollar terms, the economy is in costs and emissions for decades.’ expected to be $2.2 trillion larger in real terms in 2050 than in ‘Recent energy price spikes are a clear 2025. Real GDP per capita is projected to be $12,000 higher in 2035 and $36,000 higher in 2050, compared to current levels. example of the costs of delay….Early, coordinated action is Australia’s best An orderly transition also supports sustained increases in insurance policy against climate risks, living standards, with employment projected to increase by energy volatility and lost economic 5.1 million people by 2050 and real wages projected to increase 31% over the 25 years to 2050. Firmed renewables opportunity. Planning and acting now is continue to be the cheapest form of new generation cheaper, fairer and smarter than cleaning investment and put downward pressure on power prices. up later.’ 2035 Targets Advice, page 63 The Disorderly Transition Scenario illustrates the potential impacts if Australia delays further climate action. Increased policy uncertainty results in underinvestment and misallocation of capital. Insufficient early emissions Under the Disorderly Transition Scenario, wholesale reductions require rapid and more costly decarbonisation electricity prices are projected to be 17% higher on average from 2040 to meet net zero. This leads to weaker during the 2030s and up to 54% higher on average in the economic outcomes, with the economy projected to be 2040s compared to the Baseline Scenario. This is because a cumulative $2 trillion smaller by 2050 compared to the delayed investment in renewable electricity generation orderly scenarios, and real wages are projected to be up drives a greater reliance on gas generation, which is widely to 4% lower, in 2050. A disorderly transition also leads to projected to be more expensive. substantial capital stock being scrapped across the 2040s. Cumulative emissions to 2050 are 803 Mt CO2-e or 15% An orderly transition, where the direction of policy is clear, higher under the Disorderly Transition Scenario than the enables businesses to plan the investments they need to Baseline Scenario. modernise processes and reduce their carbon emissions. Under the Baseline and Renewable Energy Upside Scenarios, investment is forecast to grow by between 79% and 84% between 2025 and 2050. 54 | Australia’s Net Zero Plan

5.4.2 Renewable exports support greater Australia committed to achieve net zero emissions by benefits 2050 in October 2021. That commitment recognised that reducing emissions in line with the rest of the world is in Leveraging Australia’s comparative advantages in our national interest, and that failing to act would lower renewable energy will deliver broad-based benefits to economic growth, reduce investment, reduce export and Australians and help grow our exports. These are explored employment opportunities, and increase energy prices.11 in Treasury’s Renewable Exports Upside Scenario. The cost of not pursuing net zero would be significant Economic growth is projected to be meaningfully higher and consequential. The CCA’s Sector Pathways Review from 2035 onwards relative to the Baseline. In the indicates that delaying action to reduce emissions would Renewable Exports Upside Scenario, real GDP per capita is increase the risk of: projected to be about $38,000 larger in 2050 than 2025. • a later, more expensive and less orderly transition This delivers additional benefits through higher wages, higher employment and higher income. Real wages are • missed or delayed opportunities for cost-of-living relief around 1.6% higher in 2050 and wholesale electricity through energy efficiency and electrification prices around 20% lower by 2050, compared to the • missing new green export opportunities Baseline Scenario. Employment growth is also greater, with occupations such as automotive and engineering trades • adverse impacts on Australia’s reputation, particularly in the region, and works, and plant operators seeing expansion as a result of larger clean energy industries. • slower global momentum towards reducing emissions and hence heightened risks of dangerous climate Australia’s exports continue to grow. Green exports alone change impacts.12 could be $68 billion higher in 2050 than in the Baseline The report ‘Australia’s Net Zero Transformation: Treasury Scenario, including green metals and renewable ammonia. Modelling and Analysis’ discusses the costs of not pursuing In addition to economic benefits for Australia, these net zero in further detail. exports could contribute substantially to global emissions reductions, as discussed in Chapter 11.

5.4.3 Inaction would be costly The Climate Change Authority advised: ‘The CSIRO’s modelling and Authority’s analysis show any actual cost to the economy is negligible, while the benefits from investment in new green industries and avoided damages from climate change are enormous.’ ‘The true burden of climate change will lie in the cost of inaction: rising costs to adapt and respond to more frequent and extreme disasters, worsening inequality, and futures undermined for coming generations.’ 2035 Targets Advice, pages 8 and 4 Australia’s Net Zero Pathway | 55 6. Five decarbonisation priorities to achieve net zero emissions There is clear evidence that an orderly and efficient Key Messages transition to net zero will deliver a range of benefits to The Australian Government will focus on five Australia’s economy and communities. This chapter priorities to achieve net zero: sets out five priorities to achieve net zero. The priorities provide a framework to guide governments, industry and Clean electricity across the economy communities in the transition. Many of Australia’s key policies and measures target one Lowering emissions through electrification of these priorities and are outlined below. Others, such and efficiency as the Safeguard Mechanism and ACCU Scheme, and public climate finance through the Clean Energy Finance Expanding clean fuel use Corporation (CEFC), advance multiple priorities. These important enabling measures are explored in Part 3. Accelerating new technologies The six sector plans provide further detail on the pathways, Net carbon removals increased opportunities for abatement and policy directions for each sector. Sector plan snapshots are provided at Appendix 1. Figure 6.1: Australia’s five priorities for net zero Decarbonise Electrify and Switch to Innovate to expand Scale up carbon and expand the improve energy low-carbon fuels emissions reduction removals to balance electricity network and materials options residual emissions performance 56 | Australia’s Net Zero Plan

6.1 Decarbonise and expand the electricity network • The National Renewable Energy Priority List, which Renewable generation, backed up by gas, provides coordinated support for planning and batteries and hydro-power, is the lowest approvals processes for identified priority projects. cost way to replace Australia’s aging coal • Establishing the legal and regulatory framework for generation fleet.13 From 2010 to 2019, the offshore wind generation in Commonwealth waters, cost of solar photovoltaic (PV) electricity with six declared priority offshore renewable energy has decreased by approximately 85%, zones identified for feasibility licences. while the cost of wind energy has also • Supporting key projects that will unlock zero-emissions declined.14 Lithium-ion battery costs energy from pumped hydro generation, such as the have fallen by nearly 85% over this Snowy 2.0 project and Marinus Link. period, enabling increased adoption of electric vehicles and energy storage Consumer energy resources (CER) like rooftop solar and technologies.15 batteries are growing rapidly, supporting decarbonisation

6.1.1 Progress to date of our electricity system and enabling consumers to lower their bills. In 2024, an estimated 3.2 GW of new rooftop Government policy and falling technology costs have solar PV capacity was installed across Australia,17 with unlocked the benefits of renewable electricity for Australia. small-scale solar contributing 32.5 TWh, or 11.5%, of total Already, over 40% of electricity in Australia’s two major national electricity generation (an annual increase of grids is renewable, representing significant progress to 16%).18AEMO’s Integrated System Plan (ISP), with which achieving 82% renewable electricity by 2030. Treasury’s Baseline Scenario is aligned, projects that rooftop and other distributed solar could contribute over The Climate Change Authority advised: 20% of total annual generation in the NEM by 2050.19 “Continuing the transition to a renewables- The Government’s Cheaper Home Batteries Program is based electricity system can deliver around helping more Australian households install batteries. half the emissions reductions required to Over 55,000 batteries – with total storage capacity of over 1 GWh – have been installed in just over 2 months since achieve the recommended 2035 target” the program commenced on 1 July 2025. The Community 2035 Targets Advice, page 4 Batteries for Household Solar program is installing 400 medium-sized batteries to provide shared storage for However, challenges remain for rolling out large-scale households across Australia. AEMO’s ISP Step Change renewables at sufficient scale and pace to meet our goals. scenario suggests 44 GW of CER storage could be installed Ensuring a stable and attractive investment environment, by 2050, up from 1.5 GW in 2024.20 fast and durable approvals, community support, Effectively integrating these CER devices to optimise use a sufficiently skilled and sized workforce, and reliable of existing network infrastructure, generation, storage access to global supply chains are crucial to success (see and consumption of electricity presents an opportunity Part 3). Government action to de-risk and incentivise new to support a cost-effective and faster energy transition, capacity includes: system reliability, and lower energy bills for all consumers. • The $20 billion Rewiring the Nation program, which is The Consumer Energy Roadmap sets out national reform upgrading and expanding transmission infrastructure to priorities to harness CER’s full potential and deliver benefits distribute clean electricity and create a more connected and equitable outcomes to all Australian consumers. and resilient system. • The Capacity Investment Scheme, through which the Government underwrites contracts to support new renewable generation and dispatchable projects. The Scheme was expanded in July 2025 and will now underwrite up to 26 GW of new renewable capacity and up to 14 GW of new dispatchable capacity.16 Australia’s Net Zero Pathway | 57 Alongside action to improve national electricity networks, addressing regulatory barriers and planning processes to

6.2 Electrify activities wherever enable emerging industries to develop off-grid solutions possible and improve energy or tailor on-grid connections will help to meet industrial performance and materials energy needs. Energy flexibility can improve industrial competitiveness by reducing costs, optimising energy efficiency loads with production and minimising transmission costs An orderly transition enables households across the grid. Opportunities for industry are discussed and businesses to plan and make further in the Industry and Resources sector plans. informed decisions when investing in long-life assets such as home

6.1.2 Future directions renovations, household appliances like • The Government is updating the CEFC’s investment hot water and heating, and vehicles. mandate to include a new focus on the rapid roll out of renewable projects to drive down electricity prices, Improving energy performance* can provide significant and commit up to $2 billion more to the CEFC General savings at the household scale, even where upfront costs Account, to be drawn down in line with these changes are higher. For example, Treasury analysis indicates that a (see Chapter 10). typical Australian household that purchases solar panels, a battery, and electric vehicles, and switches from gas to • The Government seeks to unlock long term investment electricity to power their household, could reduce their in large scale firmed, renewable generation and storage energy by around 40% or $4,300 a year after accounting capacity. An independent expert panel is currently for upfront and financing costs, compared to choosing gas undertaking a review of National Electricity Market appliances and internal combustion engine vehicles (NEM) wholesale market settings. Its goal is to ensure (Figure 6.2). the NEM remains fit for purpose as Australia transitions from ageing coal-fired power to firmed renewable energy sources like solar, wind, and battery storage. The expert panel will make recommendations to promote investment in firmed, renewable generation and storage capacity following the conclusion of the Capacity Investment Scheme. • The Government will continue to drive investment in consumer energy resources to reduce pressure on the grid, including through uptake of solar and batteries, and virtual power plants. This includes opportunities for households as well as community, commercial and industrial properties. • The Government will streamline approvals for renewable energy projects, including through reforms to the Environment Protection and Biodiversity Conservation Act (see Chapter 8). • The Government will also explore ways to further unlock investment in renewable energy to accelerate emissions reduction in the electricity sector while maintaining energy security. This includes working with States and Territories through Renewable Energy Transformation Agreements and the Energy and Climate Change Ministerial Council. * Energy performance covers the broad management of energy demand, including energy efficiency; demand flexibility (or load shifting); and electrification or fuel switching. 58 | Australia’s Net Zero Plan Figure 6.2: Modelled benefits of electrification for a typical household, Baseline Scenario** Heating Cooktops Solar panel and battery Electrifying space heating Electrifying cooktops can Installing rooftop solar and a household can reduce household energy reduce household energy battery can reduce energy cost costs $860 per year and reduce cost $40 per year and reduce $1,200 per year and reduce emissions by 18% emissions by 1% emissions by 6% Electric vehicles Water heating Electrifying vehicles can reduce Electrifying water heating can household energy const $2,070 reduce household energy per year and reduce emissions costs $140 per year and by 67% reduce emissions by 7% **Notes: Annualised real costs from 2030 to 2050, including upfront financing and ongoing costs. Assumes a typical two-to-three-person household with two vehicles, average consumption for home heating, cooking and hot water, and purchases a 10.6kW solar system and 10kWh battery. Using material resources more efficiently also helps reduce 6.2.1 Progress to date emissions across all sectors. Circular economy principles The Australian Government is working collaboratively with encourage using fewer virgin materials; designing products states and territories to give consumers the information to be long-lasting, easy to repair, easy to disassemble and they need to make informed choices, provide financial safe; and reusing and recycling materials at their highest support to help key cohorts to electrify, regulate to expand value at the end of a product’s useful life. access to efficient appliances and vehicles, and establish A more circular economy lowers energy demand and supporting infrastructure. Measures include: emissions by retaining existing goods and materials for longer. This in turn avoids emissions associated with • The Greenhouse and Energy Minimum Standards (GEMS) scheme, which regulates minimum energy efficiency new extraction, processing, manufacturing, transport standards for a range of products and equipment. It also and ongoing use of materials across their lifecycle. As an ensures that information is available for consumers to example, every tonne of scrap metal used in the production make informed choices when purchasing products with of steel delivers 1.5 tonnes of avoided CO2 emissions.21 energy rating labels or product packaging requirements. CSIRO modelling suggests that doubling the circularity of Since 2012, the GEMS Act has saved Australian Australia’s economy by 2035 could contribute to abating up households and businesses $12–$18 billion in avoided to 23% of greenhouse gas emissions by 2050.22 energy costs. In 2021–22 alone, it is estimated to have saved Australia between $1.3 billion and $2 billion in avoided energy costs while delivering greenhouse gas emissions savings of between 4.1 and 6.3 million tonnes – equivalent to around one-quarter of South Australia’s annual emissions. Australia’s Net Zero Pathway | 59 • The National Australian Built Environment Rating Alongside energy performance and electrification System (NABERS), which measures the environmental measures, the Australian Government is also providing and energy performance of Australian buildings. the policy blueprint to drive Australia’s circular economy This has seen consumers save almost $2 billion in transition. Australia’s Circular Economy Framework energy bills and reduced emissions by approximately includes an overarching goal of doubling circularity by 13 Mt over the past two decades.23 2035 and sets clear priorities and targets to reduce waste • The $1.1 billion Social Housing Energy Performance and keep materials in our economy for as long as possible. Initiative (including $800 million from the Commonwealth) The framework focuses on 4 key sectors – industry, built will support energy performance upgrades to over 100,000 environment, food and agriculture, and resources – to help social housing properties by 2029. drive the transition. • The Clean Energy Finance Corporation’s (CEFC) The Australia’s Carbon Credit Unit Scheme recognises the $1 billion Household Energy Upgrades Fund provides contribution waste reduction and treatment can make to low-cost finance for energy performance initiatives. reducing emissions. Under the scheme’s landfill and waste It works with co-financiers to create tailored and methods, reductions in waste emissions are eligible for credits discounted green finance products which are easy for where they meet requirements (discussed under 7.6.3). households to access. Upfront cost barriers and split incentives remain a barrier The Climate Change Authority advised: for the one-third of Australians who rent or reside in multi- unit dwellings such as apartments.24 The Government is ‘Food and garden waste in landfills is a actively addressing these barriers through the provision major source of emissions from the waste of accurate and accessible information for renters and sector, so channelling waste to dedicated, landlords. It is also working with states and territories to low-emissions organics processing is an provide financial support, including through the important step. Australian governments are $100 million Community Solar Banks program, to provide shared solar for those who can’t install their own systems. working towards the goal of diverting 80% The Built Environment and Electricity and Energy Sector of waste from landfill by 2030.’ Plans provides further detail. 2035 Targets Advice, page 43 The Commonwealth is also supporting electrification in the transport sector.

6.2.2 Future directions • The New Vehicle Efficiency Standard is supporting uptake of efficient vehicles, including electric vehicles Accelerating electrification and improving energy and (EVs). The Standard will reduce costs to consumers and material performance is a major priority for further work. incentivise the supply of low and zero emission vehicles This includes: to Australian motorists. 1. A further $85 million to accelerate energy performance • The $475 million Driving the Nation Fund is investing in by: cheaper and cleaner transport. This includes innovation a. modernising the Greenhouse and Energy Minimum through the Driving the Nation Program, delivered by Standards (GEMS) Act ARENA; $39.3 million to the NRMA to deliver public charging b. investing in the National Australian Built stations across key highway routes, and $60 million through Environment Rating System (NABERS) for non- the DRIVEN Program to support installation of EV charging residential buildings infrastructure at car dealerships and repairers. c. expanding the Commercial Building Disclosure These measures are discussed further in the Transport (CBD) program to more commercial building types Sector Plan. beyond office buildings, and In the industry sector, the $400 million Powering the d. expanding the Nationwide House Energy Rating Regions Fund – Industrial Transformation Stream (ITS) is Scheme (NatHERS) to cover existing homes helping facilities reduce their greenhouse gas emissions. e. establishing a Demand-side Statement of It supports projects that improve energy efficiency, switch Opportunities to complement existing system to cleaner fuels, and electrify industrial processes. It also planning by the Australian Energy Market Operator funds enabling technologies like energy storage and demand (AEMO) and lower the cost of the transition for all management infrastructure. This complements $1 billion of consumers. other Powering the Regions fund streams. 60 | Australia’s Net Zero Plan 2. $50 million to help community sports facilities reduce Other renewable gases, such as biomethane, are their energy costs and climate-proof their facilities chemically identical to fossil methane and can be used as 3. $40 million to accelerate the rollout of kerbside and fast a direct substitute for natural gas. Biomethane is derived charging. from biogas, which is produced using various organic materials as feedstock, such as green waste, food industry 4. Review the New Vehicle Efficiency Standard in 2026 byproducts, agricultural and industrial waste. to assess the policy’s effectiveness, refine regulatory systems and mechanisms, and consider the framework Low carbon liquid fuels: LCLFs can in light of the 2035 target. be produced sustainably from waste 5. Exploring options for reducing barriers to electrifying materials, biomass, or by combining small to medium facilities and industrial processes. hydrogen from low or zero carbon feedstocks with captured carbon dioxide. 6. Exploring how to ensure business, industry and Sustainable aviation fuels and renewable communities have the best signals, opportunities and diesel are two examples of LCLFs that can frameworks to improve energy performance. be used as ‘drop-in’ replacement fuels, 7. Implementing Australia’s Circular Economy Framework avoiding the cost of upgrading assets to fast track the circular economy transition and double and infrastructure. Australia is already circularity by 2035. a significant supplier and exporter of biomass for LCLF production overseas. 8. Considering ways to improve solar and battery recycling, recovering key components so we can Global demand for these commodities is expected to grow continue to reuse materials in support of the transition. rapidly. For example, the International Energy Agency 9. Working with states and territories to maximise the estimates global demand for hydrogen could reach 430 benefits new buildings can achieve by harnessing the Mt by 2050, with 327 Mt of this demand met by renewable efficiency and cost effectiveness of electrification. hydrogen;25 up from 100 Mt produced in 2024, of which less than 1% was met by renewable hydrogen.26

6.3 Switch to low-carbon fuels 6.3.1 Progress to date Some activities are currently not able to electrify, either Under Future Made in Australia, the government is helping because technologies do not exist, or because those kick-start development of low-carbon fuel industries by technologies are not commercially competitive. In particular, incentivising innovation and supporting production. high-heat manufacturing processes for products such as steel and cement and long-distance heavy road, air and Research and development (R&D) will support cost- travel, are unlikely candidates for electrification in the short reductions in the production, transport and use of these to medium term. fuels. Alongside R&D, incentivising the production will yield on-site learnings and help to realise economies of scale, For these activities, alternative fuels such as low carbon driving further efficiencies. The government is directing liquid fuels, biomethane, renewable hydrogen and renewable significant investment into these priorities, including: ammonia provide a pathway to decarbonisation. For some industry sectors that rely on coal, such as ironmaking, • $250 million under the FMA Innovation Fund to natural gas represents an immediate option to reduce supporting research and development for nascent LCLF emissions, with the prospect of transitioning to renewable technologies. hydrogen or other low-carbon fuels as they become cost- • $33.5 million under the Sustainable Aviation Fuel effective and available at scale (see Chapter 5). Funding Initiative to support the development of LCLF production from renewable feedstocks in Australia. Renewable hydrogen and other Five LCLF projects have been approved, with others renewable gases: Renewable hydrogen is under consideration. created through electrolysis, which uses renewable electricity to separate water • $8 billion over 10 years from 2025 to accelerate molecules into hydrogen and oxygen. investment in renewable hydrogen through the Hydrogen Production Tax Incentive and Hydrogen Potential applications include powering a green metals Headstart program. industry, displacing natural gas in chemical manufacturing Putting in place enabling systems like certification, and high-heat industrial processing, and decarbonising standards and monitoring are critical to provide certainty long-distance heavy transport. to investors and potential customers on the emissions Australia’s Net Zero Pathway | 61 associated with production of LCLF and ensure that drop-in fuels align with rigorous safety standards. Government is

6.4 Innovate to expand emissions working closely with industry to implement the frameworks reduction options and regulations that ensure best practice underpins growth Research and development, and including through: scaled technology deployment, will be • Amendments to the National Greenhouse and Energy fundamental to unlocking cost effective Reporting Scheme to enable market-based reporting of abatement solutions for sectors where specific LCLF types within shared infrastructure. abatement options are not yet available or commercial. • Expanding the Guarantee of Origin (GO) Scheme to track and verify emissions from the production of LCLF and Australia has an extensive innovation ecosystem, spread other commodities. across all levels of government, the private sector and • A new fuel quality standard for (paraffinic) renewable academia. diesel, enabling its supply in Australia.

6.4.1 Progress to date

6.3.2 Future directions The Australian Renewable Energy Agency (ARENA) To build a supply chain for Australian low carbon liquid provides grants to accelerate the pace of pre-commercial fuels, the Australian Government will invest $1.1 billion in a innovation, improving the feasibility of emerging renewable new Cleaner Fuels Program. This will help stimulate private energy technologies and growing their uptake (Figure 6.3). investment in Australia’s first onshore low carbon liquid The Government replenished ARENA’s statutory funding to fuel refineries, backing local innovators, making fuel supply 2038-39 – a total of $8.2 billion– and expanded its mandate more resilient and bridging the price gap for early adopters. to include electrification technologies, energy efficiency The Government will engage with industry on how to make technologies, and manufacture of renewable energy sure Australian liquid fuel users have a fair chance to technologies. capture the emissions reduction potential unlocked by low emission Australian fuels. ARENA also plays a critical role in the transition to net zero as the body responsible for administering the $1.5 billion In addition, the government will pursue: Future Made in Australia Innovation Fund. This supports • Further collaboration with international trading partners pre-commercial innovation, demonstration and deployment to support the research, development and deployment of technologies to support green metals production, clean of fuel alternatives and supporting infrastructure. energy technology manufacturing and LCLFs. • National collaboration to support redirection of waste The Clean Energy Finance Corporation (CEFC) is a streams as feedstocks for production of LCLF. specialist investor in Australia’s net zero transition (see • Development of a national Bioenergy Feedstock further Chapter 10). Part of their capital allocation is Strategy to establish a coordinated, national direction targeted at critical R&D opportunities in clean energy for the sustainable evolution of bioenergy feedstock including: production. • The $500 million Powering Australia Technology Fund to support projects and businesses developing or commercialising climate technology opportunities, • The $200 million Clean Energy Innovation Fund which supports early-stage climate technology innovators to develop their technology. Other special investment vehicles supporting technology deployment like the National Reconstruction Fund, are discussed in chapter 10. 62 | Australia’s Net Zero Plan Figure 6.3: ARENA’s collaboration across the innovation chain. Source: ARENA Corporate Plan 2024-25 to 2027-28 Research Development Demonstration Deployment Market Diffusion Accumulation Early-stage publicly funded research Funding Bodies and Sources ARENA (including Budget Measures) Clean Energy Innovation Fund (CEFC and ARENA) Rewiring the Nation (CEFC) Clean Energy Finance corporation (CEFC) National Reconstruction Fund (NRF) Universities State and Territory Programs and Agencies Delivery Partners CSIRO Companies – Innovations and Established Industry Industry Bodies and Associations (including AEMO, AER, AEMC, EAP) Net Zero Economy Authority (NZEA) Government Programs (including the Future Made in Australia Package) Policy Mechanisms Safeguard Mechanism Powering the Regions Fund Capacity Investment Scheme Renewable Energy Target Australia’s Net Zero Pathway | 63 Other organisations and forums fundamental to Australia’s 6.4.2 Australia and Germany’s cooperation on innovation landscape include: energy and climate • The Commonwealth Scientific and Industrial Research Organisation (CSIRO), has led the development of a range of world-changing net zero focused innovations In 2024 Australia signed an agreement with as well as working to tackle emissions from the Germany to deepen cooperation on new renewable most challenging sectors, such as steel, aviation and hydrogen supply chains. This includes a $660 million agriculture. H2Global funding window to guarantee a purchase • Cooperative Research Centres (CRCs) bring together agreement for Australian hydrogen producers into world-class universities, government and industry to the European market. This joint H2Global window address long-term challenges. Not limited to net zero, will give Australian producers the opportunity to some of the current CRCs cover emissions in fuels, export to some of the world’s largest renewable agriculture, buildings, heavy industry and waste. The hydrogen markets, establishing new renewable supply Zero Net Emissions Agriculture Cooperative Research chains with Europe and supporting a Future Made in Centre (ZNE Ag CRC), which commenced in July 2024, Australia. has four targeted research programs to support sector decarbonisation. The Australian Government invested $87 million over 10 years to establish the ZNE Ag CRC. • Research and Development Corporations (RDCs) help drive agricultural innovation, where producers 6.4.3 Future directions and the Australian Government co-invest in research Australia will continue to grow our innovation economy, and development. Emissions reduction is one goal of to support. The Government will: research across commodities, alongside improved productivity and competitiveness. • Establish a new $5 billion Net Zero Fund within the National Reconstruction Fund, drawing • Business investment is supported by the Research and from and refocusing existing capital to support Development Tax Incentive (RDTI). The RDTI helps major investments by large industrial facilities in companies innovate and grow by offsetting some decarbonisation and energy efficiency, and scale up of the costs of eligible research and development. manufacturing low emissions technologies This program has already assisted private sector research in technologies like more efficient solar • Target R&D to reduce the embodied emissions within panels and more compact batteries. materials and direct emissions from construction activities including pre-fabricated and modular The National Science and Research priorities include construction and low-emissions construction materials. transitioning to a net zero future as a priority to align investment in science and research across industry and the • Informed by the Government’s Strategic Examination of science community. The Australian Government’s current R&D, look for ways to streamline and scale-up research Strategic Examination of Research and Development will collaborations that power the transition. recommend ways to get more value from investment in • Continue fugitive and methane emissions reduction research, harness and grow business investment in R&D, at industrial facilities, including through delivery of and leverage Australia’s scientific strengths to address a landmark study with the UN Environment Program national priorities. to improve understanding of methane emissions, Many of the research and technology needs for net zero important for steel and energy supply chains (see are global. International collaboration, including through section 7.1). partnerships, can create opportunities for deployment • Strengthen strategic partnerships with governments, of international solutions domestically, and export of industry and international partners to progress Australian technology and practices to overseas markets. important climate technologies with the potential to drive down emissions beyond 2035. Australia has 10 bilateral climate and clean energy partnerships, and demonstrates leadership in multilateral • Accelerating new technologies is important to organisations such as the IEA’s Technology Collaboration decarbonising heavy industry, with the deployment Program and the Clean Energy Ministerial partnership of those technologies incentivised by the Safeguard Mechanism, due for review in 2026-27. 64 | Australia’s Net Zero Plan

6.5 Scale up carbon removals to 6.5.2 Diversifying opportunities for carbon balance residual emissions dioxide removal Regardless of how effectively we While Treasury’s analysis suggests engineered CDR reduce emissions, all available analysis technologies may only play a small role in the period to indicates our economy will still be 2050, there are several reasons that continued research emitting greenhouse gases in 2050 (see and development are important for these technologies. Chapter 5). Carbon dioxide removal (CDR) Developing a range of approaches to balance residual refers to technologies, approaches and emissions – rather than relying on land-based options practices that remove CO2 directly from alone – will make Australia’s net zero transition more the atmosphere and store it in the ocean, robust. Land-based sequestration is exposed to changing on the land surface or below ground, climate conditions and impacts, including increased including in geological formations. frequency of extreme events such as bushfires, which can CDR includes land-based methods, like growing trees, as reverse carbon stores. well as engineered removals through technologies such as Engineered carbon removal and management technologies Bioenergy with Carbon Capture and Storage (BECCS) and could complement land-based carbon removals. These Direct Air Capture (DAC). technologies can abate large volumes of emissions with For all forms of removals, the storage must be long-term a relatively small land-footprint – particularly those using and durable. In addition to driving new removals, it is geological storage. They could become increasingly important to protect and maintain existing carbon stores, important to sustain net zero emissions – and potentially and regularly monitor to ensure the carbon remains stored. net negative emissions – beyond 2050. The adoption of engineered CDR technologies is currently

6.5.1 Storing carbon in vegetation and soils hindered by high costs. However, investment now could provide opportunity to innovate to reduce costs and provide Australia has substantial, relatively low-cost potential for industries with more options to offset their emissions. land-based carbon removals, particularly reforestation. Integrating carbon projects into agricultural land uses can improve productivity, increase soil moisture and reduce 6.5.3 Progress to date input costs. This provides an opportunity for farmers and The Australian Government has invested in developing land managers to diversify their income streams through engineered and land-based carbon storage domestically. carbon credits, improving their economic resilience. • The Australian Carbon Credit Unit (ACCU) Scheme But there is significant uncertainty around the scale and provides a way for land managers to earn money for composition of land-based sequestration that may be eligible carbon storage on their land. The Government taken up as Australia transitions to net zero. Estimates has invested over $1 billion in the ACCU Scheme of the carbon sequestration potential of different land to date, unlocking over 169 Mt of abatement.27 The management practices and plant types vary widely, Government is progressing reforms to the ACCU particularly over time and in light of the impacts of climate scheme, underpinned by $66 million in funding over change. Sequestration rates will also depend on landholder 5 years. This includes a new proponent-led method decisions regarding whether and when to undertake carbon development process and supporting increased First management projects. Nations participation (see further Chapter 13). Concerted effort throughout the transition will be needed to • The Carbon Farming Outreach Program is supporting ensure that carbon projects in the land complement, rather producers and land managers, including First Nations than replace, food and fibre production, as discussed in Peoples, to understand their emissions and make Chapter 14. informed decisions to manage them over time, including by increasing carbon stores in trees and soils. Australia’s Net Zero Pathway | 65 Native revegetation planting, Australia. • The government has provided $73.8 million over • Open a second round of the Carbon Capture four years from 2024 to the Support Plantation Technologies Program for $52 million to continue Establishment program. This aims to increase future to accelerate the development of new carbon plantation forest resources available for processing management technologies, critical to reaching net zero while also contributing to Australia’s emissions by 2050. reduction targets. • Deliver a Carbon Dioxide Removal (CDR) Roadmap • The Carbon Capture Technologies Program is in partnership with CSIRO. The CDR Roadmap will committed to accelerating research, development and consider the realisable potential of CDR in Australia, demonstration of carbon dioxide capture, removal and and options for how we can responsibly deploy and use technologies. The program has so far committed scale the industry. $65 million to 7 projects. • Consider options for developing, deploying, and scaling carbon management technologies. This includes

6.5.4 Future directions supporting CSIRO and Geoscience Australia to assess the nation’s carbon removal and storage potential, To ensure Australia maintains a diverse and sustainable identify cost and capability gaps, and prioritise key portfolio of scalable carbon removal options to balance technologies and research, building a strong evidence residual emissions, the government will: base to inform Australia’s carbon management policy. • Improve data collection and analytical capabilities to • Work with states and territories to review data and policy better understand land-use changes and opportunities gaps to support efficient approval and permitting of for integration of carbon removal projects within processes to deploy carbon removal technologies at scale. agricultural production systems. • Examine the carbon, biodiversity and agricultural productivity co-benefits that expanded landscape restoration efforts could deliver, strengthening the climate resilience of regional Australia. 66 | Australia’s Net Zero Plan 7. Reducing non-CO2 emissions While CO2 emissions account for approximately 64% of Key Messages Australia’s total emissions in 2024 and have declined by about 38% from 2005, 28 Australia needs to address • Greenhouse gases such as methane and emissions from all greenhouse gases if it is to reach net nitrous oxide contribute to climate change, zero (Figure 7.1). and comprise a substantial share of Australia’s emissions. Non-CO2 emissions, such as methane and nitrous oxide accounted for 29% and 4% of our national emissions in • The government is supporting methane 2024 respectively.29 These can be compared to CO2 through emissions reduction in Australia, and an emissions metric called global warming potentials working with other countries through the (GWPs). Under the Paris Agreement, Parties are required Global Methane Pledge. to use 100‑year GWP values (GWP-100) set out in the • Australia is phasing-down HFCs under the 2014 Intergovernmental Panel on Climate Change Fifth Ozone Protection and Synthetic Greenhouse Assessment Report.30 For example, nitrous oxide (N2O) has Gas Management Act 1989 toward an 85% a GWP-100 value of 265, which means every tonne of N2O emitted has the warming impact of 265 tonnes of CO2 and reduction from baseline in 2036. is expressed as 265 CO2 equivalents (CO2-e). Figure 7.1: Emissions by greenhouse gas, 2005 to 2024 500 450 400 350 Emissions (Mt CO2-e) 300 250 200 150 100 50 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Carbon dioxide Methane Nitrous Oxide Other emissions Australia’s Net Zero Pathway | 67 Cattle mustering, Western Australia, Australia.

7.1 Methane emissions Figure 7.2: Share of methane emissions in Australia by sector, 2024 Methane is mainly produced by activities associated with livestock and cropping, fossil fuel extraction and distribution, burning of biomass (such as bushfires and controlled burning), and waste and wastewater treatment (Figure 7.2). Industry Land 10% Methane does not stay in the atmosphere as long as CO2, 14% but absorbs much more energy while there. Methane has a GWP-100 value of 28, but has a global warming potential 84 times that of CO2 over 20 years.31Acting now to reduce methane emissions can help reduce climate impacts in the next few decades. Strong methane emissions reduction Resources could help limit the risk of overshooting the global 22% temperature goals and provide benefits to the climate that reductions in CO2 emissions cannot deliver alone. Australia’s methane emissions have declined since 2005, partly due to reductions from livestock and biomass Agriculture burning (such as savanna fire management) in the agriculture and land sector (Figure 7.1).32 51% Strong and early reductions in methane emissions could make a significant contribution to reducing the extent of climate change. We are acting here in Australia and also Electricity & Energy working with other countries through the Global Methane 2% Pledge to ensure significant global methane emission Built reductions are achieved by 2030. Environment 1% 68 | Australia’s Net Zero Plan

7.1.1 Reducing methane emissions in the 7.1.2 Reducing resources sector methane agriculture and land sector emissions The agriculture and land sector is Australia’s largest source The resources sector is the second-largest source of of methane emissions, with agriculture accounting for methane emissions in Australia, accounting for 22%. In 2024 51% (66 Mt CO2-e) and land a further 14% (18 Mt CO2-e) in these were predominantly from fugitive methane emissions 2024.33 Methane is primarily produced from the digestive from coal mining (23 Mt CO2-e), leakage from natural gas process of ruminant livestock (such as cattle and sheep). processing (2 Mt CO2-e), and venting of methane associated Methane emissions from the land sector are a combination with oil and gas extraction (1 Mt CO2-e).34 of human-induced sources such as land conversion and clearing, and biomass burning in addition to natural The Safeguard Mechanism covered 77% of these emissions sources such as wetlands. in 2024. It provides a key incentive for oil and gas producers to implement abatement options such as recovering and There are limited options to reduce these emissions, reusing methane emissions through installing new devices, particularly in extensive livestock grazing systems, however electrification and detecting and repairing leaks. Many of the Australian Government is investing in research to these options are available at a low, or even no-net cost support commercially-viable methane solutions. to operators, and are projected to make a substantial contribution to reducing fugitive methane emissions in • The $29 million Methane Emissions Reduction in coming years. The Australian Government will continue to Livestock (MERiL) program provides support for work closely with state governments and their agencies so researching and developing methane-reducing that coal mine methane abatement technologies can be feed additives and forage legumes for livestock. safely and efficiently deployed. Results from the studies showed significant methane reductions from the feed additives Asparagopsis The Safeguard Mechanism is being reviewed in 2026-27-, seaweed and 3-NOP. The Government has now invested which includes consideration of its incentives to drive over $17 million to support the commercialisation and onsite abatement. This includes incentives for methane scaled-up production of Asparagopsis. abatement. • The Zero Net Emissions Agriculture Cooperative 7.1.3 Reducing industry and waste sector Research Centre (ZNE Ag CRC), which commenced in July 2024, includes methane reduction from livestock methane emissions as one of its four research programs. The Australian The industry sector contributes about 10% of national Government invested $87 million over 10 years to methane emissions. Most of these emissions come from establish the ZNE Ag CRC, and a further $4 million over the waste subsector through landfills; wastewater and 10 years for the Department of Agriculture, Fisheries solid waste treatment also contribute alongside a a small and Forestry to become a partner. proportion from the industrial processing subsector. Improving measurement, reporting and verification States and territories regulate the operation of landfills (MRV) tools for farmers and producers will help keep and other waste facilities. The ACCU Scheme incentivises track of methane and other emissions. This can uncover action beyond that required by regulation, through landfill opportunities to improve farm practices to reduce and waste methods which cover projects such as: emissions and costs, while bolstering farm productivity. The government is improving greenhouse gas accounting • treating and destroying waste using eligible waste at national and farm scales, including developing voluntary treatment equipment emissions estimation and reporting standards for the • converting waste into biomethane to produce electricity sector, and supporting incorporation of the standards within GHG accounting tools and calculators. • separating organic waste from other waste. The Agriculture and Land Sector Plan provides There are over 220 waste-related projects registered under further detail. the ACCU Scheme; these have been issued over 51 million ACCUs cumulatively since 2010.35 Australia’s Net Zero Pathway | 69 Methane captured from a wastewater treatment facility is used to power the site in Nowra, New South Wales, Australia.

7.1.4 Ongoing improvement in monitoring Hydrofluorocarbons (HFCs) are the largest contributor to methane emissions high global warming potential synthetic greenhouse gases in Australia. For example, HFC-134a, which has been widely The government tracks the latest science, technologies used in automotive air conditioning, has a GWP-100 value and practices to continuously improve the emissions data of 1,300, meaning every tonne of HFC-134a emitted has the that underpins Australia’s abatement policies and actions. warming impact of 1300 tonnes of CO2. This includes $10.2 million to improve fugitive methane emission estimation and reporting by: Australia was one of the first countries to ratify the Montreal Protocol on Substances that Deplete the • Establishing an Expert Panel, led by Australia’s former Ozone Layer (the Montreal Protocol). An estimated Chief Scientist, to provide advice on the current 40 Mt CO2-e was avoided since 1995 through Australia’s scientific understanding of atmospheric measurement successful phase-out of chlorofluorocarbons (CFCs) approaches to fugitive methane emissions, and and hydrochlorofluorocarbons (HCFCs).37 The Kigali whether and how those approaches could help improve amendment to the Montreal Protocol, agreed in 2016, Australia’s fugitive methane emission estimates now included an agreement to a global phase-down of HFCs. and into the future • Supporting a world’s first study in Australia, coordinated Australia’s phase-down of HFCs under the Ozone Protection by UNEP’s International Methane Emissions and Synthetic Greenhouse Gas Management Act 1989 Observatory (IMEO), to evaluate the capability of such commenced in 2018 and is reducing consumption of HFCs approaches in a simulated surface mine setting through an annual quota on imports of bulk HFCs that decreases every 2 years, reaching an 85% reduction from • Reviewing Australia’s facility-level method for baseline in 2036. Australia commenced the phase-down estimating fugitive methane emissions from surface earlier – and from a lower mandated baseline and with mine coal extraction to inform continual improvement in more frequent reductions – than it was required to do under our monitoring. the Montreal Protocol. For 2026 and 2027 the total import Findings from this work will make significant contributions of bulk HFCs will be capped at 4.25 Mt CO2-e and gradually to international understanding of approaches for the reduce to 1.6 Mt CO2-e in 2036. detection and quantification of fugitive methane emissions. HFC phase-down is contributing to Australia’s greenhouse gas emissions reduction targets and is encouraging

7.2 Synthetic greenhouse gas emissions industry to move to alternative technologies using lower or zero global warming potential gases (Figure 8.2). Synthetic greenhouse gases are manufactured chemicals commonly used in refrigeration, air conditioning, and fire Work is continuing. Restrictions on the import of small extinguishing. Synthetic greenhouse gases can remain in the split-system air conditioning units using high GWP atmosphere for a long time, contributing to their high global HFCs commenced in 2024, and programs are underway warming potentials, however they only make up a small across states and territories to encourage the uptake of proportion of Australia’s emissions at approximately 3%.36 more energy-efficient refrigeration and air conditioning equipment. 70 | Australia’s Net Zero Plan References 1 Department of Climate Change, Energy, the Environment 14 International Renewable Energy Agency (IRENA), Renewable and Water, National Inventory Report 2023, Government of Power Generation Costs in 2024, IRENA, Abu Dhabi, United Australia, Canberra, May 2025 Arab Emirates, June 2025 2 Climate Change Authority (CCA), 2024 Sector Pathways 15 Intergovernmental Panel on Climate Change (IPCC), Climate Review, Government of Australia, Canberra, September 2024 Change 2023 Synthesis Report, IPCC, Geneva, Switzerland, March 2023 3 Treasury’s modelling differs from the analysis in Australia’s annual emissions projections (discussed in Chapter 3). The 16 Department of Climate Change, Energy, the Environment and projections are prepared in accordance with international Water (DCCEEW), Capacity Investment Scheme - DCCEEW, reporting requirements. They focus on the national emis- Government of Australia, August 2025 sions outlook to 2040, under current policy settings, and in 17 Clean Energy Regulator (CER), Quarterly Carbon Market the context of current global action (which falls short of the Report - June Quarter 2025 workbook, Clean Energy Regula- global temperature goals). tor, Government of Australia, Canberra, July 2025 4 Intergovernmental Panel on Climate Change (IPCC), Climate 18 Department of Climate Change, Energy, the Environment Change 2023: Synthesis Report, IPCC, Geneva, Switzerland, and Water (DCCEEW), Australian Energy Statistics, Table O: March 2023 Electricity generation by fuel type 2023–24 and 2024, 5 Verikios G, et al, Modelling Sectoral Pathways to Net Zero Government of Australia, Canberra, June 2025 Emissions, CSIRO, Canberra, August 2024 19 Australian Energy Market Operator (AEMO), 2024 6 Climate Change Authority (CCA), 2035 Targets Advice, Integrated System Plan (ISP), Australian Energy Market Government of Australia, September 2025 Operator (AEMO), Victoria, June 2024 7 Way, R, et al, Empirically grounded technology forecasts and 20 Australian Energy Market Operator (AEMO), 2024 Integrated the energy transition, Joule, Volume 6, Issue 9, Pages System Plan (ISP), Australian Energy Market O 2057-2082, September 2022 perator (AEMO), Victoria, June 2024 8 Verikios G, et al, Modelling Sectoral Pathways to Net Zero 21  Worldsteel Association, Factsheet: Scrap use in the steel Emissions, CSIRO, Canberra, August 2024; Climateworks industry, Worldsteel, Brussels, Belgium, May 2021 Centre, Climateworks Centre decarbonisation scenarios 22  Miatto A, et al, Modelling Circular Economy Transition 2023: Australia can still meet the Paris Agreement, Targets, CSIRO, Canberra, September 2024 Climateworks Centre, Victoria, November 2023; Net Zero Australia, Net Zero Mobilisation report: How to make net 23 National Australian Built Environment Rating System zero happen, Net Zero Australia, Victoria, July 2023; (NABERS), NABERS Annual Report 2023/24, NABERS, New Business Council of Australia, Achieving a net zero economy, South Wales, October 2024 Business Council of Australia, Victoria, October 2021; Wood 24 Australia Institute of Health and Welfare (AIHW), Housing T, Orange Book 2025: Australia’s net-zero challenge, Grattan affordability, Government of Australia, Canberra, July 2025 Institute, Victoria, March 2025 25 International Energy Agency (IEA), Net Zero by 2050: 9 Change Authority (CCA), 2024 Sector Pathways Review, A Roadmap for the Global Energy Sector 2023 Update, IEA, Government of Australia, Canberra, September 2024 Paris, France, September 2023 10 Verikios G, et al, Modelling Sectoral Technology and 26 International Energy Agency (IEA), Global Hydrogen Review Emissions Pathways to 2035 and Net Zero Emissions – 2025, IEA, Paris, France, September 2025 Final Report, CSIRO, Australia, 2025 27 Clean Energy Regulator (CER), ACCU project and contract 11 Department of Industry, Science, Energy and Resources register, Government of Australia, Canberra, September 2025 (DISR), Australia’s Long-Term Emissions Reduction Plan, 28  Department of Climate Change, Energy, the Environment and Government of Australia, Canberra, October 2021 Water (DCCEEW), Quarterly Update of Australia’s National 12 Climate Change Authority (CCA), 2024 Sector Pathways Greenhouse Gas Inventory: December 2024, Government of Review, Government of Australia, Canberra, September 2022 Australia, May 2025 13 Graham P, et al, GenCost 2024–25: Final report, CSIRO, 29 Department of Climate Change, Energy, the Environment and Canberra, July 2025; Australian Energy Market Operator Water (DCCEEW), Quarterly Update of Australia’s National (AEMO), 2024 Integrated System Plan (ISP), Australian Greenhouse Gas Inventory: December 2024, Government of Energy Market Operator (AEMO), Victoria, June 2024 Australia, May 2025 Australia’s Net Zero Pathway | 71 30 United Nations (UN), Paris Agreement, United Nations Treaty Series, vol. 3156, p. 79, UN, New York, United States, December 2015; Intergovernmental Panel on Climate Change (IPCC), Climate Change 2014: Synthesis Report, IPCC, Geneva, Switzerland, November 2014; United Nations Framework Convention on Climate Change (UNFCCC), Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA), Session and meeting reports: Katowice Climate Change Conference - December 2018: CMA 1-3, UNFCCC, Bonn, Germany, March 2019; United Nations Framework Convention on Climate Change (UNFCCC), Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA), Session and meeting reports: Glasgow Climate Change Conference - October/November 2021: CMA 3, UNFCCC, Bonn, Germany, March 2022 31 Intergovernmental Panel on Climate Change (IPCC), Climate Change 2014: Synthesis Report, IPCC, Geneva, Switzerland, November 2014 32 Department of Climate Change, Energy, the Environment and Water (DCCEEW), Quarterly Update of Australia’s National Greenhouse Gas Inventory: December 2024, Government of Australia, May 2025 33 Department of Climate Change, Energy, the Environment and Water (DCCEEW), Quarterly Update of Australia’s National Greenhouse Gas Inventory: December 2024, Government of Australia, May 2025 34 Department of Climate Change, Energy, the Environment and Water (DCCEEW), Quarterly Update of Australia’s National Greenhouse Gas Inventory: December 2024, Government of Australia, May 2025 35 Clean Energy Regulator (CER), ACCU project and contract register, Government of Australia, Canberra, September 2025 36 Department of Climate Change, Energy, the Environment and Water (DCCEEW), Quarterly Update of Australia’s National Greenhouse Gas Inventory: December 2024, Government of Australia, May 2025 37 Department of Climate Change, Energy, the Environment and Water (DCCEEW), Montreal Protocol on Substances that Deplete the Ozone Layer, Government of Australia, September 2024 72 | Australia’s Net Zero Plan 3 Cross-cutting policies and enablers Aerial panorama of unique ecosystem of Noosa Everglades - beautiful curvy noosa river and lush, green wetlands in South East Queensland, Australia, near Sunshine Coast and Noosa Heads 73 | Australia’s Net Zero Plan Australia’s transition to net zero is underway, but there remain barriers to achieving decarbonisation at the pace and scale required. These include slow and complicated planning and approvals processes for renewable energy and enabling Chapter 8 infrastructure, supply chain constraints, investment requirements, and workforce shortages. Discusses how establishing the right planning frameworks will accelerate the transition while The transition will require coordinated action across achieving environmental outcomes the economy to address these barriers. Getting these settings right will help share benefits across the country and build confidence, accelerating the transition Chapter 9 to the pace we need to achieve our 2035 target and net zero by 2050. Sets out the role of carbon markets Chapter 10 Highlights how the Australian Government is facilitating domestic and foreign investment for net zero Chapter 11 Explores actions underway to develop a skilled and diverse workforce 8. . Reforming approvals to transition sustainably With the right systems in place, Australia can facilitate rapid Key messages: deployment, while ensuring we meet Australia’s ambitions for protecting and restoring our natural environment, • Australia’s net zero transition requires rapid protecting food security and agriculture production and deployment of major infrastructure projects. preserving First Nations heritage. These are all essential for • Planning and environmental approval maintaining social licence for the transition. processes need to be reformed to deliver This chapter explores the areas where governments are faster outcomes and stronger environmental working to update planning, environmental approvals and decisions. other processes to balance sometimes competing priorities and deliver on multiple national objectives. The Climate Change Authority advised: 8.1 States and territories administer ‘Reforming Australia’s planning system in Australia’s planning rules a way that manages competing priorities while also accelerating planning and The Climate Change Authority advised: approval decisions, will need to be a key ‘Australian planning processes are often priority for governments.’ complex, requiring the involvement of Sector Pathways Review 2024, page 179 multiple government agencies and multiple levels of government to progressively Australia has a long history of delivering major approve elements of a project.’ infrastructure projects. But the transition to net zero Sector Pathways Review 2024, page 180 represents a step-change in scale, requiring more major projects across the country to be deployed at an In Australia, land-use planning and environmental approvals accelerated pace. This includes wind and solar generation are the responsibility of all levels of government, with and transmission projects, mines and processing facilities state, territory and local governments having primary for critical minerals, and other net zero industries. The remit. Like the Australian Government, these jurisdictions deployment of new infrastructure will need to advance are making efforts to accelerate approvals to support alongside the normal business of constructing housing, the timely deployment of large-scale renewable energy roads, and other infrastructure. projects. For example, in November 2024, the NSW The total land area required to build Australia’s renewable Government introduced the Renewable Energy Planning capacity and transmission network to 2050 is estimated Framework to support renewable energy development, to be a very small proportion of our total land mass.1 including within Renewable Energy Zones. The framework In addition, wind turbines, solar arrays and transmission provides guidance and tools to increase transparency, lines can coexist with other land-uses (for example, improve investment certainty, and enable faster and more solar PV on buildings and windfarms integrated into consistent approval pathways for projects that align with broadacre cropping). best practice. Cross-cutting policies and enablers | 75

8.2 The Commonwealth regulates To balance these needs and plan for sustainable water use, governments are collaborating on key water infrastructure issues of national significance and planning. Governments are considering principles and actions that will help plan for and manage demands Australia’s national environmental law is the Environment for water, including in the context of net zero transition, Protection and Biodiversity Conservation Act 1999 (EPBC through development of the National Water Agreement. Act). Most activities regulated under the EPBC Act are also subject to state and territory or local government laws. Collaboration also occurs through forums like the The EPBC Act applies to any activity that is likely to have a Environment Ministers Meeting and the Energy and significant impact on identified nationally protected matters. Climate Change Ministerial Council (discussed further in Chapter 12). Bilateral efforts, such as the Renewable The Australian Government is committed to strengthening Energy Transformation Agreements between the Australian and streamlining our national environmental laws and Government and individual states and territories have establishing a national environment protection agency. also delivered some progress. For example, the South Reforms will deliver: Australian Agreement includes a commitment from the • stronger environmental protection and restoration Australian Government to underwrite 1000 MW of new wind and solar and 400 MW of new storage capacity in • more efficient and robust project assessments South Australia through the Capacity Investment Scheme. The South Australian government will improve community • greater accountability and transparency in engagement and planning and approvals processes decision making to ensure projects can be built by 2030, among other The reforms are about improving national productivity measures. through faster and more streamlined environmental The Australian Government has created the National approvals as well as delivering greater environmental Renewable Energy Priority List with states and territories protections through strong new environmental standards. to deliver a ‘faster yes or faster no’ to identified key renewables projects. Identified projects will receive

8.3 This national challenge needs additional support and facilitation through regulatory and environmental processes. They will still have the same a federated response scrutiny applied as any other project and continue to be required to meet all statutory requirements. The inaugural While each state and territory is responsible for their own Priority List identifies 56 priority projects consisting of planning laws, national collaboration can help facilitate 24 transmission, and 32 generation and storage projects. investment and faster deployment. This is especially critical If approved, these projects could deliver an additional in removing duplication between levels of government 16 GW of generation and approximately 6 GW of storage where a single project must undergo both state/territory capacity across the nation. and national approval. The Australian Government is working with jurisdictions to support, more effective environmental regulation, through reforms that are focused on reducing duplication and enhancing landscape-scale approaches for development and conservation. National collaboration is also important to ensure water resource management is aligned with climate goals, alongside agriculture, industry and community needs and supports the natural environment. Many net zero technologies rely on water supplies including hydrogen, hydroelectricity, low-carbon liquid fuels and carbon sequestration. Suitable planning by each level of government is needed to ensure sustainable supply for all users. 76 | Australia’s Net Zero Plan 9. The role of carbon markets in Australia’s transition Key messages

9.1 Australia’s carbon markets Carbon markets are markets in which carbon units, • Carbon markets are an efficient way to drive corresponding to a fixed quantity of greenhouse gas emission reductions, and an important part emissions or abatement, are exchanged within a defined of Australia’s suite of policy measures. framework. Australia has 3 national carbon market • The Australian Government will continue frameworks helping to achieve low-cost abatement: implementing reforms to ensure Australia’s 1. The Australian Carbon Credit Unit (ACCU) Scheme carbon markets: incentivises carbon abatement through projects ranging - are effective and operate with high- from reforestation to energy efficiency. Proponents carry out projects to reduce emissions or sequester integrity carbon. An ACCU reflects a tonne of carbon dioxide- - complement other policies and measures equivalent sequestered or avoided (Box 9.1). - support broad participation ACCU Scheme projects are subject to strict eligibility - deliver additional benefits where criteria to ensure credited abatement is additional, appropriate measurable and evidence based. For a project to generate ACCUs, it must follow the rules set out in a - avoid adverse impacts, including method. Methods are required to meet legislated Offset to biodiversity and land access for Integrity Standards and the independent Emissions agricultural production. Reduction Assurance Committee determines whether • Australia will play a constructive role these standards are met. Methods are also periodically to support robust and high-integrity reviewed to maintain integrity. Since 2011, the ACCU international carbon markets. Scheme has delivered over 169 million tonnes of abatement across Australia, backed by more than $1 billion in government support.2 Carbon markets incentivise cost-effective abatement 2. The Safeguard Mechanism, sets emissions limits within a robust measurement framework that helps known as baselines for large industrial facilities and ensure integrity. Broad participation from landholders, covers 31% of Australia’s emissions.3 Covered facilities communities and businesses will help spread the benefits are required to either directly reduce their emissions on- of climate action. Complementary and aligned policy, site or surrender carbon units to meet their baselines. planning and market frameworks will support related When a facility’s emissions are below its baseline, objectives, including cultural and nature benefits, and it is issued Safeguard Mechanism Credits (SMCs) agricultural productivity. corresponding to the difference between its emissions and its baseline. SMCs are a type of carbon unit that can be traded or used by the facility. 3. Voluntary Carbon Markets enable companies and individuals to support emissions reductions beyond their own direct activities by purchasing carbon units. This may contribute to achieving voluntary corporate emission reduction targets; balancing the emissions impacts of a product or service such as air travel; or philanthropic efforts to reduce emissions. Both ACCUs and international carbon units (created from emission reduction projects overseas) are purchased in voluntary markets. Any purchases of international units do not count towards Australia’s national emission reduction targets. Cross-cutting policies and enablers | 77 Alongside these national frameworks, states and territories have their own mechanisms for incentivising Box 9.1: The evolving role of the ACCU Scheme least-cost abatement through carbon markets. For example, the Victorian Energy Upgrades program requires The role of the ACCU Scheme in Australia’s climate energy retailers to relinquish Victorian Energy Efficiency policy landscape has evolved substantially over time. Certificates to government each year to meet regulatory The Carbon Credits (Carbon Farming Initiative) Act obligations. 2011 (CFI Act) established the legislative framework There are also markets that trade in energy savings or for ACCUs. renewable energy production, such as the Commonwealth’s From 2012 to 2014, the ACCU scheme operated as a Renewable Energy Target Scheme or NSW Renewable Fuel complement to the Carbon Pricing Mechanism. The Scheme. While these markets trade units corresponding mechanism set a carbon price for major emitters; to a fixed unit of energy rather than carbon, they have those emitters could use ACCUs to help meet their many parallels to carbon markets and make a valuable obligations. The mechanism was central to Australia’s contribution to emissions reductions. emissions reduction efforts at the time, supported by At the international scale, carbon market frameworks new institutions like the Clean Energy Regulator and allow for the trade of carbon units between countries. the Climate Change Authority. The framework established under Article 6 of the Paris After the Carbon Pricing Mechanism was repealed in Agreement supports the trading of Internationally 2014, the ACCU scheme, became the central measure Traded Mitigation Outcomes (ITMOs) to contribute to drive emission reductions. In 2015, the government to the achievement of nations’ Nationally Determined established the Emissions Reduction Fund and over Contributions (NDCs). These activities enable purchasing subsequent years committed $3.1 billion under long countries to achieve existing or more ambitious emissions term contracts to purchase a total of almost 250 reduction targets, potentially at a lower cost or on a faster million ACCUs.4 timeline compared to what might be possible through domestic action alone. The Australian Government In 2022, Australia legislated stronger national has been an active partner in establishing a robust emission reduction targets. The Safeguard framework for carbon trading through the Paris Agreement Mechanism was reformed in 2023 to drive emission and continues to provide capacity building within the reductions at covered facilities, the New Vehicle Indo-Pacific to enable broad participation. Efficiency Standard was legislated in 2024, and the Capacity Investment Scheme was established to accelerate investment in renewable energy generation 9.2 Carbon markets support and clean dispatchable capacity. The ACCU Scheme Australia’s net zero transition remains a key tool but now operates as part of a broader suite of climate measures. The primary Governments are well placed to set emission reduction source of demand for ACCUs is now from Safeguard goals, but do not have complete information regarding facilities. 5 abatement opportunities that exist across the economy. A key strength of carbon markets as a policy tool is that they encourage businesses to reduce emissions wherever they are most cost effective. This flexibility reduces the cost of meeting climate goals and can enable more While these schemes operate under different frameworks, ambitious goals to be achieved. Linkages across carbon they are also linked. For example: markets can increase their efficiency; this is a key reason • under the Safeguard Mechanism, ACCUs can be for allowing ACCUs to be used for Safeguard Mechanism surrendered by Safeguard facilities to help meet their compliance. compliance obligations, alongside SMCs.6 • voluntary market participants can purchase ACCUs to help meet their voluntary commitments. 78 | Australia’s Net Zero Plan

9.2.1 Safeguard and ACCU market The ACCU Scheme also has existing controls to guard against adverse environmental, economic or social operation impacts. Eligibility requirements for projects include: The Safeguard Mechanism allows facilities to meet their • obtaining eligible interest holder consents before obligations by using a mix of on-site abatement and ACCUs can be issued carbon units. Safeguard facilities with low-cost abatement opportunities take those up – both to meet their own • exclusion of certain types of offset projects due to likely adverse environmental and social impacts baselines and to earn SMCs, which they can sell to others. Facilities with higher-cost abatement opportunities can • consistency with natural resource management plans meet their baselines by purchasing credits from others. This ensures the largest emitting industrial facilities • obtaining regulatory approvals under all state, territory and national laws relating to land use and development, contribute to national emissions reductions, while the environment and water. recognising that many need time to develop cost-effective abatement options. Similarly, businesses across the Methods address specific environmental, economic and economy that can generate low-cost abatement through social risks, and the relevant minister must consider any ACCU projects have an incentive to take those opportunities adverse impacts that could arise from projects before up, so they can sell the ACCUs to Safeguard facilities. making a method. In this way, the Safeguard Mechanism encourages all The Australian Government has established high-integrity covered facilities to invest in cost-effective abatement measurement, reporting and verification protocols on-site, stimulates further abatement in other sectors, and through the National Greenhouse and Energy Reporting achieves the overall emission reduction goal at least-cost. (NGER) Scheme, which underpin reporting by Safeguard Mechanism facilities and calculation of SMCs. The NGER Under the ACCU Scheme, every credit must be backed by Scheme is subject to continuous improvement and periodic real and measurable abatement, and methods must meet review by the Climate Change Authority. the legislated Offset Integrity Standards: • Additionality – any carbon abatement that is credited 9.2.2 Voluntary carbon market reforms would be unlikely to occur in the ordinary course of events. The Australian Government’s Climate Active program • Measurable and verifiable – the removal, reduction of provides an incentive for Australian businesses to greenhouse gases should be measurable and capable voluntarily participate in a high-integrity voluntary of being verified. carbon market. Climate Active certification is awarded to businesses and organisations that have credibly reached a • Eligible carbon abatement – abatement should be able state of carbon neutrality. to be used to meet Australia’s international mitigation obligations. Established in 2010 as the National Carbon Offset • Evidence-based – the approach to crediting should be Standard, and updated to Climate Active in 2019, the supported by clear and credible evidence. program provides principles for voluntary engagement with carbon markets. It has facilitated the use of more than • Project emissions – material greenhouse gas 54.8 million carbon credits, including more than 3.3 million emissions emitted as a direct result of the project ACCUs and 51.4 million international carbon credits.7 should be deducted. • Conservative – when an estimate, projection or Climate Active is currently under review and a decision assumption is made it should be conservative. about the future direction of the program has not yet been made. The government understands the need for certainty on Climate Active reforms and is carefully considering the role of the program alongside the changing policy landscape and community expectations around voluntary action, including how it interacts with Australia’s new mandatory climate-related financial disclosures framework. Cross-cutting policies and enablers | 79

9.3 Future directions for Australia’s The Australian Government strengthened governance through legislative reforms in 2023, including to appoint carbon markets a full-time chair to the Emissions Reduction Assurance Committee, bolster the independence of scheme Carbon markets are part of a portfolio of measures administration and require increased audits for some that will help Australia achieve net zero emissions by projects. The government will continue to enhance 2050. Carbon markets work alongside other key policies transparency and integrity by increasing the amount of including risk-sharing arrangements like the Capacity project information published by the CER, and requiring up- Investment Scheme, sector-specific regulations like new front consent from Native Title holders at project registration. vehicle and appliance efficiency standards, and research and industry development programs. These policies 2. Bringing forward high-integrity supply overcome a range of barriers to emissions reduction action that go beyond cost. The Australian Government The government is increasing opportunities to generate high- will not introduce an economy-wide price on carbon integrity ACCUs from a diversity of activities. A new method and will instead maintain a suite of measures to drive has been developed to incentivise abatement at landfill emissions reductions in ways that strengthen facilities; this is on track to be finalised by the end of 2025. our economic productivity, community and New methods to recognise carbon abatement from managed environmental outcomes. burning of savanna landscapes in northern Australia, and from managing agricultural land to store more carbon, are Throughout the transition to net zero, the Australian under development. The government is also investing in Government will work with suppliers, purchasers, the Carbon Farming Outreach Program to support farmers communities, trading partners and independent and land managers to make informed decisions about experts to sustain effective carbon markets that benefit participating in carbon markets (see Chapter 14). communities, industries and the natural environment. To expand opportunities under the scheme, and foster innovation, the government introduced a proponent-

9.3.1 Continuous improvement in the led process to develop methods in 2024. This enables ACCU Scheme businesses, industry groups, researchers and others to propose new emissions reduction methods. The public Demand for ACCUs is expected to increase over time, to register of proposals provides visibility and can help support participants in compliance and voluntary markets drive early support for technologies. Four proposals were to achieve their emissions reduction goals. The Australian prioritised in 2024, and method development is underway. Government is considering its future role as a direct purchaser of abatement, in light of the Safeguard reforms The scope of eligible activities under the scheme will change and the evolving role of the ACCU scheme. as the broader climate change policy framework evolves. For example, activities at Safeguard facilities are no longer Supply is currently strong. Around 19 million ACCUs were eligible to create ACCUs for covered emissions, and multiple issued in 2024; this is projected to grow to 31 million in energy efficiency methods have been retired over the last few 2035.8 Australia’s Emissions Projections 2024 estimate years because other policies have been developed that better the supply of new ACCUs, alongside existing holdings support those activities. within the market, will be sufficient to meet projected demand out to 2035.9 3. Facilitating interoperability with the Nature Repair Market The Australian Government will continue to improve the ACCU scheme so it contributes to Australia’s net zero The Nature Repair Market is incentivising biodiversity transition through: outcomes together with carbon abatement. The Nature Repair Market has been designed to align with the ACCU 1. Improving scheme governance, reinforcing Scheme, with both schemes administered by the Clean integrity and transparency Energy Regulator. Registrations for projects under the first Nature Repair Market method opened in March 2025, with the Recent reviews by the Climate Change Authority (CCA), first project registered in August 2025. Under this method, independent experts, and the Australian National Audit eligible participants can design a project to earn both a Office, have consistently found the ACCU Scheme is tradeable biodiversity certificate and ACCUs where they meet well designed, well administered, and contributing to relevant method requirements. The government will continue Australia’s transition to net zero.10 to consider opportunities for alignment as the Nature Repair Market scheme develops. 80 | Australia’s Net Zero Plan 4. Strengthening synergies between carbon • the coverage arrangements, taking into account any removals and other land uses competitive issues, abatement potential and regulatory compliance There are opportunities to store carbon in the land in ways that are consistent or complementary with other land uses, • whether international units should be considered including agriculture. Activities such as regenerative agriculture, • the use of SMCs (noting these credits provide a significant silvopastures, shelterbelts, and riparian plantings integrate incentive for investment in onsite abatement) and offsets carbon storage into farming practices. These can enhance beyond 2030 (incorporating advice from the Climate agricultural productivity by improving the richness of soil and Change Authority on the extent to which on-site abatement protecting crops, land and livestock from the elements. is being driven by the reforms, and whether any additional incentives are required) Landholders can leverage carbon markets to deliver abatement outcomes and optimise use of their land. • the treatment of flexibility mechanisms beyond 2030 The government has heard stakeholder concerns about • the suitability of arrangements for emissions-intensive, the risks of large-scale carbon farming compromising trade-exposed activities productive land, and potential impacts on local • a range of other matters.Ɨ communities. Appropriate planning and co-ordination is needed to minimise transition risks and find a suitable 9.3.3 International carbon trading balance between different land uses. Further analysis building on the work done to date will be important to Australia recognises that high-integrity international carbon help understand the nature of changes and impacts on markets can help achieve global emissions reductions communities, and inform responses. Chapter 14 and the targets. The Paris Agreement allows for Internationally Agriculture and Land Sector Plan explore this topic further. Traded Mitigation Outcomes (ITMOs) to be exchanged between parties. This enables crucial finance to be accessed by countries that need it while supporting strong social and The Climate Change Authority advised: environmental outcomes, and can help countries achieve ‘Tree plantings that help meet the 2035 target higher ambition targets. could be established across a variety of land Australia supports robust, high-integrity international carbon types, including marginal farmland, without markets. The Australian Government worked alongside other compromising agricultural production or countries to establish the framework for trading ITMOs food security. Diversifying land use and through the Paris Agreement and provides capacity building within the Indo-Pacific. The Australian Government does developing new business activities that not currently allow ITMOs to be used towards our national sequester carbon can give land managers emissions reduction targets or for compliance purposes. Our and farmers new opportunities and income focus is firmly on enabling our industries to reduce emissions streams on their land.’ domestically as this places them in the best position to capture 2035 Targets Advice, page 53 the economic benefits of the transition to net zero. Regardless of how Australia chooses to engage with international markets, Australia will continue to collaborate

9.3.2 The Safeguard Mechanism internationally to help build capacity for countries to participate in international cooperative approaches and increase their The Safeguard Mechanism is flexible and scalable. Its contributions to global emissions reduction. settings are calibrated to Australia’s national emission reduction targets of 43% below 2005 levels by 2030 and net zero by 2050. To 2030, baselines for most facilities The Climate Change Authority advised: decline by 4.9% per year. The Safeguard Mechanism also ‘Australia should not need to use international sets strong baselines setting for new entrants, which helps offsets to meet the 62–70% target by 2035.’ ensure Australia’s emissions trajectory is robust to changes 2035 Targets Advice, page 91 in demand for our commodities, whether that be in energy commodities or new demand for critical minerals. Ɨ A list of matters to be considered by the 2026–27 Review into the Safeguard The government will conduct a review of the Safeguard Mechanism is contained in Attachment B to the Explanatory Statement to the Mechanism in 2026-27. This will consider: Safeguard Mechanism Reforms Rules 2023 Source: Federal Register of Legislation, Explanatory statement: National • the emissions baseline decline rate from 2030 onwards Greenhouse and Energy Reporting (Safeguard Mechanism) Amendment (Reforms) Rules 2023, Government of Australia, Canberra, August 2023 Cross-cutting policies and enablers | 81 10. Attracting investment to achieve net zero Key messages

10.1 Attracting domestic and foreign investment • A clear and credible pathway to net zero provides certainty to investors which helps The Climate Change Authority advised: to attract investment. ‘…there is a global reorientation in trade • The Australian Government is investing and investment underway as governments, strategically to de-risk and incentivise regulators, and markets around the world private capital, including foreign investment. transition to net zero emissions and • Australia’s Sustainable Finance Roadmap Australia needs to adapt to these changes provides a pathway for mobilising the or risk the economic opportunities flowing private capital required to achieve net zero, to other countries.’ modernising our financial markets and Sector Pathways Review 2024, page 192 maximising the economic opportunities associated with energy, climate and Global capital flows are already shifting. Investors, sustainability goals. both in Australia and overseas, are looking for long-term value that also serves to reduce global emissions. The • Strong trading arrangements with partner International Energy Agency’s annual World Energy countries will help attract investment in Investment report has found that annual clean energy clean energy industries and improve access investments are set to rise to over US$2 trillion in 2025, to technologies and inputs required for double investment in fossil fuels.11 The IEA reports the the transition. scale of global investment must increase further to keep temperature rises to within 1.5oC, including: • doubling annual investment in renewables, The Australian Government is investing in our net zero grids and batteries future. However, government alone cannot finance the transition to net zero; private investment at all scales, • tripling annual investment in transport, industry and buildings. from households and small businesses to institutional funds, is also required. This creates opportunity for Australia. This chapter discusses the government’s role in supporting The Sustainable Finance Roadmap helps to mobilise the private sector investment in deployment, infrastructure and significant private capital required to support net zero. equipment to deliver the transition. The roadmap includes 3 pillars to strengthen the financial system and facilitate investment in the transition: 1. Improve transparency on climate and sustainability to help guide capital to net zero-aligned investments and build public confidence in the integrity of the financial system as a contributor to the transition. This includes holding businesses to account for greenwashing, such as through enforcement action by corporate regulators, and setting benchmarks through the Sustainable Finance Taxonomy. 2. Financial system capabilities, to strengthen Australia’s position as an attractive destination for green capital by ensuring fit for purpose regulatory regimes. 3. Australian Government leadership and engagement, including issuing sovereign green bonds and promoting interoperable frameworks. 82 | Australia’s Net Zero Plan The Australian Trade and Investment Commission Over its history, the CEFC has attracted $3 of private (Austrade) works with foreign investors to identify, attract funding for every $1 of public investment.12 and facilitate investment projects aligned to government priorities, such as Australia’s net zero transformation. At the start of 2025 the Government added $2 billion to the This work includes promoting Australia as a welcoming CEFC’s general funding, allowing it to sustain its crucial destination for investment, capitalising on the country’s investments in clean energy technologies. The Government hard-earned reputation for: is updating the CEFC’s investment mandate to include a new focus on the rapid roll out of renewable projects to • a safe and profitable investment destination drive down electricity prices, and committing up to $2 • strong environmental, social and governance billion more to the CEFC General Account, to be drawn (ESG) credentials down in line these changes. • cohesive action on climate across levels The National Reconstruction Fund Corporation (NRF) of government. provides debt, equity and guarantees to projects in priority Since mid-2022, Austrade has facilitated over $15 billion of areas of the Australian economy, including renewables and foreign investment across nearly 200 projects to support low-emission technologies. Australia’s net zero transformation – delivering almost The Net Zero Fund will be a new $5 billion sub-fund of the 22,000 jobs. NRF to invest in decarbonisation of large industrial firms, By applying robust review processes to foreign investment, including through capital expenditure to reduce emissions; Australia can enjoy the economic growth that comes from this and manufacturing renewable and low emissions capital, while maintaining our national security (Box 10.1). technologies. The Net Zero Fund will drive decarbonisation and modernise industrial processes. The funds will be drawn from existing NRF capital and will be a refocusing of

10.2 Government is investing to the NRF’s priorities. crowd-in capital The Regional Investment Corporation (RIC) is another national investment vehicle funded by the Australian The Government is working with the private sector to drive Government. The RIC specialises in low-interest loans investment. While most of the investment will come from for farm businesses and farm-related small businesses. the private sector, the Government is providing targeted In August 2025, the government announced an additional investment to multiply impact beyond what public finance $1 billion in new loan funding to the RIC to expand support can achieve alone. for the growth, resilience and sustainability of Australia’s Established in 2012, the Clean Energy Finance Corporation agricultural sector. The government will also broaden RIC’s (CEFC) is the world’s largest green bank, offering loan scope to include assistance for improving climate concessional loans to help attract private investment. Since resilience, boosting sector productivity and supporting its inception, the CEFC’s loans have been instrumental agriculture to be part of Australia’s net zero transition. in shoring up support for projects and investments that Other financial instruments and special investment might not have otherwise attracted conventional finance. vehicles also crowd-in private investment and support This has operated at all scales, from grid-scale renewable decarbonisation: electricity, to concessional loans to households purchasing electric vehicles. The CEFC is also investing in a range of • The Capacity Investment Scheme, which underwrites decarbonisation opportunities in other sectors, including private investment in renewable electricity generation agriculture, low-carbon liquid fuels and property. and storage. The CEFC has delivered a triple benefit to the Australian • Production tax incentives for critical minerals processing and renewable hydrogen to attract public, by: investment under Future Made in Australia. • accelerating the transition by proving the potential of various technologies, including a central role in establishing solar and battery storage • increasing activity that has contributed to wages and economic growth • earning a return on investment for the Australian taxpayer. Cross-cutting policies and enablers | 83 The Australian Government has opened the Investor low carbon liquid fuels, the Australian Government will Front Door, with a pilot beginning in September 2025. The invest $1.1 billion in a new Cleaner Fuels Program. This Investor Front Door is designed to streamline how investors will help stimulate private investment in Australia’s first and business interact with the government, helping support onshore low carbon liquid fuel refineries, backing local nationally significant projects navigate approvals processes innovators, making fuel supply more resilient and bridging and identify suitable government financing opportunities. the price gap for early adopters. The Government will engage with industry on how to make sure Australian liquid The Australian Government is also targeting capital fuel users have a fair chance to capture the emissions to specific regions to help deliver a fair and equitable reduction potential unlocked by low emission Australian transition. The Net Zero Economy Authority is acting as a fuels. This will reduce reliance on imported fuels and catalyst for investment and major project development in unlock new export opportunities over time. the regions most affected by the transition to net zero – the Hunter (NSW), Latrobe (VIC), Collie (WA) and Central Other Future Made in Australia priorities include batteries Queensland. The NZEA’s work is fostering job creation and solar PV. Australia’s National Battery Strategy and actively supporting the transition by facilitating outlines how Australia will build a diverse and competitive public and private sector participation and investment in Australian battery industry that will improve Australia’s transformational net zero projects, including working with supply chain resilience and economic security. It includes established investment funds. the $500 million Battery Breakthrough Initiative, delivered by ARENA, to promote the development of battery manufacturing capabilities in Australia. ARENA is also

10.3 Investing to build resilience and delivering the $1 billion Solar Sunshot program, supporting secure supply chains commercialisation of Australian innovations and scaling-up domestic solar PV manufacturing. This will improve supply chain security for a technology at the centre of the clean The Climate Change Authority advised: energy transition. ‘A heavy reliance on importing transition technologies from overseas means it will be essential for governments to work Box 10.1 Managing national security risks with industry and international partners through the transition to establish supply chains resilient to Attracting foreign investment, strong trade global economic, climate and geopolitical relationships and robust supply chains are integral to disruptions. This cannot be achieved Australia’s transition. However, these arrangements by onshoring transition technology can give rise to national security risks, which risk manufacturing in Australia alone.’ undermining confidence in the transition. Sector Pathways Review 2024, page 195 Australia must also manage cybersecurity risks for connected devices we are using to reduce emissions. The net zero transition can build national resilience Smart energy management devices, heat pumps, to future risks and shocks by strengthening domestic batteries and electric vehicles produce valuable capabilities and supply chains, especially where Australia yet sensitive data. This data helps reduce costs for has a comparative advantage in a low-emissions world. consumers but raises risks, especially if the vendor of By strategically guiding private investment to industries these technologies is owned, controlled or influenced that will reposition Australia upstream in supply chains, by foreign governments with interests or values that the government is reducing exposure to international conflict with Australia’s. The 2023–2030 Australian disruptions and improving our sovereign capability. Cyber Security Strategy seeks to address these types of risks while stimulating investment and providing For example, Australia has historically depended heavily on clarity for industry, including in reducing emissions. imports of petrol, diesel and aviation fuel, with only 13% of the petroleum feedstocks for Australian refineries coming from local sources.13 To build a supply chain for Australian 84 | Australia’s Net Zero Plan

10.4 Trade relationships and settings Targeted partnerships are helping Australia position itself for success in global clean energy industries and markets. are critical for investment For example, the China-Australia Steel Decarbonisation Dialogue has been established to bring together the world’s For decades, Australia has relied on international trade largest steel producer, China, and the world’s largest iron for prosperity. exporter, Australia, to progress a sustainable steel sector. As trading partners implement their net zero commitments, Australia currently exports over $100 billion a year of iron Australia’s fossil fuel exporters are projected to experience ore to China.15 declines in demand.14 Treasury’s modelling report notes Australia also has a range of bilateral agreements with that, should forecasts by the International Energy Agency some of our largest trade and investment partners be realised, Australian coal production could decrease by at to support scaling-up low-carbon technologies and least 71% to 2050 and Australian gas and LNG production collaboration on research and development; including with could decline by at least 66% by 2050. In contrast, global India, Germany, Singapore, Japan, the Republic of Korea, demand for the commodities needed for the net zero China, the Netherlands, and the United Kingdom. transition such as critical minerals like lithium and nickel are projected to grow, alongside new growth sectors such These partnerships build on Australia’s Free Trade as green ammonia and green metals. Agreements, which add significant value across the Australian economy through access for our exports to Australia’s comparative advantages in renewable energy important markets. and critical minerals can be combined with our strong trading partnerships, fair and competitive markets, open In addition, Australia engages in important multilateral trade and investment and proximity to key markets in groupings like the Climate Club and G20, which support Asia to grow the value of our exports. In addition to the development of policies, approaches and standards on the investment and jobs benefits, by displacing higher trade and clean energy. emissions production elsewhere, Australian exports could underpin emissions reductions beyond our borders. Australia is driving coordinated international approaches to certify low emissions products that will facilitate Treasury considered how Australian production and export trade, building on our Guarantee of Origin (GO) scheme. of green iron, green ammonia and lithium could contribute The scheme, commencing in late 2025, is a voluntary to global abatement, estimating Australia’s production of framework for emissions accounting of products and these products could contribute 466 Mt CO2-e to global certification of renewable electricity. It supports the decarbonisation in 2050. This is equivalent to 1.2% of global government’s Future Made in Australia plan and underpins emissions and more than Australia’s net emissions in eligibility for government initiatives such as the 2024. This allows Australia to make a significant additional Hydrogen Production Tax Incentive. contribution to global efforts – beyond the decarbonisation of our own economy. The Climate Change Authority advised: ‘Australia can boost its contribution to the global goals of the Paris Agreement - over and above meeting a strong domestic emissions reduction target - by partnering with trading partners to decarbonise their energy systems and supply chains.’ 2035 Targets Advice, page 10 Cross-cutting policies and enablers | 85 Australia has played a lead role in the International When fully implemented, these BCAs will apply to Partnership for Hydrogen and Fuel Cells in the Economy, aluminium, cement, fertilisers, hydrogen, iron and steel. the most advanced multilateral government forum Importers will need to have a liability corresponding to considering a global approach for hydrogen certification. the carbon emissions embedded in their imported goods, Through this cooperation, the Australian Government accounting for any emissions liabilities paid overseas. contributed to the development of hydrogen emissions Thailand has also announced that it will implement an accounting methodologies, which are now being given emissions trading scheme, accompanied by a border effect through the GO scheme. carbon adjustment. Governments around the world are increasingly seeking Australia’s climate policies already have strong measures to regulate trade in certain goods on the basis of their to address the risk of carbon leakage to maintain the embodied carbon. The EU and UK are both developing strength of Australian industries and ensure a level playing border carbon adjustments (BCAs) to ensure that imported field through the transition. Australia has been considering goods face similar carbon costs as domestic products, how best to continue this over time (Box 10.2). helping prevent loss of industries abroad and encouraging cleaner industrial production globally. Box 10.2. Maintaining Australia’s competitive advantages through addressing risks of carbon leakage Carbon leakage occurs when companies, faced with emissions reduction requirements domestically, move production to overseas jurisdictions without such requirements. When differences in policy impact are large enough, local industry might ‘leak’ offshore and continue their activities beyond the reach of effective climate policy. This creates costs (loss of investment and industry) without global emissions reduction benefits. Australia’s Carbon Leakage Review was led by Professor Frank Jotzo and undertaken between July 2023 and March 2025. The review assessed carbon leakage risks and found existing policy measures, such as access to concessional Safeguard baseline decline rates and public co-investment, mitigate leakage risks in the short to medium term. However, for some sectors, the review considered settings may need to be augmented with additional measures over time. The review examined whether further policy measures in the medium to longer term would further support a level playing field by ensuring domestic and imported goods face the same emission reduction obligations in the Australian market. The review recommended that a BCA be introduced for a select group of commodities that are at particular risk of carbon leakage from imports, with it initially covering cement and clinker, and to be considered for other commodities subject to further assessment. The review also noted consequential changes to the Safeguard Mechanism should be considered in any decision to implement a BCA. The Australian Government will release the report from the review to continue discussions on its recommendations with impacted industries and will give further consideration to the issues and whether to implement a BCA in the 2026–27 review of the Safeguard Mechanism. The review also recommended the government continue to actively engage in multilateral and plurilateral initiatives that could support the implementation of BCAs; such as through the development of interoperable standards and approaches to default emissions intensities or measurement of embedded emissions. The government will continue to engage in international forums such as the Climate Club, the IEA, the OECD’s inclusive Forum on Carbon Mitigation Approaches, and APEC, to support interoperable approaches for implementation of domestic climate policies and help unlock the export potential of low-emission commodities. 86 | Australia’s Net Zero Plan 11. Working in the net zero transition Key messages 11.1 Training and education are key • A highly skilled and diverse workforce will be needed to underpin Australia’s net zero The Climate Change Authority advised: transition. This requires ongoing training and investment. ‘Australia’s education system must be prepared for the new industries and skills • Supporting diverse workforce participation, required for the transition.’ especially building opportunities for women, Sector Pathways Review 2024, page 187 will be essential for delivering the transition. • Growth of new clean energy industries Many occupations needed for the transition are already will create employment opportunities experiencing skills shortages. Ongoing upskilling, training for Australians. and investment in our workers will be essential to enable broad workforce shifts to growing clean energy industries. Jobs and Skills Australia (JSA) identified in its report, Australia’s transition to net zero is an opportunity The Clean Energy Generation, that there are 38 critical to build a more resilient, inclusive, and competitive occupations where demand for clean energy work is likely economy. to increase by around 15% to 2030 – an increase of almost This chapter outlines how government and business can 240,000 workers based on the central scenario – to meet build the skilled workforce needed for the government’s target of 82% renewable electricity a successful transition. generation by 2030. The report found that the biggest worker shortages will be for electricians, with an additional 85,000 expected to be needed by 2050, 27% more than the currently projected supply.16 Treasury modelling indicates that if Australia realises its ambitions as an exporter of clean energy embodied products, this would create new employment opportunities. Occupations projected to be increasingly in demand include automotive and engineering trades workers, and machinery and stationary plant operators as a result of larger clean energy industries. Infrastructure Australia’s Delivering Net Zero Infrastructure: Workforce Report notes multiple sectors across the economy will need to draw upon the same pool of construction workers to continue operations while delivering their net zero targets. Coordinating efforts on overlapping workforce issues, such as in infrastructure and housing construction, will be needed to manage any potential cross-sector competition while continuing to strengthen the workforce with the right capabilities. Australia will also need more university-qualified professionals for the transition. This will include engineers and project managers to plan new infrastructure, scientists to innovate new climate solutions and continue refining our understanding of climate systems, and sociologists to support the public to engage with the energy transition and have their say in how it should progress. Cross-cutting policies and enablers | 87 In recognition of this need, the Australian Government is targeting a tertiary qualification attainment rate of at least

11.2 Supporting regional workers 80% by 2050, up from 60% today, covering both vocational and communities to seize education and training (VET) and university qualifications. net zero economy opportunities The Climate Change Authority advised: ‘Strategic investment in skills and training The Climate Change Authority advised: can assist workers to transition into ‘New and growing industries can create emerging clean energy and manufacturing economic opportunities for affected industries, while helping to address workers and regional communities, with capability gaps that would otherwise hold support from governments including for back growth.’ re-training and upskilling of workers and 2035 Targets Advice, page 70 the provision of public infrastructure.’ Sector Pathways Review 2024, page 116 The long lead time of apprenticeships, degrees and other training pathways – often at least 3–4 years – means The benefits of the transition will not necessarily be that targeted initiatives over the next few years will be evenly distributed. As Australia decarbonises, new crucial in building the workforce needed. The Australian industries are emerging while emissions-intensive Government, with states and territories, has prioritised industries in mining, manufacturing and transport ‘supporting the net zero transformation’ under the undergo rapid change. As some roles disappear, others National Skills Agreement. The Australian Government will emerge. Building on the existing skills of the energy is supporting greater participation in growing sectors industry workforce, this shift will require retraining by prioritising skills, developing stronger links between workers to participate in and drive clean-industry growth. industries, and building awareness of opportunities. Key Many workers will enter new occupations in construction, initiatives include: electrical trades and advanced manufacturing. • Fee-free TAFE, TAFE Centres of Excellence and the Key Apprenticeship Program, which are supporting The composition of occupations across industries and Australians to take up opportunities in the net zero locations will change. Around 1.1% of the Australian transition, including underrepresented cohorts such workforce is employed in sectors directly exposed to the as women and First Nations people. net zero transition, and an additional 4% of the workforce are employed in emissions-intensive sectors.17 Where • National licensing for electrical trades to enable them this employment tends to be concentrated in particular to work seamlessly across states and territories regions like the Hunter (NSW), Latrobe (Vic), Collie (WA) without requiring separate licensing. and Central Queensland, the move away from emissions- • A national network of 10 Jobs and Skills Councils intensive industries will affect not just jobs, but local (JSCs) to work with industry and the VET sector, to economies and community identity. ensure training addresses existing and emerging skills needs to build the clean energy workforce. • The Future Made in Australia agenda prioritises safe and secure jobs, and developing skilled and inclusive workforces, under its Community Benefit Principles. The government will consider these principles when weighing up options to support new industries. 88 | Australia’s Net Zero Plan These communities are resilient, but they need to be 11.3 Equitable access to opportunities supported – with clear plans, targeted investment, and a and diversity will strengthen say in shaping their own future. The Australian Government is rolling out 3 key initiatives to support regions through the Australia’s workforce transition: The Climate Change Authority advised: • Regional Workforce Transition Plans will offer tailored, place-based supports and services for workers, families ‘Diversifying workforces can increase and communities for regions expected to be heavily participation of under-represented groups impacted by the transition. and represents one of few ways to address • The Energy Industry Jobs Plan will help workers in the acute workforce shortages being coal- and gas‑fired power stations and across relevant experienced by transition industries now.’ supply chains, move to new jobs as those stations close. Employers across the supply chain will help Sector Pathways Review 2024, page 186 workers to prepare, including with career counselling, financial advice and paid time off for training in formal Government and business must work together to maximise qualifications or short courses. The Net Zero Economy opportunity for all workers, especially where there has Authority oversees this program in its priority regions. been inadequate workforce inclusion to date. This includes • Transitioning Workforce Fund will deliver tailored women, First Nations people, people with a disability, solutions to address barriers to transition for workers, skilled migrants, and culturally and linguistically diverse communities, businesses and unions. By building communities. community capability to overcome the specific barriers Women face considerable barriers to participating in that individual communities face, they will experience industries critical to the net zero transition, such as a more orderly transition, even as employment and manufacturing, mining, construction and engineering. In economic conditions change on the road to net zero. construction and mining, women make up only 13% and The Australian Government will work closely with 21% of the workforce respectively.18 In gender-segregated local communities in transitioning regions to establish sectors, women can face discriminatory or unsafe consultative mechanisms, including through the work of workplaces, sexual harassment, lack of suitable amenities, the Net Zero Economy Authority and regional connections. and limited flexible work opportunities. Most of the women This is discussed further in Chapter 14. employed are in sales or administration roles rather than on a worksite, contributing to an average gender pay gap of 25.3% and 19.8% between men and women in these industries.19 The Australian Government is supporting women’s safe and equitable participation by working to prevent workplace sexual harassment and sex discrimination, improve women’s access to safe and inclusive study, training and work opportunities in male-dominated industries, and accelerate meaningful progress towards gender equality in Australia. This includes through initiatives such as: • Building Women’s Careers Program • Introducing positive duty into the Sex Discrimination Act 1984 • Working for Women: A Strategy for Gender Equality to guide the government’s ongoing commitment to women’s participation in the energy transition, leadership in climate policy, and centering First Nations women and girls in policy development. Cross-cutting policies and enablers | 89 References 1 Australian National University Institute for Climate, Energy 11 International Energy Agency (IEA), World Energy and Disaster Solutions (ANU ICEDS), No threat to farm Investment 2025, IEA, Paris, France, June 2025 land, ANU, Canberra, May 2024 12 Clean Energy Finance Corporation (CEFC), Annual Report 2 Clean Energy Regulator (CER), ACCU project and contract 2023-24, CEFC, Sydney, October 2024 register, Government of Australia, Canberra, September 13 Department of Climate Change, Energy, the Environment 2025; Clean Energy Regulator (CER), Auction Results, and Water (DCCEEW), Australian Petroleum Statistics, Government of Australia, Canberra, October 2024 Government of Australia, Canberra, June 2025 3 Clean Energy Regulator (CER), 2023–24 safeguard data 14 International Energy Agency (IEA), World Energy Outlook highlights, Government of Australia, Canberra 2025 2024, IEA, Paris, France, October 2024 4 Clean Energy Regulator (CER), Unpublished, Government of 15 Department of Industry, Science and Resources (DISR), Australia, Canberra, 2025 Resources and Energy Quarterly – June 2025, Government 5 Clean Energy Regulator (CER), Quarterly Carbon Market of Australia, Canberra, June 2025 Report June Quarter 2025, Government of Australia, 16 Jobs and Skills Australia (JSA), The Clean Energy Canberra, July 2025 Generation, Government of Australia, Canberra, October 6 Department of Climate Change, Energy, the Environment 2023 and Water (DCCEEW), Climate Active data (unpublished), 17 Jobs and Skills Australia (JSA), The Clean Energy Government of Australia, Canberra, September 2025 Generation, Government of Australia, Canberra, October 7 Department of Climate Change, Energy, the Environment 2023 and Water (DCCEEW), Climate Active data (unpublished), 18 Australian Bureau of Statistics (ABS), Labour Force, Government of Australia, Canberra, September 2025 Australia, Detailed, Government of Australia, Canberra, 8 Clean Energy Regulator (CER), Quarterly Carbon Market July 2025 Report June Quarter 2025, Government of Australia, 19 Workplace Gender Equality Agency (WGEA), Industry Data Canberra, July 2025 Explorer, Government of Australia, Canberra, 2025 9 Department of Climate Change, Energy, the Environment and Water (DCCEEW), Emissions projections, Government of Australia, October 2024 10 Climate Change Authority (CCA), 2023 Review of the ACCU Scheme, CCA, Canberra, December 2023; Australian National Audit Office (ANAO), Issuing, Compliance and Contracting of Australian Carbon Credit Units, Government of Australia, Canberra, April 2024 90 | Australia’s Net Zero Plan 4 Working together 91 | Australia’s Net Zero Plan The transition to net zero is bigger than any one individual, community, business or government can tackle alone. Everybody has a role to play. The transition offers major opportunities, including jobs in clean energy industries, regional development and Chapter 12 greater collaboration with First Nations Australians. However, some communities will be particularly affected Discusses the roles of governments, the private by the challenges the transition will bring. Government sector, academia and research institutions, is focused on ensuring that Australians share in the and communities, and how we are working benefits and are supported through the challenges. with international partners. Chapter 13 Outlines how First Nations people’s connection to Country and culture is fundamental to climate action in Australia. It sets out how First Nations leadership is creating opportunities to reduce emissions and ensure benefits flow to First Nations communities. Chapter 14 Outlines how government will work with and support communities and regions through the transition. 12. Roles and responsibilities Key messages

12.1 All governments are working towards net zero • The Australian Government is working with all levels of government to provide the right State, territory and local governments are vital partners with the Australian Government in achieving our collective policies and regulatory settings for net zero. net zero ambition. • The private sector is investing to Over the last decade, states and territories have led the way. decarbonise, prove and scale-up new They have set interim and long-term emission reduction technologies, and capitalise on new targets, supported by policies and targeted investment, markets. to guide the transition in ways best suited to their • Australia’s universities and research jurisdiction (Figure 12.1). Our emissions reduction pathway will continue to be shaped by the efforts of states and organisations are leading the world in the territories. development of new technologies. States and territories are also partners in implementing • Coordination mechanisms like the Energy major national initiatives, including investing in Community and Climate Change Ministerial Council, Solar Banks and the Social Housing Energy Performance international forums and partnerships are Initiative to support electrification, reduce energy helping to align efforts, share information costs, build resilience and increase participation. They and maximise benefits. are delivering major infrastructure projects that will transform and decarbonise our energy and transport systems, such as Marinus Link, connecting the electricity network between the mainland and Tasmania, and the Sydney Metro Network. Local governments lead and support community efforts to reduce emissions, as well as adapt to climate impacts. They play a central role through land-use planning, delivery of local transport, waste and recycling services, and management of municipal buildings and infrastructure – directly reducing emissions and building community capacity. Local governments are on the front lines of climate impacts in communities. The Australian Local Government Association has published Adapting Together: Local Government Leadership in a Changing Climate, which outlines examples of the actions local governments can take to build resilience, and the economic benefits from local government action. The best outcomes will come from all levels of government working collaboratively to prepare for climate impacts and respond to challenges when they arise. Working together | 93 Figure 12.1 State and Territory Emissions Reductions Targets Net Zero by Net Zero by NT 2050 QLD 2050 30% by 2030 * 75% by 2035 * Net Zero by WA 2050 Net Zero by NSW 2050 50% by 2030 70% by 2035 Net Zero by ACT 2045 50-60% by 2025 Net Zero by 65-75% by 2030 SA 2050 Net Zero by 90-95% by 2040 60% by 2030 VIC 2045 28-33% by 2025 Net Zero by 45-50% by 2030 75-80% by 2035 TAS 2030 ACT NSW NT QLD The ACT Climate Change NSW is developing a new Net The Northern Territory has The Queensland Strategy 2019–2025 outlines Zero Plan to 2035 to chart a been guided by the Climate Government has committed steps being taken to build path to meet its legislated 2030 Change Response: Towards to net zero emissions by 2050 resilience to climate change and 2035 emissions reduction 2050 and associated Three and working with industry impacts and meet the ACT’s targets and lay the foundation Year Action Plan which outlined sectors to develop plans to emission reduction targets, to be net zero by 2050. The a strategy and actions for a reduce emissions. Queensland including net zero by 2045. new Net Zero Plan will reflect pathway to net zero, while will deliver an Energy Roadmap While a new Strategy is commitments to reduce building climate resilience by the end of 2025. A net currently under development, emissions across the entire and unlocking economic zero roadmap and emissions the separate Integrated economy and will complement opportunities in a low carbon reduction plans for other Energy Plan 2024–2030 is the NSW EPA’s Climate Change future. The Northern Territory critical sectors of the economy providing long-term guidance Policy and Action Plan, which is developing a new policy – industry, transport, land and for the ACT’s energy system sets out a comprehensive position that aligns with its agriculture, built environment, transition. The Plan advances program of increasing commitment to rebuild the and resources – will be regulatory and policy settings regulatory requirements to Territory economy. published in 2026. The net that enable ACT households reduce emissions at facilities zero roadmap will also outline and businesses to invest and within the EPA’s remit. Queensland’s adaptation benefit from electrification. priorities to ensure industries and communities are resilient. SA TAS VIC WA South Australia’s Net Zero Tasmania’s Emissions The Victorian Government is The Western Australian Climate Strategy 2024–2030 outlines Reduction and Resilience preparing its 2026–30 Climate Policy (2020) outlines a the government’s objectives, Roadmap 2024–29 connects Change Strategy and new strategic vision for a climate- policy priorities and actions to the State’s six sectoral sectoral emissions reduction resilient and low-carbon future, reduce greenhouse emissions Emissions Reduction and pledges. The Strategy will targeting net zero emissions by at least 60% by 2030 and Resilience Plans and Risk set the direction for Victoria by 2050 through stakeholder drive progress towards net Assessment for Climate Change reducing emissions to net zero collaboration and investment zero emissions by 2050. 2024. It sets out a pathway by 2045 and strengthening in green jobs and industries, The strategy aims to reduce for emissions reductions and climate resilience. It will build and regional development. The greenhouse emissions across climate resilience through on the 2021–25 Climate Change Sectoral Emissions Reduction the economy while creating new support for businesses and Strategy that outlined the Strategy for Western Australia jobs, developing new industries, industries to address while state’s plan for climate action (2023) builds on this, outlining supporting wellbeing, and maintaining the State’s target while advancing innovation, initial actions across all enabling decarbonisation of net zero emissions to 2030 investing in new industries and sectors to support the state beyond state borders. and beyond. creating Victorian jobs. government’s net zero target.​ *Interim emissions reduction targets in the Clean Economy Jobs Act 2024 (Qld) are being reviewed The Australian Government is partnering with local 12.1.1 Cooperation through ministerial government. For example, the $100 million Community councils and meetings Energy Upgrades Fund supports energy upgrades at existing local government facilities, including replacing gas heating in council-owned swimming pools, replacing street The Climate Change Authority advised: lights with energy-efficient alternatives, and incorporating ‘ Strategic coordination between battery storage at sporting fields, libraries, and community governments remains essential, particularly centres. These initiatives are reducing local energy costs, increasing resilience, and reducing emissions. where borders are shared, infrastructure is interconnected, or investment and Like the Australian Government, many state, territory and approval decisions and social impacts local governments have committed to reaching net zero span jurisdictions.’ in their own operations, showing what can be done using electric transport, building upgrades, and power purchase 2035 Targets Advice, page 61 agreements (Box 12.1). Ministerial councils and meetings have a central role in supporting effective collaboration across different levels of government. They help overcome shared barriers and Box 12.1 A net zero Australian Public Service provide an opportunity to showcase best practice and by 2030 align efforts. Ministerial councils shaping the net zero transition include: In 2023, the Australian Government released the Net Zero in Government Operations Strategy, • Energy and Climate Change Ministerial Council which outlines the government’s commitment to • Council on Federal Financial Relations reduce the Australian Public Service’s emissions to net zero by 2030. • Infrastructure and Transport Ministers’ Meeting • Agriculture Ministers’ Meeting The strategy describes actions towards reducing emissions from Australian Government operations • Environment Ministers’ Meeting and transitioning to net zero in areas like property, • Skills and Workforce Ministerial Council energy, procurement, fleet and travel. • Building Ministers’ Meeting Key actions include: • Planning Ministers’ Meeting. • transitioning to renewable energy, facilitated through a whole-of-government coordinated procurement of electricity • improving building energy efficiency and electrification • transitioning the APS fleet to zero emission vehicles where appropriate. Progress is being made. In the 2023-24 reporting period, 38% of electricity consumed was certified from renewable generation, and 72% of ordered passenger vehicles were low-emission vehicles.1 Working together | 95 The Energy and Climate Change Ministerial Council (ECMC) is a forum for the Commonwealth, Australian states

12.2 Australia’s private sector drives and territories, and New Zealand to work together on key innovation and investment reforms in energy and climate change. In August 2025, Australia’s private sector is at the forefront of innovation ECMC agreed 6 strategic priorities for the coming year, while and investment in Australia’s net zero transition. recognising each jurisdiction may pursue its own policies on energy transformation according to its unique needs and • 94% of ASX50 companies have set a net zero circumstances, working collaboratively to deliver the best commitment.2 outcomes at a national level. The ECMC’s priorities are: • Australia’s largest banks are transitioning their • Addressing barriers to affordable, high-quality, safe, financing activities to align with net zero setting sector- reliable and secure supply of electricity and gas that specific policies, targets and transition plans for their is fair and prioritises the interests of consumers emission intensive investments.3 throughout the energy transformation, including by • Australia’s superannuation funds are also directly supporting consumer energy resources. investing in initiatives and businesses that will reduce • Ensuring all Australians, including regional, remote emissions and support climate action, while earning and First Nations communities, are empowered and returns for shareholders and members. supported to benefit from the energy transformation. • The Clean Energy Council estimates that investments • Delivering a coordinated, strategic and timely approach in clean energy in Australia reached a record to transforming our energy systems to meet net $12.7 billion in 2024.4 zero, capturing the opportunities of new diverse Australia’s Sustainable Finance Roadmap provides a energy technologies including onshore and offshore clear reform pathway to mobilise the private capital generation, storage and transmission, and ensuring necessary to finance the net zero transition. The the resilience of the sector in the face of the changing Sustainable Finance Taxonomy provides a common climate. language for green and transition finance in Australia, • Driving the efficient and effective achievement of supporting the allocation of capital towards activities that Australia’s emissions reduction commitments, including enable Australia’s net zero ambitions. net zero by 2050, and promoting Australian industries and businesses to attract international investment and capitalise on the global transition. • Delivering a coordinated and comprehensive approach to Australia’s adaptation and resilience to climate change, in all sectors of the economy. • Delivering a coordinated and strategic approach to achieving improvements in energy performance and flexibility across the Australian economy, including facilitating increased electrification of activities. The ECMC is also investigating a National Climate Change Partnership, which would provide a framework for government collaboration on climate mitigation, adaptation and resilience, and ensure ECMC focuses on addressing the highest shared climate priorities. The Infrastructure and Transport Ministers’ Meeting is focused on how to decrease transport-related emissions across jurisdictions. In August 2025, Ministers agreed to develop a national decarbonisation policy framework for whole-of-life carbon for transport infrastructure projects. This framework, supported by a flexible approach to national implementation, will support carbon reduction across every phase, from early planning to operation and end-of-life. Solar technology manufacturing, Newcastle, New South Wales, Australia. 96 | Australia’s Net Zero Plan

12.3 Academia, universities and Australia is also partnering with countries in our region to act on climate change, transform their economies thought leaders and increase their capacity to respond to climate impacts (Box 12.2). Innovation is critical for Australia to reach net zero (see Chapter 7). Australia’s R&D ecosystem, academic Export Finance Australia (EFA) plays a key role in financing institutions and thought leaders play an important role these initiatives. EFA is the Australian Government’s in developing the technologies, processes and practices export credit agency, providing loans, guarantees, bonds, we need to reach net zero. Partnerships between the insurance and equity to: researchers trialling new technology and the industries which can scale and deploy these solutions with people and • support small and medium enterprises, larger companies and governments to realise Australia’s communities across Australia are increasingly important. export opportunities or contribute to export supply Australia’s research institutions, including universities and chains the CSIRO, as well as non-governmental organisations • support Australia’s economic resilience and security, (NGOs) such as the Australian Conservation Foundation, and net zero transformation the Climate Council, the Australian Council of Trade Unions (ACTU) and Australian Council of Social Service (ACOSS), • help finance sustainable infrastructure in the Indo- Pacific that has an Australian benefit. are also advancing research and action to guide a fair and orderly transition. On 5 December 2023 at COP28 in Dubai the Australian Government signed up to the Clean Energy Transition Partnership (CETP; also known as the Glasgow Statement).

12.4 Working with partners in the Through this, Australia committed to end new direct public global net zero effort financing for international unabated fossil fuel energy sector projects, except in limited and clearly defined Australia is working with international partners in global circumstances. The government has amended the Export efforts to achieve net zero. Finance and Insurance Corporation (EFIC) Act, so it now requires EFA to have regard to Australia’s obligations under The Government is collaborating with key regional partners the Paris Agreement, our emissions reduction targets, and to unlock research, policy and investment in carbon Australia’s commitments under the CETP. management technologies, including transboundary CCS options. For example, Australia can support the decarbonisation of key regional and trading partners by safely and permanently storing captured CO2 emissions from those countries. Regional collaboration on transboundary CCS via the Regional Cooperation Initiative on Carbon Sequestration could generate the economies of scale needed to make carbon management technologies, such as CCS, a more accessible decarbonisation option for Australian industries and hard-to-abate sectors. Working together | 97 Box 12.2 Climate change in the Pacific Many areas of the western Pacific, including Fiji, Samoa and New Caledonia, have experienced sea-level rises of 10 to 15 cm since 1993, nearly twice the global rate of change.5 Sea surface temperatures have risen 3 times faster than the global average and marine heatwaves have doubled in frequency since 1980, significantly impacting ecosystems, economies, and livelihoods of our Pacific neighbours.6 The Fijian government has identified 42 low-lying coastal villages for planned relocation due to inundation of homes and saltwater intrusion into arable land.7 Global action to reduce emissions is essential to protecting these islands, and the diverse peoples and cultures that call them home. Australia is working with our Pacific partners to build capacity to adapt to these impacts and mitigate climate change. This includes working through the Pacific Islands Forum to implement the 2050 Strategy for the Blue Pacific Continent, including the Pacific owned, led and managed Pacific Resilience Facility. Through the Australian Infrastructure Financing Facility for the Pacific, Australia is also investing $350 million through the Pacific Climate Infrastructure Financing Partnership (PCIFP) to help the Pacific transition to renewable energy and fund critical climate adaptation works. REnew Pacific is a key component of PCIFP. Over 5 years, this program is investing $75 million in off-grid renewable energy for Pacific and Timor-Leste communities, to support clean energy projects that improve health, education, agriculture, and communications. It offers grants and co-financing with NGOs, businesses, and governments to drive inclusive development. Launched at COP29, it builds on earlier partnerships to become the region’s climate infrastructure partner of choice. In 2025 Australia signed the world-first Australia-Tuvalu Falepili Union, in which Australia recognises Tuvalu’s continuing statehood and sovereignty notwithstanding climate-related sea-level rise, commits to assist Tuvalu in response to major disasters, and supports mobility with dignity for the citizens of Tuvalu. Australia is bidding to host the 31st Conference of the Parties (COP) in 2026 in partnership with the Pacific. The COP is the largest climate conference in the world. Hosting it would elevate Pacific voices in the global discussion – bringing global attention to the region’s unique challenges and solutions, and accelerating global climate action and investment. 98 | Australia’s Net Zero Plan 13. First Nations leadership in the transition Key messages

13.1 First Nations Clean Energy Strategy is a foundation for • The First Nations Clean Energy Strategy is action supporting economic opportunity and jobs for Aboriginal and Torres Strait Islander The First Nations Clean Energy Strategy 2024-2030 people as part of the clean energy transition. provides the foundation for climate action through the clean energy transition in partnership with First Nations peoples. • First Nations peoples’ knowledge and It addresses the intersection between First Nations rights connection to Country and culture can and interests and the clean energy transition to support support emissions reduction and adaptation First Nations peoples to lead and benefit from the transition to climate change. wherever they live in Australia. The First Nations Clean Energy Strategy prioritises collaboration, respect for cultural knowledge, and the First Nations communities are crucial partners in the development of clean energy projects that deliver social, net zero transition. An estimated 70% of Australia’s land economic, and environmental benefits to First Nations and waters are owned, managed or co-managed by First communities and the broader Australian community Nations people and/or subject to other rights and interests (Box 13.1). While the strategy was developed specifically including native title.8 This underscores the central role for clean energy, the principles at the heart of the strategy First Nations communities must be afforded in managing are applicable across all sectors: the transition to net zero. 1. Aboriginal and Torres Strait Islanders, being the First Nations peoples of Australia, must be enabled to First Nations communities self-determine how they lead, participate in, and benefit from the clean energy transition. are also experiencing 2. First Nations peoples maintain their right to live on the devastating effects of their land, with access to reliable and affordable clean energy. climate change on Country. 3. First Nations peoples are stewards and custodians of First Nations-led solutions Country, including the land, waters, skies and seas. This are needed to help adapt and connection is ongoing and enduring. improve resilience. 4. Access to clean energy and a safe climate benefits all human and non-human life. Working in genuine partnership with Traditional Custodians 5. First Nations peoples’ cultural heritage must be and First Nations communities is necessary to enable recognised, protected and celebrated throughout the communities to shape and share in the economic benefits clean energy transition. of the transition. For instance, First Nations peoples comprise just 1.9% of Australia’s clean energy workforce, which presents an enormous opportunity for increased participation.9 By empowering First Nations peoples to lead and participate in the net zero transition we can take meaningful steps to achieving the priority reforms of the National Agreement on Closing the Gap. Working together | 99 Building genuine partnerships and collaboration is Box 13.1 Net Zero technology can improve energy a shared responsibility. Government has a special access for remote communities duty of care to lead these efforts and ensure they are underpinned by robust and transparent data collection, Many remote First Nations communities face energy monitoring and reporting. The First Nations Clean Energy insecurity, being dependent on diesel generators and Climate Change Advisory Committee provides which are unreliable, expensive and emissions advice to the Minister for Climate Change and Energy on intensive. Renewable microgrids, powered by solar, the Strategy, including design and implementation of its wind, and battery storage, offer a pathway to energy communication and engagement plan, and developing its independence, reduced costs, lower emissions and themes, objectives and initiatives. better life outcomes. The government has allocated $70 million in funding The Australian Government is investing in First for the First Nations Clean Energy Program (the Program) Nations Community Microgrids through a dedicated over 3 years starting in 2025-26. This includes: $75 million stream in the Australian Renewable Energy Agency’s (ARENA) Regional Microgrids • grants for First Nations peoples to access Program. This supports projects empowering independent clean energy advice First Nations communities to participate in their • support to engage in clean energy project electricity supply arrangements and develop energy development infrastructure, resolving barriers to deployment of • access to clean energy information and resources microgrid solutions. • policy development to increase access to finance. Under the program, ARENA will provide $13 million to the Remote Area Energy Supply (RAES) First Nations An additional $4.6 million will enable continuation of the Community Microgrids Project in South Australia, First Nations Clean Energy and Climate Change Advisory with a matching financial contribution from the South Committee for the lifespan of the Strategy to 2030. Australian Government. This project will deliver This supports the government’s continuing commitment high-penetration renewable energy microgrids to the to First Nations leadership and participation in remote communities of Yalata, Pipalyatjara and Oak program delivery. Valley. Each community is currently reliant on diesel generation and faces high cost and unreliable energy access. In the Northern Territory, ARENA will provide $1.4 million to Alice Springs based Ekistica, to lead a project to co-design a scalable, culturally appropriate energy service model tailored for First Nations homeland communities. Working closely with the NT Government, National Indigenous Australians Agency, Land Councils, Aboriginal Housing NT and other partners, the project will tackle long- standing inefficiencies in service delivery and place communities at the center of decision-making. 100 | Australia’s Net Zero Plan

13.2 Climate change on Country First Nations peoples have managed Australia’s natural Box 13.2 Supporting First Nations led climate environment for over 65,000 years and have experienced action and education the climate changing over this time, with integral The Australian Government is supporting a First knowledge being passed down through generations. Nations-led response to the on-ground impacts of Many communities today maintain a deep and enduring climate change. The government is working with connection to the land, seas and waters that make regional leaders and Traditional Owners to deliver the up their Country and Culture. This knowledge and Torres Strait and Northern Peninsula Area Climate connection to Country should guide Australia’s efforts to Resilience Centre through a $15.9 million investment tackle climate change across Australia. over 6 years (2022–23 to 2027–28). Climate change on Country is already disrupting The centre was developed following a regional cultural practices and threatening the health, social and roundtable in 2022. Torres Strait participants called emotional wellbeing of communities. High temperatures for an approach that could connect Traditional risk delaying traditional ceremonies, bushfires and Knowledge, lived experience and western science to floods can damage Country including sacred sites, design and identify climate action in communities and extreme events are impacting community health, across the region. livelihoods and property. Regions such as the low-lying Torres Strait Islands are especially vulnerable to sea The centre has been created through a co-design level rise. Limited ability to adapt to increased flooding process and implementation is being guided by is further compromised by existing cultural and societal regional leaders. challenges. First Nations-led solutions are needed to address these challenges (Box 13.2). In late 2024, the centre released the Torres Strait and Northern Peninsula Area Climate Resilience Grant The Indigenous Protected Areas program supports First Program. The program was designed with regional Nations people to care for their land and sea Country, leaders and provides up to $10.8 million over 3 years including through adapting to climate change impacts for the recruitment and training of local First Nations and building resilience, in line with cultural priorities and climate resilience officers, to lead practical climate knowledge systems. adaptation projects and community education. In early 2025, grants were awarded to 3 regional First Nations peoples are also leading climate mitigation organisations. activities through active land management, participating in the Australian Carbon Credit Unit Scheme. The centre aims to create an enduring dialogue on climate change in the region across all levels of Projects such as savanna fire management (Box 13.3) government to provide a consistent and coordinated provide opportunities for First Nations peoples to apply response to climate challenges. traditional knowledge and strengthen their connection with Country, while also reducing emissions. These projects generate carbon credits which provide income and employment within communities, and benefit biodiversity. Through the Carbon Farming Outreach Program, the Australian Government is partnering with the Indigenous Carbon Industry Network to develop tailored resources and training for trusted advisers of First Nations land managers to support their participation in carbon farming. The Nature Repair Market will also provide opportunities for First Nations people to take climate action through the development of government-accredited methods for nature repair, which can simultaneously support climate action by removing and storing carbon from the atmosphere.10 Working together | 101 Kakadu National Park, Northern Territory, Australia. Box 13.3 Cool burns, big impact - savanna fire management in action In northern Australia, fire has always been part of the landscape. Today, supported by the Australian Carbon Credit Unit (ACCU) Scheme, Traditional Owners and First Nations ranger groups are reintroducing customary strategic early dry season burning to reduce greenhouse gas emissions and generate income while supporting ecosystem health and cultural land management. As of June 2025, there are 86 projects registered nationwide under the ACCU Scheme’s savanna fire management methods.11 Arnhem Land Fire Abatement (ALFA) is an Aboriginal-owned, not-for-profit organisation, which supports six registered savanna fire management projects across the Northern Territory, including the 28,000 km² West Arnhem Land Fire Abatement (WALFA) project.12 WALFA combines First Nations fire knowledge and skills with scientific and technological tools to account for emissions reduction under ACCU Scheme requirements. At the start of the dry season, Traditional Aboriginal Owners and rangers across Arnhem Land commence a cultural practice passed down through countless generations – carefully burning their custodial estates using sophisticated fire management practices.13 Rangers break up savanna fuel loads with planned burns between April and July, reducing the risk of intense late-season wildfires that would otherwise release large amounts of methane (CH₄) and nitrous oxide (N₂O). To do this, they undertake extensive planning and consultation, protect important environmental, cultural and infrastructure assets in the landscape and apply planned low-intensity fire to the landscape. Burns are lit by aircraft, vehicles or on foot with matches and drip torches, in suitable weather conditions to protect people, wildlife and culturally significant sites.14 WALFA has generated over 2.5 million ACCUs, with more than 5.9 million tonnes CO₂-e abated across all ALFA projects.15 The impact extends beyond carbon. Income from the WALFA project is reinvested into community priorities including ranger employment, equipment, ecological monitoring and homeland schools.16 The WALFA project demonstrates that ACCU Scheme savanna fire management projects can reduce emissions, enhance biodiversity, reduce landscape threats, reinforce cultural land management rights and reinvest ACCU income into Aboriginal land management and community outcomes on Country.17 102 | Australia’s Net Zero Plan

13.4 First Nations peoples in the 13.5 Strong partnership approaches global transition underpin our transition With support from the Australian Government, First First Nations people are workers, small business owners Nations peoples across Australia are advocating for the and entrepreneurs who make a significant contribution role of Indigenous Peoples on the world stage. As part to Australia’s national economy and our international of the United Nations Framework Convention on Climate trade. Australia’s net zero transition creates new Change (UNFCCC), Australia is pushing for the rights economic opportunities. and interests of Indigenous peoples to be considered, and their leadership and participation in the transition to The Australian Government has established the First net zero to be enabled. Nations Economic Partnership to ensure a strong partnership approach to unlocking this potential. The Through these international dialogues, Australia and Economic Partnership is investing $75 million to help international partners are working to share best practice build Native Title Prescribed Bodies Corporate Holders’ around climate action and adaptation that enhances capacity to deliver meaningful participation for Native Indigenous engagement, and strengthen knowledge, Title holders and their communities, including through technology and practices that support the agency of partnership with the private sector on clean energy Indigenous and local climate action. projects. The Net Zero Economy Authority is also working with First Nations communities to leverage the benefits of the transition and has established a First Nations’ Working Partnership to guide its approach. These partnerships enable Australia to move beyond isolated transactions towards building lasting partnerships that create and share wealth, and ensure First Nations leadership. Australian Pavillion COP29 in Baku, Azerbaijan. Working together | 103 14. Working with communities Decarbonising Australia’s economy and realising the Key messages opportunities of the transition will not be possible without the insights, engagement and support of • Government will work with communities, Australian communities. including regions most affected by the transition, to ensure they benefit through job Research and practical experience consistently demonstrated that communities are looking for creation, productivity growth and support comprehensive, transparent information on the for local industries. transition and the tangible benefits for their local • Effective planning can provide opportunities communities - as well as effective management of for land managers to support carbon, local environmental and other concerns.18 biodiversity and productivity goals through Our regions are at the forefront of the net zero land-based abatement. transition, experiencing changes in production systems, job and market opportunities and the physical landscape. There are enormous opportunities for regions to be leading our clean economy, but there The Climate Change Authority advised: are also challenges that must be addressed to ensure ‘ Gaining and maintaining social licence no-one is left behind. Many communities are already actively engaging with the transition, while others through trust, legitimacy and credibility need support to build their capacity to engage in is a critical success factor for projects discussions around new developments and land use in necessary in Australia’s transition their local area. to net zero.’ The Australian Government is enhancing policies, Sector Pathways Review 2024, page 187 planning and practices to ensure the benefits of the transition are shared with communities and diverse needs are balanced. Albany, Western Australia, Australia. 104 | Australia’s Net Zero Plan

14.1 Leadership to deliver These are not easy challenges to grapple with. The government is working with communities to understand, community benefits and where feasible, mitigate their concerns. This is a shared responsibility with the private sector. Initiatives are The Climate Change Authority advised: underway including implementing the National Guidelines for Community Engagement and Benefits for Electricity ‘ Governments can assist by proactively Transmission Projects in partnership with states and leading and coordinating engagement territories. These guide project proponents’ engagement with communities to provide information, with communities to minimise adverse impacts and facilitating benefit sharing, receiving ensure local benefits match community priorities. This feedback and negotiating outcomes.’ complements the Australian Government’s commitment to ensuring fair and transparent community engagement Sector Pathways Review 2024, page 180 around renewable energy infrastructure (Box 14.1). The net zero transition will involve a shift to clean industrial operations across our regions, an expansion in electricity infrastructure, and opportunities to use land for multiple Box 14.1 The Australian Energy Infrastructure purposes to generate new streams of revenue. Consultation Commissioner for the Net Zero and sector plans highlighted that The Australian Energy Infrastructure Commissioner stakeholders want the government to play an enabling role (AEIC) leads efforts to promote community to help them realise these opportunities. engagement practices in the renewable energy transformation. The AEIC is responsible for: As part of the Future Made in Australia Act 2024, the government introduced the Community Benefit Principles • dispute resolution and engagement with to ensure that public investments deliver broad, tangible local communities, including First Nations benefits to Australians. The principles state that Future communities, about proposed or operating energy Made in Australia support should: projects • promote safe and secure jobs that are well paid and • providing transparent information about the have good conditions planning and operation of major energy projects and the renewable energy transition • develop more skilled and inclusive workforces, including by investing in training and skills development and • identifying and promoting best practices related broadening opportunities for workforce participation to the planning, development and operation of energy projects. • engage collaboratively with and achieve positive outcomes for local communities, such as First Nations In 2023, the former commissioner undertook an communities and communities directly affected by the independent Community Engagement Review to transition to net zero advise on improving community engagement on renewable energy infrastructure developments. • strengthen domestic industrial capabilities including The review made 9 recommendations, which were through stronger local supply chains accepted in full or in principle by the Energy and • demonstrate transparency and compliance in relation Climate Change Ministerial Council. to the management of tax affairs, including benefits received under Future Made in Australia. A Developer Rating Scheme is now underway as a pilot program. The Scheme will deliver an By setting the standard for how large-scale net zero independent, voluntary, scorecard-based assessment industries should support communities, the Australian of developers using objective measures. This will Government is leading the way in delivering a fair and provide landholders and communities with reliable orderly transition for communities. information about companies that propose new local energy infrastructure. The Australian Government is also taking action to ensure communities are appropriately engaged in renewable development as Australia decarbonises its electricity system. There are diverse views and attitudes across the country regarding the local dimension of the energy transition, including the location of new renewable electricity infrastructure. Working together | 105

14.2 Balancing land-based Capacity building, such as through the Australian Government’s Carbon Farming Outreach Program, is abatement with other land helping land managers to make informed choices (as management goals discussed in Chapter 9). Industry groups also play a role. For example, the Carbon Market Institute has introduced a code of conduct for promoting best practice integrity, The Climate Change Authority advised: transparency and accountability in the carbon market, ‘ Balancing competing land uses is including when engaging with First Nations communities.19 key to not only avoiding unintended More can be done to manage risks and unlock further consequences but also to earn social opportunities. The Australian Government is exploring ways licence. Stakeholders highlighted that it to support uptake of carbon storage activities, especially will be important that actions to increase where there are synergies with nature and productivity, land-based removal also achieve multiple including: benefits, like biodiversity, social and • working to encourage multiple benefits from ACCU cultural outcomes.’ Scheme projects including better recognition of co- benefits and fostering interoperability with the Nature Sector Pathways Review 2024, page 101 Repair Market Scaling up land-based abatement is a priority in Australia’s • using policy design to encourage activities which integrate carbon storage with food and fibre production, net zero transition (Chapter 6). rather than wholesale or large-scale land-conversion, Unlocking the benefits of land-based abatement requires particularly on highly productive agricultural land. This that we balance agricultural production, carbon storage and includes farm forestry and managing lands to increase biodiversity objectives, including the water needs for each. soil carbon Australia’s landscape already supports a diverse range • exploring options to strengthen data and analysis of land use to understand, track and manage changes and of activities. Governments, the private sector and impacts over time. communities play a role in finding the appropriate balance between different land uses in different places. However, decisions about how land is managed, which crops to grow, or which markets to access remain largely up to individual landowners. Darlington Point Solar Farm, NSW, Australia. 106 | Australia’s Net Zero Plan

14.3 Working with communities significantly affected by the transition The net zero transition will affect all Australians, but will have particular impact on Australia’s industrial regions. The Net Zero Economy Authority (NZEA) has been established to ensure regions, communities and workers are supported to manage the impacts, and share in the benefits, of the net zero economy. This includes: • helping workers in coal and gas facilities affected by the transition to prepare for and find new, well-paid, safe and secure jobs • supporting affected communities to prosper through economic development and investment • being a trusted and influential voice to build understanding of, and shape policy on, the regional net zero transition. Established in legislation, the NZEA is working closely with the regions that will be most affected by Australia’s transition to net zero, currently prioritising efforts in Collie (WA), Central Queensland, the Hunter Region (NSW) and the Latrobe (Vic), as well as supporting consideration of transformational opportunities in the Pilbara (WA) and Upper Spencer Gulf (SA). As these regions see coal-fired power stations close, the NZEA and the Department of Employment and Workplace Relations will support workers, communities and businesses to take the steps to transform their local economy. This will include supporting skills development, supply chain participation, and regional investment to create opportunities. Support for transitioning workforces including the Energy Industry Jobs Plan and Regional Workforce Transition Plans is discussed further in Chapter 11. The NZEA joins an existing network of regional officials and Australian Government-funded regional initiatives that are closely connected to their communities. Regional Workforce Transition Officers help business, industry, and communities, navigate and coordinate the transition to net zero in key employment regions. Regional Development Australia committee members and AusIndustry Regional Managers build on this network to provide valuable linkages between regional communities and the Australian Government. They inject local and regional views, concerns and interests from the community and industry in the policy process and program design. Working together | 107 References 1 Department of Finance, Net Zero in Government 11 Clean Energy Regulator (CER), Savanna fire management Operations Annual Progress Report, Government methods, Government of Australia, Canberra, July 2025; of Australia, Canberra, June 2025 Clean Energy Regulator (CER), ACCU project and contract register, Government of Australia, Canberra, September 2 Australian Council of Superannuation Investors, Promises, 2025 Pathways & Performance. Climate Change Disclosures in the ASX200, Melbourne, July 2024 12 Clean Energy Regulator (CER), ACCU project and contract register, Government of Australia, Canberra, September 3 United Nations Environment Program (UNEP), Members – 2025; Clean Energy Regulator (CER), West Arnhem Land United Nations Environment – Finance Initiative, Geneva, Fire Abatement (WALFA) Project, Government of Australia, Switzerland, September 2025 Canberra, September 2025 4 Clean Energy Council (CEC), Clean Energy Australia 2025 13 Arnhem Land Fire Abatement (ALFA), Arnhem Land report, CEC, Victoria, May 2025 Fire Abatement Annual Report 2023, ALFA, Casuarina, 5 World Meteorological Organization (WMO), Climate change Northern Territory, February 2023 transforms Pacific Islands, WMO, Geneva, Switzerland, 14 Pollination Foundation, Indigenous Carbon Credit Case August 2024 Studies, Sydney, October 2024 6 World Meteorological Organization (WMO), Climate change 15 Clean Energy Regulator (CER), West Arnhem Land Fire transforms Pacific Islands, WMO, Geneva, Switzerland, Abatement (WALFA) Project, Government of Australia, August 2024 Canberra, September 2025 7 Thornton F, et al, Multiple mobilities in Pacific Islands 16 Pollination Foundation, Indigenous Carbon Credit Case communities, Forced Migration Review, United Kingdom, Studies, Sydney, October 2024 June 2020 17 Pollination Foundation, Indigenous Carbon Credit Case 8 Department of Agriculture, Fisheries and Forestry (DAFF), Studies, Sydney, October 2024 Australia’s Indigenous land and forest estate (2024), Government of Australia, Canberra, October 2024 18 PoruschiL, et al, Australian attitudes toward the renewable energy transition – Part 1: General attitudes, Government 9 First Nations Clean Energy Network, First Nations of Australia, Canberra, April 2024; Department of the Prime peoples key to Australia’s clean energy revolution: The Minister and Cabinet, Government of Australia, Canberra, Conversation, First Nations Clean Energy Network, October 2023 Northern Territory, December 2025 19 Carbon Market Institute (CMI), Code of Conduct - Carbon 10 Clean Energy Regulator (CER), Nature Repair Market Market Institute, CMI, Melbourne, July 2021 scheme, Government of Australia, Canberra, August 2025 108 | Australia’s Net Zero Plan Table of boxes and figures BOX PAGE Box 1.1: The cascading impacts of intense storms in Broken Hill 18 Box 3.1: Uncertainty in emissions projections 31 Box 3.2: The Safeguard Mechanism and its role in national emissions reductions 33 Box 5.1 CSIRO modelling of sectoral pathways and 2035 targets for CCA 43 Box 5.2 Australia’s fuel and energy mix is expected to change over time 49 Box 5.3 Australia’s industrial transition 51 Box 9.1 The evolving role of the ACCU Scheme 78 Box 10.1 Managing national security risks through the transition 84 Box 10.2 Maintaining Australia’s competitive advantages through addressing risks of carbon leakage 86 Box 12.1 A net zero Australian Public Service by 2030 95 Box 12.2 Climate change in the Pacific 98 Box 13.1 Net Zero technology can improve energy access for remote communities 100 Box 13.2 Supporting First Nations led climate action and education 101 Box 13.3 Cool burns, big impact - savanna fire management in action 102 Box 14.1 The Australian Energy Infrastructure Commissioner 105 Darlington Point Solar Farm, NSW, Australia. Net Zero Report | 109 FIGURE PAGE Figure 1.1 Global emissions trajectories 19 Figure 1.2 International investment in energy 2015–2025 20 Figure 1.3 Set-do-review-refine framework 23 Figure 2.1 Key messages by stakeholder cohort 26 Figure 3.1 Australia’s emissions by sector, 2024 28 Figure 3.2 Percentage change in emissions by sector since June 2005 29 Figure 3.3 Emissions projections by sector, 2005 to 2030 30 Figure 3.4 Differences between emissions projections 10, 5, and 3 years in advance, compared to actuals for 2014-2024 31 Figure 3.5 Emission sources in 2024 covered by legally binding policy measures 32 Figure 4.1 Australia’s emissions reduction targets and progress 37 Figure 4.2 2035 target straight line trajectory and corresponding emissions budget 41 Figure 5.1 Projected emissions under Treasury Baseline Scenario, by Sector 44 Figure 5.2 Indicative abatement and composition by sector, Treasury Baseline Scenario, 2025 to 2030 45 Figure 5.3 Indicative abatement and composition by sector, Treasury Baseline Scenario, 2030 to 2035 46 Figure 5.4 Projected emissions reduction for industrial sectors, Treasury Baseline Scenario, 2025 to 2050 47 Figure 5.5 Indicative abatement and composition by sector, Treasury Baseline Scenario, 2035 to 2050 48 Figure 5.6 Australia’s energy supply mix, 2025 to 2050, DCCEEW analysis of Treasury Baseline Scenario 49 Figure 5.7 Australia’s emissions by fuel type, 2025 to 2050, DCCEEW analysis of Treasury Baseline Scenario 49 Figure 5.8 Estimated energy demand savings from energy efficiency, DCCEEW analysis of Treasury Baseline Scenario, 2025 to 2050 50 Figure 5.9 Projected residual emissions in 2050, Baseline Scenario 52 Figure 5.10 Emissions from domestic gas use by industry grouping, Treasury Baseline Scenario, 2025 to 2050. 53 Figure 6.1 Australia’s five priorities for net zero 56 Figure 6.2 Modelled benefits of electrification for a typical household, Baseline Scenario 59 Figure 6.3 ARENA’s collaboration across the innovation chain. 63 Figure 7.1 Emissions by greenhouse gas, 2005 to 2024 67 Figure 7.2 Share of methane emissions in Australia by sector, 2024 68 Figure 12.1 State and Territory Emissions Reductions Targets 94 110 | Australia’s Net Zero Plan Abbreviations and acronyms ACCU Australian Carbon Credit Unit ACTU Australian Council of Trade Unions AEIC Australian Energy Infrastructure Commissioner ARENA Australian Renewable Energy Agency CBAM Carbon Border Adjustment Mechanism CCA Climate Change Authority CCS Carbon Capture and Storage CCU Carbon capture and use CEFC Clean Energy Finance Corporation CER Consumer energy resources CIS Capacity Investment Scheme CO2 Carbon dioxide CO2-e Carbon dioxide equivalent CRC Cooperative Research Centre CSIRO Commonwealth Scientific and Industrial Research Organisation DCCEEW Department of Climate Change, Energy, the Environment and Water ECMC Energy and Climate Change Ministerial Council EFA Export Finance Australia EMM Environment Ministers’ Meeting ESG Environmental, social and governance EV Electric vehicle FAST-P Singapore’s Financing Asia’s Transition Partnership FGS Future Gas Strategy FNCES First Nations Clean Energy Strategy GDP Gross Domestic Product GO Scheme Guarantee of Origin Scheme GWP Global warming potential HFCs Hydrofluorocarbons IEA International Energy Agency IMF International Monetary Fund ISP Integrated System Plan ITMM Infrastructure and Transport Ministers’ Meeting JSA Jobs and Skills Australia LCLF Low carbon liquid fuel Mt CO2e Million tonnes of carbon dioxide equivalent NABERS National Australian Built Environment Rating System NAP National Adaptation Plan NCRA National Climate Risk Assessment NDC Nationally Determined Contribution NEM National Electricity Market NEVS National Electric Vehicle Strategy NGERS National Greenhouse and Energy Reporting Scheme NGOs Non-Government Organisations NRF National Reconstruction Fund NTEP National Energy Transformation Partnership NVES New Vehicle Efficiency Standard NZEA Net Zero Economy Authority PCIFP Pacific Climate Infrastructure Financing Partnership PM&C Department of the Prime Minister and Cabinet PV Photovoltaic (solar) R&D Research and development RD&D Research, development and deployment RETA Renewable Energy Transformation Agreement SAF Sustainable aviation fuel SFR Sustainable Finance Roadmap SWIS South West Interconnected System UNFCCC United Nations Framework Convention on Climate Change WALFA West Arnhem Land Fire Abatement 112 | Australia’s Net Zero Plan Glossary Abatement A reduction in atmospheric greenhouse gases through emissions avoidance or removal and sequestration of carbon from the atmosphere. ACCU project Eligible offsets projects registered under the ACCU Scheme. ACCU Scheme An Australian Government scheme that offers landholders, communities and businesses the opportunity to run projects in Australia that avoid the release of greenhouse gas emissions or remove and sequester carbon from the atmosphere. It is enacted through the Carbon Credits (Carbon Farming Initiative) Act 2011 and the Carbon Credits (Carbon Farming Initiative) Rule 2015. Active transport Ways of travelling including walking, cycling and other physically active modes of transport that can be undertaken alone or combined with public transport. Climate adaptation In human systems, the process of adjustment to actual or expected climate and its effects, to moderate harm or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate and its effects; human intervention may facilitate adjustment to expected climate and its effects. Carbon border adjustment A mechanism that seeks to equalise the carbon compliance costs facing domestic and overseas mechanism production by imposing an adjustment at the border. Carbon capture and A process in which carbon dioxide from industrial or energy related sources is separated (captured), storage (CCS) conditioned, compressed and transported to a (usually geological) storage location for long-term isolation from the atmosphere. Carbon capture and use A process in which carbon dioxide is captured and the carbon used in a product. The climate effect of (CCU) CCU depends on the product lifetime, the product it displaces, and the carbon dioxide source (fossil, biomass or atmosphere). Carbon credit A tradeable unit that represents 1 tonne of carbon dioxide equivalent (t CO2e) stored or avoided by a project. Carbon leakage Carbon leakage refers to shifts in the production of emissions-intensive trade-exposed commodities from countries with more ambitious emissions reduction policies to those with weaker (or no) emissions reduction policies, due only to differences in policy stringency across countries. Carbon offset A type of carbon credit that represents a reduction in emissions – whether prevented from entering the atmosphere or removed from the atmosphere – that is used to compensate for emissions that occur elsewhere. Circular economy An economic system focused on reducing waste, reusing resources and designing products for longer life, recyclability and minimal environmental impacts. Critical minerals Critical minerals are metallic or nonmetallic materials that are essential to our modern technologies, economies, and national security, and whose supply chains are vulnerable to disruption. Decarbonise To stop or reduce carbon gases, especially carbon dioxide, being released into the atmosphere as the result of a process, like the burning of fossil fuels. Demonstrated Technologies that are available but not yet widely adopted. technologies Early-stage technologies Technologies that are still in the research, development and demonstration stage or are not yet ready to be deployed. Electrification Switching from energy sources, such as liquid fuels or gas, to electricity. Embodied emissions Emissions generated during the production and transportation of goods, from the extraction of raw materials to the manufacturing process and final delivery to the consumer. For infrastructure, embodied emissions come from the emissions embodied in the input materials, as well as the emissions generated during the construction and installation processes. Emissions budget A cumulative amount of emissions that can be emitted, e.g. 4,000 Mt CO2e during a specified time period, e.g. 2021–2030. Energy efficiency The amount of energy required to perform given task or produce a given result. Increasing energy efficiency means using less energy for the same result. Energy performance Covers the broad management of energy demand, including energy efficiency; demand flexibility (or load shifting); and electrification or fuel switching. Net Zero Report | 113 Enteric fermentation The process in animals by which gases, including methane, are produced as a by-product of microbial fermentation associated with digestion of feed. Firming/firmed renewables Ensuring reliability of electricity supply by supplementing variable renewable energy with dispatchable generation sources such as energy storage (i.e. batteries). Fossil fuels Fossil fuels include coal, petroleum, natural gas, oil shales, bitumens, tar sands, and heavy oils. All contain carbon and were formed as a result of geologic processes acting on the remains of organic matter produced by photosynthesis, a process that began in the Archean Eon (4.0 billion to 2.5 billion years ago). Green metal Iron, steel, alumina and aluminium produced with low or zero greenhouse gas emissions. Greenhouse gases Any gas (natural or produced by human activities) that absorbs infrared radiation in the atmosphere, leading to warming effects. Greenhouse gases include carbon dioxide, methane and nitrous oxide. Hard-to-abate emissions Emissions from essential processes and products with no near-term decarbonisation options. Hydrofluorocarbons A type of synthetic greenhouse gas, mostly used in refrigeration and air-conditioning equipment. (HFCs) Hydrogen A substance commonly used in industrial applications, such as the production of methanol and ammonia, and can also be used as a fuel. It is traditionally produced by stripping hydrogen from natural gas using steam, which produces carbon dioxide as a by-product. Low-carbon or renewable hydrogen can be produced from water using renewable energy. Low and zero emissions Technologies that significantly reduce greenhouse gas emissions compared to traditional alternatives, technologies and mitigate other environmental impacts. Low carbon liquid fuel Liquid fuels with lower lifecycle emissions than conventional fossil fuels. LCLFs can be sustainably (LCLF) produced from biomass, waste materials and/or green hydrogen. Mature technologies Technologies that are ready and available to be deployed now. Microgrid A set of distributed energy resources (see above) that provides energy generation and storage at a local level and can be controlled independently, either within a wider grid or as a standalone grid. Mitigation Reducing greenhouse gas emissions in order to stop climate change getting worse. Mt CO2e Million tonnes of carbon dioxide equivalent. Is used to standardise different greenhouse gas emissions impacts on climate change to be reported as a single value. Usually shown in tonnes (t CO2-e) or million tonnes (Mt CO2-e). Net emissions The sum of anthropogenic greenhouse gas emissions to the atmosphere and anthropogenic removals of greenhouse gases from the atmosphere. Net negative emissions Metric-weighted anthropogenic carbon removals in excess of metric-weighted anthropogenic greenhouse gas emissions. Net zero emissions An overall balance between greenhouse gas emissions and removals. (carbon neutrality) Prospective technologies Emerging technologies or operational changes which are at an early stage of development. Renewable energy Energy from a source that is not depleted when used, such as wind or solar power. Renewable fuels Fuels made from biogenic and/or synthetic feedstocks (source materials), also referred to as ‘sustainable fuels’ and ‘low carbon liquid fuels’. Residual emissions The volume of gross anthropogenic greenhouse gas emissions (see Gross emissions) that remain after emissions reduction activities, but not including emissions removal. Also referred to as residual gross emissions. 114 | Australia’s Net Zero Plan Appendix A: Sector plan snapshots Electricity & Energy Sector Plan Pathway to Net Zero Sector Overview Emissions decline as our energy system becomes more efficient, more Actions electrified and transitions to clean energy supply Covers the generation of electricity, manufacture of petroleum 400 1. Accelerate energy performance improvements products, the supply of gas, and other related services • National Energy Performance Strategy • Directly accounted for around 1% of GDP in 2023, and underpins 350 • Household Energy Upgrades Fund and Social Housing and other sectors Energy Performance Initiative 300 • $50 million to support energy upgrades for community sports clubs • 34% of national emissions in 2024 116 | Australia’s Net Zero Plan 250 • Expand and reform existing rating and disclosure mechanisms • Emissions peaked in 2009 and are now 22% below 2005 levels, such as Greenhouse Energy Minimum Standards, the with renewables displacing coal 200 Commercial Building Disclosure Program, and the Nationwide • Renewables have grown from 13% to 40% of generation in our House Energy Rating Scheme 150 • Establish a Demand-side Statement of Opportunities two largest grids over the past 10 years Emissions (Mt CO2-e) • $40 million to accelerate the rollout of kerbside and fast electric 100 vehicle charging 50 2. Expand and decarbonise electricity supply Abatement opportunities • Snowy Hydro 2.0 0 2025 2030 2035 2050 • Clean Energy Finance Corporation Improve energy performance • Capacity Investment Scheme Electricity Liquid fuels Gas Coal • Consumer Energy Resources Roadmap through electrification, boosting energy efficiency and increasing demand flexibility • Cheaper Home Batteries program Figure: Electricity & energy sector emissions • Grid Enhancing Technologies program, Accelerating Connections Source: DDCCEEW and Treasury modelling and analysis 2025, Baseline Scenario. Fund, Enhancing Capacity of Existing Network Infrastructure Decarbonise and expand electricity network Pathways are illustrative only. through investment in firmed renewables and • Rewiring the Nation incentivising consumer energy resources • National Electricity Market Review Key challenges 3. Develop renewable gases while maintaining supply security Renewable gases • Safeguard Mechanism, including review in 2026-27 such as biomethane and hydrogen • Gas Market Review • Delivering better network utilisation and clearer market investment signals • Guarantee of Origin scheme • National Hydrogen Strategy, production supports and H2Global • Timely deployment of infrastructure through smooth planning Low carbon liquid fuels and approvals processes and connection processes 4. Decarbonise liquid fuels while maintaining supply security like Sustainable Aviation Fuel and renewable diesel • Safeguard Mechanism, including review in 2026-27 • Building social licence, and ensuring greater regional benefits • Future Made in Australia Innovation Fund • Reducing cost and increasing availability of LCLF and • $1.1 billion Cleaner Fuels Program renewable gases Phases of the transition To 2030 To 2035 To 2050 • Renewable electricity generation increases to 82% on-grid • Economy-wide energy efficiency improvements support growing demand • The energy system is high performance: efficient, flexible and • Rooftop solar and battery uptake expands, cutting bills and • Demand flexibility is embedded as electrification of homes, businesses, optimised to deliver reliable and secure renewable energy emissions low-heat industrial use and light vehicles continues • Electricity demand grows significantly as new industries scale • Electric vehicle uptake drives declines in overall liquid fuel • Firmed renewables meet all our electricity needs • Orderly coal exit as firmed renewable electricity supply grows demand • Renewable gas supply scales up and begins to displace natural gas use • Natural gas increasingly replaced by renewable gases • Renewable gas substitutes for some natural gas uses • Foundations of hydrogen and LCLF markets established that can’t be electrified • LCLF comprises a significant proportion of remaining liquid fuel use and Australia is an advanced producer and exporter • Growing LCLF production supports a lower-emissions fuel mix Agriculture and Land Sector Plan Pathway to Net Zero Sector Overview 100 Actions 100 90 Covers emissions and carbon storage from agricultural activities, land 90 80 1. Understand emissions at the enterprise and national level management and on-farm energy use 80 • Voluntary emissions estimation and reporting standards, and 70 • Agriculture accounted for 2.4% of value-added GDP, 10.8% of exports, incorporating standards into emissions calculators 70 60 and 5.9% of rural employment in 2024 • Improving National Greenhouse Accounts to better reflect 60 50 regional differences and mitigation actions • Agriculture was 19.6% of national emissions and the land sector was 50 40 2. Support innovation to deliver commercially viable a net sink equivalent to -16.5% of national emissions in 2024 abatement options Emissions 40 30 • Agricultural emissions are dominated by methane from ruminant Emissions (Mt CO CO2-e) 30 • Zero Net Emissions Agriculture Cooperative Research Centre livestock and manure management, and nitrous oxide from 20 (Mt2-e) agricultural soils • Methane Emissions Reduction in Livestock program 20 10 • Investment in Rural Research and Development Corporations • Land sector has changed from a major net source of emissions to a 10 0 large net sink. Agriculture emissions have been broadly stable 3. Strengthen on-ground action 2025 2030 2035 2040 2045 2050 0 • New $1 billion investment in the Regional Investment Corporation 2025 2030 2035 2040 2045 2050 Non-Energy Emissions Energy Emissions • Carbon Farming Outreach Program Abatement opportunities Non-Energy Figure 1: Agriculture sector Emissions emissions Energy Emissions • Natural Heritage Trust Climate-Smart Agriculture Program • Clean Energy Finance Corporation 180 4. Enhance the role of land in a net zero economy Enteric fermentation 160 180 140 • Australian Carbon Credit Unit Scheme e.g. herd and pasture management, feed additives 160 120 • Nature Repair Market 140 100 • Support Plantation Establishment Program 120 Manure management 80 • Australian Bushland Program 100 e.g. covered anaerobic ponds, anaerobic digesters 60 • $1.1 billion Cleaner Fuels Program 80 40 Net sequestration 60 Net sequestration (Mt CO Agricultural soils 20 40 CO2-e) e.g. precision agriculture, enhanced efficiency fertilisers, 0 (Mt2-e) 20 Key challenges fertiliser use efficiency 2025 2030 2035 2040 2045 2050 0 2025 2030 2035 2040 2045 2050 On-farm energy use Existing land sector Forest regeneration and blue carbon • Diverse industry, with varying capacity to engage in decarbonisation e.g. renewables, electrification, energy performance Reforestation Existing Soil carbon land sector Savanna fire Forest regeneration management and blue carbon • Uplift and use of greenhouse gas accounting systems to support improvements, low carbon liquid fuels understanding of emissions Reforestation Soil carbon Savanna fire management • Lack of commercially viable abatement options for use in Protect and enhance carbon stores in agriculture Figure 2: Land sector net carbon removals vegetation and soils Source: Baseline Scenario, Treasury modelling and analysis 2025. • Balancing land use for agricultural production, carbon storage, e.g. environmental plantings and farm forestry feedstocks and nature repair Appendix A | 117 Pathways are illustrative only. Phases of the transition To 2030 To 2035 To 2050 • Agriculture and land emissions and sequestration • Emissions intensity of agriculture declining through • Technologies for agriculture emissions reductions are commercially viable and taken up at scale largely stable herd and pasture management, more efficient use • Market signals, including demand for low-emissions intensity products and financial returns for carbon • Investments in technology solutions to reduce of inputs such as fertiliser, and energy performance storage and nature repair, are stimulating on-ground action emissions longer-term improvements • The transition is benefitting local communities, supporting First Nations participation, increasing • Investments in systems, knowledge and capacity • Reforestation practices are increasing with incentives agricultural productivity, protecting and enhancing our biodiversity and contributing to food security to support on-ground action, with incremental supporting wider uptake • Agriculture and land are appropriately contributing to Australia’s net zero goal electrification underway Built Environment Sector Plan Pathway to Net Zero Sector Overview 16 Actions 14 Covers residential, commercial and public buildings, urban open 1. Accelerate electrification and increase energy performance spaces and water infrastructure 12 • National Energy Performance Strategy, including $1 billion • Australia has more than 11 million residential and 1 million Household Energy Upgrades Fund and $800M Social Housing 10 commercial and public buildings Energy Performance Initiative • Construction subsector within the built environment accounted for 8 • Cheaper Home Batteries Program 118 | Australia’s Net Zero Plan around 7% of GDP in 2023 6 • Modernise the Greenhouse Energy Minimum Standards • 5% of national emissions in 2024 • Expand the National Australian Built Environment Rating System Emissions (Mt CO2-e) • Indirectly, accounts for almost half of emissions from electricity 4 for non-residential buildings generation, and further emissions embodied in building materials 2 • Expand the Commercial Building Disclosure Program • Since 2005, direct emissions have risen by 30% resulting from increase in the number of buildings, specifically apartments • Expand the Nationwide House Energy Rating Scheme (NatHERS) 0 • Home energy ratings have risen to an average of 6.8 stars in 2025 to cover existing homes 2025 2030 2035 2040 2045 2050 from 1.8 stars in 2003 • $50 million to support energy upgrades at community sports Residential Buildings Commercial Buildings clubs Built Environment sector emissions • Clean Energy Finance Corporation Source: Baseline Scenario, Treasury modelling and analysis 2025. Pathways are illustrative only. Abatement opportunities 2. Continued collaboration with jurisdictions through Ministerial Councils for greater national consistency Key challenges in building regulations and policies Electrification of buildings • Implement the Trajectory for Low Energy Buildings • Retrofitting existing buildings due to upfront costs, or complexity • Implement Consumer Energy Resources Roadmap for commercial, multi-use or multi-unit buildings • Overcoming split incentives: where property owners incur the costs of upgrades, but may be reluctant to invest as energy 3. Innovation and deployment of technology to support Improving energy performance savings bill benefits flow to tenants material efficiency and low carbon options for concrete, through energy efficiency and demand flexibility • Ensuring equity for households facing additional barriers, for cement and steel example low-income households face compounding issues as • ARENA, including Future Made In Australia Innovation Fund households with lower capital and more likely to rent Improve building designs, • Regulations for buildings are shared across all levels of • Low Carbon Concrete Centre material efficiency and embodied carbon government, creating complexity in achieving national within building materials consistency and potential for overlapping regulation Phases of the transition To 2030 To 2035 To 2050 • Household and business energy efficiency upgrades and • Households and business continue electrification and energy performance • All users that can, have electrified electrification are underway retrofits • HFC phase down completed in 2036 • Strong uptake of household batteries and solar • Improved standards for new buildings • Embodied carbon in construction and renovation is minimised • Frameworks to reduce embodied carbon established • Appliance and equipment efficiency continuing to improve through • Investment in research and development to support modern standards and as new technology comes online methods of construction • Phase down of high global warming potential refrigerants • Introduce embodied carbon requirements for most buildings (HFCs) in air conditioning and refrigeration Industry Sector Plan Pathway to Net Zero Sector Overview 70 Actions 60 Covers manufacturing and processing of goods, refining and waste 1. Improve energy use now to reduce costs 50 processes across 9 sub-sectors • $5 billion support through National Reconstruction Fund • Accounts for the equivalent of 7.7% of GDP (2024), with 120,000 40 • Energy Efficiency Grants for Small and Medium Sized Enterprises businesses generating $205.8 billion in gross value added 30 • National Energy Performance Strategy • 14% of national emissions in 2024 Emissions (Mt CO2-e) • Safeguard Mechanism, including review in 2026-27 • The Safeguard Mechanism covers approximately 56% of industrial 20 scope 1 emissions 10 2. Electrify processes where possible • Safeguard Mechanism, including review in 2026-27 0 • Clean Energy Finance Corporation Abatement opportunities 2025 2030 2035 2040 2045 2050 • Australian Renewable Energy Agency, including $40 million Manufacturing Chemicals & plastics Cement & concrete National Industrial Transformation Program and $400 million Iron & steel Other metals refining & smelting Alumina & Aluminium Industrial Transformation Stream Improve energy performance Waste & resource recovery • Powering the Regions Fund through energy efficiency and demand flexibility Industry sector emissions Alumina & aluminium manufacturing 3. Switch to alternative fuels and inputs • Safeguard Mechanism, including review in 2026-27 Electrify uses and processes where possible Waste & resource recovery • National Hydrogen Strategy, Hydrogen Production Tax Incentive, Iron & steel manufacturing Hydrogen Headstart Switch to alternative fuels and inputs where Chemicals & plastics manufacturing • $1.1 billion Cleaner Fuels Program electrification not feasible • Australian Renewable Energy Agency e.g hydrogen, low carbon liquid fuels Cement & concrete production Food & beverages manufacturing 4. Invest in technology opportunities to support the transition • $1.5 billion Future Made in Australia innovation fund Manufacturing & additional industries Key challenges • National Reconstruction Fund including a new $5 billion Pulp, paper & paperboard manufacturing Net Zero Fund • Scaling supply of firmed renewable energy and low carbon fuels Other metals refining & smelting • $1 billion Green iron investment fund and incentivising electrification • $2 billion Green aluminium production credit • Development of commercially viable options for industrial 0 2 4 6 8 10 12 14 16 18 processes requiring high-temperature heat or natural gas • $1 billion Solar Sunshot as a feedstock Emissions (Mt CO2-e) • $500 million Battery Breakthrough Initiative, delivered by ARENA • Maintaining the competitiveness of industrial facilities through Industry sector emissions sources 2024 the transition Source: Baseline Scenario, Treasury modelling and analysis 2025. Pathways are illustrative only. Appendix A | 119 Phases of the transition To 2030 To 2035 To 2050 • Commercially available abatement technologies taken up, • Heavy industry gradually deploying technologies such as electric boilers, • Growth of new industry opportunities in green metals, green chemicals, including electrification of low temperature heat processes high temperature heat pumps and mechanical vapour recompression as they clean energy manufacturing and other areas of comparative advantage • Foundations of hydrogen market established become commercially available • Deployment of carbon management technologies, and any • Expand and decarbonise electricity supply (See energy and • Sub-sectors such as iron and steel, alumina and aluminium begin fuel breakthrough technologies like flash ironmaking, molten oxide electricity sector plan) switching and using alternative feedstocks such as hydrogen as they electrolysis or hydrogen plasma smelting become available Resources Sector Plan Pathway to Net Zero Sector Overview 100 Actions Covers exploration and production of minerals, oil and gas, 1. Reduce fuel combustion emissions and coal resources. Also covers mine closure, decommissioning • Safeguard Mechanism, with review in 2026-27 and rehabilitation • Future Made in Australia Innovation Fund • Contributed 11.4% of Australia’s GDP in 2024 and two thirds 80 • Powering the Regions Fund of Australia’s total merchandise exports in 2025 • Clean Energy Finance Corporation 120 | Australia’s Net Zero Plan • Contributes a significant proportion of global exports • $1.1 billion Cleaner Fuels Program of LNG (20% in 2024) and metallurgical and thermal coal (46% and 19% in 2023) 2. Reduce fugitive emissions • 22% of national emissions in 2024, mostly from gas and coal 60 • Safeguard Mechanism, with review in 2026-27 production • Future Gas Strategy, including offshore venting and flaring • Sector emissions saw a continual increase from 2005 through • Powering the Regions Fund to 2020, but are now declining • Enhanced measurement, including expert panel • The Safeguard Mechanism covers 87% of the sector’s emissions • Working with states on regulatory frameworks 40 Emissions (Mt CO2-e) 3. Scale up carbon management technologies • Safeguard Mechanism, with review in 2026-27 Abatement opportunities • National Reconstruction Fund • Resourcing Australia’s Prosperity Reducing fuel combustion emissions 20 through electrification and low-carbon fuels e.g. LCLF and hydrogen Key challenges Reducing fugitive emissions 0 through ventilation air methane (VAM) abatement, • Barriers to retrofitting abatement technologies 2025 2030 2035 2040 2045 2050 to existing facilities, including cost, commercial, leak detection and repair, pre-drainage of coal methane and reduced routine venting and flaring environmental and infrastructure Coal Oil Gas LNG Iron Ore Mining Other Mining Critical Minerals Mining Critical Minerals Processing Electricity Generation • Development of commercially viable low-carbon fuels, alongside deployment of firmed renewable energy Scaling up carbon management technologies • Maintaining Australia’s role as a reliable trading partner e.g. carbon capture and storage (CCS) Figure 1: Projected emissions in the resources sector to 2050 for minerals, metals and energy through the global transition Source: Baseline Scenario, Treasury modelling and analysis 2025. Pathways are illustrative only. Phases of the transition To 2030 To 2035 To 2050 • Reduced routine venting and flaring from oil and gas facilities • Increased electrification and energy performance across the sector • Widespread use of VAM abatement and pre-drainage technologies • New resources facilities designed for electric power and improved • Deployment of heavy electric vehicles and equipment, with in coal mines energy efficiency, where technically and commercially feasible greater penetration of low carbon liquid fuels and renewable energy • Increased use of low-carbon fuels • Demonstration and commercialisation of electrified haulage and in remote regions • Use of CCS continues to grow equipment • Greater use of methane pre-drainage in coal mines • Demonstration of VAM abatement technology in Australian coal mines • Scale-up of VAM abatement technology in coal mines • Expansion of CCS • Use of CCS continues to grow Transport Sector Plan Pathway to Net Zero Sector Overview Actions 70 Covers light and heavy road transport, rail, maritime, aviation and the 1. Invest in enabling low and zero emissions infrastructure 60 construction of transport infrastructure • Infrastructure Policy Statement & Infrastructure • Accounts for 4.6% of Australia’s GDP (transport, postal and Investment Program 50 warehousing industry, 2024) and underpins many other sectors • $100 million Active Transport Fund, High-Speed and Inland Rail • 22% of national emissions in 2024 • National Freight and Supply Chain Strategy 40 • After steady growth since 2005, emissions dipped in 2020-2022 2. Electrify and increase energy performance with COVID restrictions but are now 21% above 2005 levels 30 • New Vehicle Efficiency Standard including 2026 review • Electric vehicle uptake is accelerating, growing from 0.8% of • National EV Strategy Emissions (Mt CO2-e) new light vehicle sales in 2020 to 10% in 2025 20 • Safeguard Mechanism including 2026-27 review • $40 million to accelerate the rollout of kerbside and fast electric vehicle charging 10 Abatement opportunities • Electric Car Discount • Maritime Emissions Reduction National Action Plan 0 Electrification of light vehicles 2025 2030 2035 2040 2045 2050 3. Switch to low carbon alternatives and improved energy efficiency • $1.1 billion Cheaper Fuels Program Private Transport Commercial Transport • Guarantee of Origin & Fuel Quality Standards Electrification of heavy vehicles • National Hydrogen Strategy and production supports Low carbon liquid fuels (LCLF) or hydrogen where Figure: Transport sector emissions • Sustainable Aviation Fuel (SAF) Funding Initiative battery electric is not feasible Source: Baseline Scenario, Treasury modelling and analysis 2025. • Australian Jet Zero Council Pathways are illustrative only. Track electrification, battery electric 4. Innovate to expand cost competitive technology options • $250 million Future Made in Australia Innovation Fund for LCLF LCLF or hydrogen where battery electric is not feasible Key challenges • $475 million Driving the Nation Fund • $500 million Powering Australia Technology Fund Hydrogen derived fuels (e.g. methanol or ammonia), hydrogen and LCLFs • Accelerating rollout of EV charging infrastructure 5. Scale up efforts to reduce embodied emissions • National Carbon Values for use in cost benefit analyses • Solutions for longer range heavy vehicles, maritime and aviation • National Sustainable Procurement in Infrastructure Guideline not yet commercially viable LCLF (Sustainable aviation fuel) • $21 million for Low Carbon Concrete Centre Electrification or hydrogen for short haul • Reducing cost and increasing availability of LCLF and hydrogen • Future Made in Australia green metal investments Appendix A | 121 Phases of the transition To 2030 To 2035 To 2050 • EVs become increasingly more affordable • EV market and charging infrastructure matures; significant proportion of • EVs, battery and hydrogen technologies widespread – including in rail • On-going investment in charging infrastructure light vehicles are EVs and shipping • Electrification of buses and small trucks • Bi-directional charging and vehicle to grid capabilities scale up • Bidirectional charging widespread, supporting grid capacity and • Trials for battery electric rail, short range maritime and aviation stability • Battery electric and hydrogen-fuel cells begin to be deployed for rail, short • Foundations of hydrogen and LCLF (including sustainable range ships and flights • LCLF comprises a significant proportion of remaining liquid fuel use aviation fuel) markets established and Australia is an advanced producer and exporter • Continued investment in active and public transport • LCLF and hydrogen market grows, supported by certification and accounting frameworks • Low emission ports and airports operational infrastructure • National rail charging and refuelling network and intermodal hubs 122 | Australia’s Net Zero Plan Department of Climate Change, Energy, the Environment and Water A GPO Box 3090 Canberra ACT 2601 P 1800 920 528 dcceew.gov.au Net Zero Report | 123