Australian Federal Budget 2024-25: Insights into climate resilience and net zero transition

To achieve net zero emissions, significant actions are required to produce renewable energy and sustainable fuels while reducing emissions in sectors such as heavy industry, buildings, and agriculture. Australia's abundant renewable energy resources offer a unique opportunity to reposition its economy for future prosperity and support global decarbonisation. Rapid progress necessitates investments in secure and resilient net zero supply chains and a skilled workforce.

The Government is investing in net zero enabling industries to prepare the economy for this transformation. This includes ensuring a resilient clean energy manufacturing supply chain and expanding access to critical minerals. Investments in workforce preparation for clean industries will provide Australia with a lasting competitive edge both domestically and globally.

The focus on these industries reflects the reality that Australia's exports will increasingly consist of low-carbon products, with over 97 percent of its trading partners setting net zero targets. Australia’s competitive advantage lies in products that incorporate renewable energy, owing to the low cost and growing abundance of renewable electricity. This positions Australia to support major trading partners in reducing their emissions, making the country an essential component of global net zero supply chains.

Overview of Net zero spending and definition

The Government acknowledges the need to identify, disclose, and track net zero spending to improve Australia's climate response and align with international efforts. Comprehensive accounting for net zero spending is challenging due to its cross-portfolio nature, including sectors like energy and health.

The Australia Government has currently redefined it’s definition of net zero spending and currently investing in the net zero transformation through five key avenues:

1. Reducing Emissions: Initiatives aimed at lowering emissions within Australia's energy system and the broader economy.
2. Strengthening Net Zero Industries and Skills: Fostering the development of industries and skills needed for a net zero future.
3. Adapting to Climate Change: Enhancing climate and disaster resilience to help Australia manage the physical impacts of climate change.
4. International Climate Leadership: Funding to support Australia's engagement in international climate forums and with other jurisdictions.
5. Building Government Climate Capability: Enhancing the Government's capabilities to effectively deliver on climate objectives and enabling a national approach to climate change.

These categories offer a straightforward framework for understanding how each measure contributes to net zero action. As Australia's approach to net zero budget transparency evolves, these categories are expected to adapt. Policies may serve multiple net zero or non-net zero goals; spending is classified based on its primary purpose. Policies that indirectly contribute to net zero objectives are not included in the current framework.

Example of indirect benefit spending

Health system funding supports responses to the health effects of climate change, such as more extreme heat days. It also supports services for existing health conditions. There are different ways the spending could be classified, the whole amount, none, or a proportion could be classified as net zero spending.In this Budget, spending with only an indirect contribution to net zero action isexcluded. If there is a specific program in health related to climate impacts, thatwould be counted (for example the 2022–23 October Budget measure: NationalHealth and Climate Strategy. See healthcare section).

Grants Programs

The 2024-25 Federal Budget introduces several grants programs aimed at incentivising the shift to low-emissions energy production. Suppliers that are working on low-emissions technologies and solutions will be able to access funding to commercialise and continue R&D.

In addition, a big focus has been places on drought resilience. This is a significant outcome as it emphasis the already changing climate we are experiencing in Australia

Future Drought Fund Initiatives

Existing allocations under the Future Drought Fund are now specifically directed towards agricultural sector initiatives, including:

• Drought Resilience Adoption and Innovation Hubs: $132 million over eight years to continue supporting these hubs.
• Long Term Trials Program: $60.3 million to test farming practices that enhance drought and climate resilience.
• Scaling Success Program: $37 million to expand projects previously funded by the Future Drought Fund that have shown strong results.
• Future Drought Fund Communities Program: $36 million to support social resilience in the face of drought.
• Innovation Challenges Pilot: $20 million to accelerate research and innovation addressing drought-related challenges.

Winners

Green energy supply chain companies, such asproducers of hydrogen, battery technologies, greenmetals and critical battery minerals.

SMEs

The 2024-25 Federal Budget introduces several measures aimed at supporting small and medium-sized enterprises (SMEs) in their financial and operational activities. Among these initiatives are a $325 electricity bill rebate and an enhanced instant asset write-off program. These measures are designed not only to provide immediate financial relief but also to encourage investments that can drive growth and sustainability within the SME sector.

$325 Electricity Bill Deduction

Approximately one million eligible SMEs will receive a $325 rebate on their electricity bills during the 2024-25 financial year. This rebate will be applied as a quarterly reduction throughout the year, offering significant cost savings and easing the financial burden on businesses.

Instant Asset Write-Off

Key points of the instant asset write-off program:

• The threshold for the instant asset write-off has been temporarily increased to $20,000.
• This applies to SMEs with an aggregated annual turnover of less than $10 million.
• Eligible assets must be first used, or installed and ready for use, between 1 July 2024 and 30 June 2025.
• The write-off applies on a per asset basis.
• Assets valued at $20,000 or more, which cannot be immediately deducted, may continue to be placed into the small business simplified depreciation pool and depreciated according to the small business capital allowance rules.
• Provisions preventing SMEs that have opted out of simplified depreciation measures from using the instant asset write-off will continue to be suspended until 30 June 2025.

The instant asset-write off rules allow SMEs to immediately deduct the cost of depreciating assets. Typically, SMEs with turnover up to $10 million can write off assets costing up to $1,000 immediately.

Still on the fence for larger SMEs

A measure currently stalled in Parliament proposes that for the year ending 30 June 2024, SMEs with turnover up to $50 million will be eligible to write off assets costing up to $30,000. However, due to a lack of enacted legislation supporting these claims, there is ongoing uncertainty.

Supporting Sustainability Initiatives for SMEs

The enhanced instant asset write-off program can significantly support sustainability initiatives for SMEs. By increasing the threshold to $20,000, businesses are incentivised to invest in energy-efficient equipment, renewable energy systems, and green technologies. These investments not only reduce operational costs through lower energy consumption but also contribute to environmental sustainability. Additionally, access to immediate deductions can improve cash flow, enabling SMEs to reinvest savings into further sustainable practices and innovations, fostering a more resilient and eco-friendly business landscape.

Example for professional services SME.

BrightConsult Pty Ltd is a professional consulting firm with an aggregated turnover of less than $10 million. In November 2024, BrightConsult Pty Ltd decides to invest in the following:

• Energy-Efficient LED Lighting System - $15,000
• High-Performance Laptops for Staff - $18,000
• Electric Vehicle for Client Visits - $50,000

When BrightConsult Pty Ltd completes its income tax return for the 2024-25 financial year, it can claim the following deductions based on the measures announced in the Budget:

• Outright deduction – Energy-Efficient LED Lighting System - $15,000
• Outright deduction – High-Performance Laptops for Staff - $18,000
• Electric Vehicle for Client Visits - Subject to the car limit and the pooling rules under small business capital allowance rules (depending on the business use of the vehicle).

By leveraging these deductions, BrightConsult Pty Ltd benefits from immediate financial relief, which improves cash flow and provides additional funds to reinvest in the business. The investments in energy-efficient lighting and electric vehicle infrastructure demonstrate the firm's commitment to sustainability, reducing long-term operational costs and contributing to a lower carbon footprint. Furthermore, upgrading to high-performance laptops enhances productivity, supporting the company's overall efficiency and service delivery.

Critical minerals and clean energy

The Australian 2024-25 Federal Budget introduced the Future Made in Australia Package, setting forth a new framework aimed at enabling "the biggest transformation in the global economy since the industrial revolution" and helping Australia achieve "net zero by 2050." As we approach critical milestones for net zero commitments, the Budget emphasises supporting Australia's energy transition and capitalising on the opportunities arising from global changes. This presents substantial prospects for businesses that adopt green initiatives and projects, particularly for those that invest proactively.

Clean Energy

The Budget allocates $19.7 billion over 10 years from 2024-25 to accelerate investment in Future Made in Australia priority industries, including renewable hydrogen, green metals, low-carbon liquid fuels, and the manufacturing of clean energy technologies, particularly in solar and battery supply chains. This funding aims to catalyse clean energy supply chains and support Australia's ambition to become a renewable energy superpower.

The Budget comprises the following initiatives:

Support for Renewable Hydrogen Production:

The Budget allocates $8 billion over 10 years from 2024–25, with an average of $1.2 billion per year from 2034–35 to 2040–41, to support the production of renewable hydrogen, promote the growth of a competitive hydrogen industry, and aid Australia's decarbonisation efforts. Key components include:

• $6.7 billion Hydrogen Production Tax Incentive available from 1 July 2027. This incentive aims to drive greater investment in renewable hydrogen production.
• $1.3 billion for an additional round of the Hydrogen Headstart program, with an average of $151.6 million per year from 2034–35 to 2038–39 to support early-mover renewable hydrogen projects by bridging the green premium.
• $1.7 billion over 10 years from 2024–25 for the Future Made in Australia Innovation Fund, administered by the Australian Renewable Energy Agency (ARENA), to support innovation, commercialisation, pilot and demonstration projects, and early-stage development in priority sectors like renewable hydrogen, green metals, low-carbon liquid fuels, and clean energy technology manufacturing, including batteries.

Core investment into renewables including solar and batteries

• $1.5 billion to the Australian Renewable Energy Agency (ARENA) to enhance its core investments in renewable energy and related technologies.
• $1.4 billion over 11 years from 2023–24 (with $66.8 million per year from 2034–35 to 2036–37) to support the manufacturing of clean energy technologies. This includes assisting local Australian businesses in developing next-generation solar panel and battery manufacturing capabilities.
• $549 million over eight years from 2023–24 to support battery manufacturing. This includes an additional $523.2 million for the Battery Breakthrough initiative, administered by ARENA, to promote the development of solar manufacturing capabilities. Additionally, $20.3 million over five years from 2023–24 is allocated to the Powering Australia Industry Growth Centre and the Future Battery Industries Cooperative Research Centre to enhance industry and research collaboration.

Up-skilling workforce through Future Made in Australia

$218.4m over eight years from 2023–24 (and $1.3m per year ongoing) to support a Future Made in Australia through the development of a skilled and diverse workforce and trade partnerships to support renewable energy growth plans. This includes:

• $91m over five years from 2023–24 (and an additional $0.6m over three years from 2028–29) to support the development of the clean energy workforce, including through addressing vocational education and training sector trainer workforce shortages.
• $55.6m over four years from 2024–25 to establish the Building Women’s Careers program to drive structural and systemic change in work and training environments. The program will fund partnerships between training providers, community organisations, employers, and unions to improve women’s access to flexible, safe and inclusive work and training opportunities in traditionally male-dominated industries of national priority, including clean energy sectors.
• $38.2m over eight years from 2023–24 (and $1.3m per year ongoing) to provide funding for a range of Science, Technology, Engineering and Mathematics (STEM) programs to increase diversity in STEM education and industries.

Critical minerals

The Government is significantly investing in the critical minerals industry, focusing on various initiatives:

• Critical Minerals Production Tax Incentive: A $7 billion tax incentive starting on 1 July 2027 to support the refining and processing of critical minerals such as lithium, nickel, and rare earth elements. Details on the specifics, such as the incentive rate, eligibility, and duration, are yet to be released.
• Strategic Investments: $1.2 billion is allocated for strategic investments in priority critical minerals projects.
• Geoscience Australia Funding: $566 million over 10 years to map Australia’s national groundwater systems and resource endowments, aiming to identify potential sites for critical and strategic mineral discoveries, carbon capture and storage, and clean hydrogen projects. This could be a significant boost for permanent carbon storage in Australia.
• Environmental and Investment Streamlining: $183 million over eight years is designated to the Department of Climate Change, Energy, the Environment and Water to strengthen environmental approvals for renewable energy, transmission, and critical minerals projects. Additionally, funds are aimed at streamlining the foreign investment framework, increasing scrutiny for critical minerals investments while improving processing times for non-critical minerals.

Winners‍

- Downstream producers of ‘critical minerals’ (31specified minerals including lithium, nickel and rare earth elements) and renewable hydrocarbons.

- Businesses developing, adopting and exploringemerging green technologies including carbon capture

- Investors in renewable energy

Healthcare

While healthcare in Australia contributes 7% of emissions, there has been no significant announcement specific to the sector in terms of financing decarbonisation plans.

It is important to note that under National Health and Climate Strategy first launched 3 December 2023 a decarbonisation plan have been set for the industry. The strategy outlines priorities for the next five years to address the health and wellbeing impacts of climate change. It sets out actions aimed at building healthy, climate-resilient communities, and establishing a sustainable, resilient, high-quality, net-zero health system.

For NSW, The Net Zero Roadmap 2024 - 2030 will provides blueprint for health system to achieve the NSW Government's net zero targets: 50% emissions reduction by 2030 and net zero by 2050

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This document will continue to be updated as the NetNada team further analysis the budget.