Australia's new PM Albanese pledges stronger climate, renewables push

Australia's incoming Labor Prime Minister Anthony Albanese pledged stronger climate action to make the country a renewables superpower in victory speeches over the weekend ahead of being sworn in May 23.

With 73% of the vote counted and nine seats yet to be declared as of May 23 in national elections, Labor had won 73 seats, the Coalition (Liberal, National Party) 54 seats, the Greens three seats and others 12 seats. Some 76 seats are needed to declare a majority victory.

"Together we can end the climate wars," Albanese said May 21. "Together we can take advantage of the opportunity for Australia to be a renewable energy superpower."

Then addressing supporters on the streets May 22, Albanese said, "there will be some changes in policy particularly with regard to climate change and our engagement with the world."

Labor's "Powering Australia" plan ups the country's emissions reduction target to 43% by 2030 from the current 26%-28% cut on 2005 levels as declared in Nationally Determined Contributions under the UNFCCC's Paris Agreement.

The plan references the need for an "urgent upgrade" to the country's electricity grid backed by a A$20 billion ($14.22 billion) budget, and an increased share of renewables in the national power mix to 82% by 2030.

Renewables accounted for 32.5% of generation in 2021, according to the Clean Energy Council.

Labor has also promised to introduce an electric car discount, removing import tariffs and the Fringe Benefits Tax from models below the luxury car tax threshold.

"I expect the new government will principally aim to accelerate Australia's buildout of wind, solar and other clean energy sources, as well as the uptake of demand-side technologies, principally electric vehicles," James Bowen, Policy Fellow at the Perth USAsia Centre told S&P Global Commodity Insights.

"The government is likely to continue supporting Australia's potential emergence as a major regional hydrogen supplier. It could also focus more on fostering green over blue developments in this space," Bowen said.

S&P Global Commodity Insights assessed Queensland hydrogen produced via alkaline electrolysis (including capex) at A$14.59/kg May 20, down 20% month on month.

New South Wales hydrogen produced via coal gasification with CCS was assessed at A$3.52/kg May 20, up 18% month on month.

Divisive topic

Labor's hydrogen plans under Powering Australia offered few details on projects or funding, in contrast to the outgoing Coalition's regular funding announcements and support for hydrogen hubs in the run-up to the election.

"Labor was keen to get elected without talking a lot about climate because it was such a divisive topic in the last election," Tim Buckley, Director, Climate Energy Finance Studies told S&P Global.

The new government's initial policy focus would be on climate, transmission, renewable energy zones and "electrification of everything", Buckley said.

Decarbonization of heavy industry and hydrogen was likely to be stage two of the policy overhaul, he added.

"Hydrogen will see more funding and support – more on the renewable hydrogen projects versus too much spending on carbon capture and storage to support blue hydrogen exports," said Martin Carolan, Managing Director & CEO of Provaris Energy, a company developing integrated renewable hydrogen projects for exports.

Labor may be supportive of CCS but less supportive of subsidies to companies involved in fossil fuels, another industry member said.

"There could be some negative impacts on coal in particular and also for gas as Labor has rejected the coalition government's 'gas-led recovery plan'," Brian Kitney, director of Meliora Investments, a clean energy consultant, told S&P Global.

Safeguard mechanism

While a new carbon tax was not seen as likely by sector commentators, the incoming government was expected to implement a limited market intervention "using the existing safeguard mechanism," Richie Merzian, Director, Climate & Energy Program at The Australia Institute told S&P Global.

"This will take the form of a baseline and credit scheme for the 215 largest polluting facilities," he said.

The safeguard mechanism is part of Australia's central climate instrument, the Emissions Reduction Fund, used to decarbonize the country's major energy-intensive players.

Designated facilities are those with annual direct greenhouse gas emissions of over 100,000 metric tones CO2e.

Labor's Power Australia plan is to adopt the Business Council of Australia's recommendation that "emission baselines (be) reduced predictably and gradually over time."