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Energy Insights

Federal Budget - A focus on emissions reduction, electricity and gas

In May 2021, the Federal Government handed down its 2021-22 budget with $1.8 billion worth of new initiatives, support, and investment in key areas of emissions reduction, electricity and gas. The Government’s perspective is that the budget measures will “provide reliable, secure and affordable energy to all Australians, and increase investment in technology solutions to reduce emissions in a way that supports jobs and economic growth.”

Key investment areas

The budget announcement included several key initiatives that will impact energy market development, help develop new technologies, or assist businesses and large energy users reduce emissions and better manage energy costs.

Emissions reduction

Investment in emissions reductions initiatives represents $1.2 billion in aggregate.  These are designed to stimulate the development of new technologies as well as reduce energy costs for businesses. Examples include:

  • $280 million to establish a “below baseline” crediting mechanism to incentivise and reward large industrial facilities for reducing energy consumption and emissions below an agreed baseline or limit.
  • $276 million to further accelerate the growth of an export hydrogen industry by establishing four additional clean export hubs.
  • $50 million of specific funding for ARENA to invest via venture capital type mechanisms as an alternative to grant funding
  • $14.3 million to assist in reducing costs and improving the efficiency of the reporting under the National Greenhouse and Energy Reporting Scheme
  • $10.4 million to assist in expanding the range of options available to businesses seeking to reduce emissions through the Climate Active program voluntarily.

There is approximately $215 million investment in electricity-related initiatives designed to maintain security, reliability and competitive pricing. Examples include:

  • $76.9 million to assist the Portland aluminium smelter in participating in the Australian Energy Market Operator’s Reliability and Emergency Reserve Trader scheme.
  • $34.3 million to continue implementing the energy market reform agenda currently in progress through the Energy Security Board’s post-2025 electricity market review program.
  • $30 million to support a grid-scale battery and microgrids in remote indigenous communities in the Northern Territory
  • $24.9 million to assist new gas-fired generators to better prepare for hydrogen-based electricity production
  • $19.3 million to invest in new renewable energy microgrids in northern Queensland

Approximately $58 million in new gas-related initiatives were also announced to continue the Government’s push towards a gas led recovery. Examples include:

  • $38.7 million to support key gas infrastructure projects to assist in alleviating potential supply shortfalls
  • $6.2 million to support the continued reform and development of the Wallumbilla Gas Supply Hub in Queensland.  That is designed to assist in improving the liquidity and transparency of gas pricing.
  • $4.6 million to reforms aimed at assisting large gas businesses to negotiate competitive outcomes in gas supply arrangements better.


There have been mixed reactions from sectors of the energy industry, the opposition and other stakeholders to certain investments outlined in the budget.

However, it is clear that the Government is continuing its focus on technology-related investments to reduce emissions while maintaining reliability, energy security and competitive prices. 

If you have any questions or need advice on the impacts and opportunities of the budget on your business, please contact your Energy Action account manager on 1300 964 589 or by clicking here.

You can find out more about the Australian Federal Budget for 2021-22 by clicking here.

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