Insights / May 15th, 2024

ESG Priorities in Budget 2024: What You Need to Know

The 2024 Budget contains funding for an array of ESG measures to align with Australia’s climate policy as well as its focus on supply chain due diligence. The key ESG Budget item was the “Future Made in Australia Policy”, with $22.7 billion in total allocated to this budget item. The Future Made in Australia Policy is Australia’s version of the US Inflation Reduction Act. Under this policy, there will be a Future Made in Australia Act which will impose the structures necessary to “transition to a net zero economy”.

Within the Future Made in Australia Policy, there were the following budget items which are all focused on the transition of our energy to renewable energy and our economy to a net zero economy:

  1. $1.7 billion for the “Future Made in Australia Innovation Fund” to develop new industries such as green metals and low carbon fuels.

  2.  $520 million to “deepen net zero trade and engagement with the Indo-Pacific region”.

  3.  $566 million to map the geological potential of Australia (i.e., to map our critical minerals). 

  4. $209 million in funding for the new Net Zero Authority. The Net Zero Authority will be tasked with assisting the public and private sectors with the transition to net zero, which will be important with mandatory climate disclosures starting for many companies on 1 January 2025. There was also $1.3 million allocated to develop and issue guidance for best practice transition plans for the transition to net zero. 

  5. Development of the “Guarantee of Origin” Scheme which will measure and certify the emissions intensity of “green products” across supply chains. There is $32.2 million allocated for the start of this scheme which will focus on renewable hydrogen initially before moving to green fuels and metals. The federal and state governments have formed the “National Renewable Energy Supply Chain Action Plan” and an additional $14.3 million has been allocated to work with working with trade partners to support global rules on unfair trade practices and to negotiate benchmarks for trade in high-quality critical minerals. 

    This, and the $1 billion allocated to increasing solar panel manufacturing here in Australia, seems to be a response to the forced labour and solar panel supply chain issues arising out of China. Polysilicon, a key component of solar panels, largely comes from the Xinjiang Uyghur Autonomous Region in China where there have been allegations of forced labour camps for Uyghur people and other minority groups. Having solar panels made in Australia significantly reduces that supply chain risk. 

  6. $23 million in funding for the Department of Climate Change, Energy, Environment and Water (DCEEW) to develop a circular economy policy, program and legislative functions. 

There is also $48 million allocated over 4 years to reform the Australian Carbon Credit Unit Scheme, which has faced criticism over the last year for the allocation of carbon credits to projects which, in subsequent studies, have not delivered the emissions reductions to match the carbon credits issued for the relevant projects. Interestingly, there was no funding allocated for gas expansion, despite the government's gas expansion policy released earlier in the week. In saying this, the budget allows for $14.5 billion for subsidies to fossil fuel producers and major users.

Under the “S” in ESG, there was $2.5 million in funding allocated to undertake an audit of the Government procurement procedures and supply chains. The Attorney General has said that this will act as a “blueprint for future action from governments to review their supply chains and ensure they are not importing goods that are the product of forced labour.  Proposed amendments to the Modern Slavery Act 2018 (Cth) (“MS Act”) were released on May 2023 but a draft bill to amend the MS Act has not been released yet. This move may indicate that a draft bill is coming soon.

For more information about how these budget updates and how they may affect your organisation, or how we can assist you more broadly with your ESG strategy, please reach out to Emma Peters, Alexandra Kenny or our ESG team.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.