Tax shake-up for gas, $4 billion for Australia to 'power the world'

Australia can “power the world” as a “renewable energy superpower”, Treasurer Jim Chalmers says.

A slew of projects and programs were announced in the budget that focused on boosting renewables, growing green industries, and pushing the country toward a net zero economy.

“Australia’s biggest opportunity for growth and prosperity is the global shift to clean energy,” Chalmers said.

He said $4 billion in the budget was dedicated towards “realising our future as a renewable energy superpower”.

The biggest chunk goes to a $2 billion Hydrogen Headstart program, which will support “large-scale renewable hydrogen projects”.

“Hydrogen power means Wollongong, Gladstone, and Whyalla, can make and export everything from renewable energy to green steel,” Chalmers said.

Another $57.1 million will help develop a program that aims to boost critical mineral supply chains with overseas neighbours.

Australia is the world’s largest producer of lithum, the third largest of cobalt, the fourth largest of rare earths, and contains almost 25 per cent of the world’s nickel resources.

These minerals are essential for the creation of products such as electric vehicles and batteries.

The government has forecast global demand for lithium and nickel to grow about 40 times larger from 2020 to 2040.

But the budget papers also warned that Australia would need to double its electricity generation by 2050 – or even more, given the potential demands of new export industries such as hydrogen or green steel.

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The budget aims to meet this need with increased investment in renewables, allocating $12 billion of the government’s $20 billion Rewiring The Nation program for major projects, including $4.7 billion to unlock critical transmission in NSW, and $1.5 billion for renewable energy zones in Victoria.

Environmental measures such as $200 million for disaster resilience projects like levee and seawall upgrades, and bushfire risk mitigation, will also be in place, along with a $236 million flood warning system.

The government will spend $121 million to establish Environment Protection Australia, which Environment Minister Tanya Plibersek would be “a tough cop on the beat”.

The “transparent and independent” body will make environmental assessments, decide project approvals and conditions, and make sure that those conditions are being followed.

The government will look to change the rules for offshore liquefied natural gas (LNG) projects that currently pay the petroleum resource rent tax (PRRT).

A recent Treasury review found that LNG projects, compared to oil projects, often took much longer to become cash flow positive, which meant they could carry forward deductions for many years.

To date, no LNG project has paid any PRRT and many aren’t expected to until the 2030s.

Now, the government will cap deductions that can be used to offset assessable income for offshore LNG projects to 90 per cent each year.

This means the companies will pay PRRT on at least 10 per cent of their income.

The cap will only apply to offshore projects, which export most of the gas they extract, and won’t be put in place until seven years after any project’s first year of production.