The Australian Labor Party was returned to government in a landslide at the general election held on 3 May 2005.
It has set an overall 43 per cent greenhouse gas emissions reduction target below the 2005 level by 2030, and net-zero by 2050.
How it will achieve these outcomes will be one of the challenges of this Parliament.
International consensus behind the net-zero idea was originally achieved through the adoption of the Paris Agreement made under the United Nations Framework Convention on Climate Change.
This anticipated the development of an international rules-based system to ensure the reduction of carbon levels, something anticipated by the Commonwealth’s Carbon Leakage Review, when it said:
Australia is a proponent of the international rules-based system, including the global climate and trade regimes. International cooperation underpinned by this system is critical for a peaceful, stable and prosperous world. This system has been a foundation of Australia’s economic and social development. The international rules-based system has a crucial role to play with the challenge of climate change sharpening and as international trade patterns become more complex.
As the Carbon Market Institute explains:
‘Carbon leakage’ refers to the spillover effect where emission reductions in one place are ‘cancelled out’ by a related hike in emissions elsewhere. This may occur due to differences between emissions reduction policy settings, whereby industries covered by an emissions reduction policy (such as Australia’s reformed Safeguard Mechanism) may be incentivised to offshore production to a country or region with weak or no carbon pricing to avoid compliance costs.
Some of the legislative mechanisms the Government proposes to use to meet the targets include:
CBAM
The preliminary findings of the Carbon Leakage Review include that a border carbon adjustment (CBAM) could be an appropriate solution to carbon leakage risks for selected, at-risk commodities—beginning with cement and clinker and expanding then to ammonia and derivatives, steel and glass.
An Australian CBAM or similar mechanism is designed to ensure the carbon price of imports is equivalent to the carbon price of domestic production, so that the competitiveness of Australian industry is not impacted and would work in parallel with the current safeguard mechanism.
The Review is in the hands of government and will publish what it will do in due course.
The Safeguard Mechanism
The Safeguard Mechanism is a policy creating a baseline and credit emissions trading scheme requiring identified facilities operating in covered industries to reduce greenhouse-gas emissions in line with specified targets.
The Mechanism will be reviewed during the life of this Parliament, during 2026-27.
Commitment to Deliver ‘National Determined Contributions’ under Paris
The returned Government has also committed to reducing greenhouse emissions by 43% by 2030 (based on 2005 levels).
However, Australia, along with 182 other countries) did not update its national determined contributions (a ‘rachet’ mechanism how it proposes to further reduce emissions) indicating how they will do this when scheduled to do so for 10 February 2025, with a previous newspaper report from 2024 suggesting that Australia has indicated it will delay the release of its NDC until after the country’s election in May, and ‘in part due to uncertainty about the ramifications of the US presidential election’.
Reporting
Section 292A of the Corporations Act 2001 will require corporations of varying sizes to make climate related disclosures that follow AASB S2 (climate related disclosures) published by the Australian Accounting Standards Board which were designed to ensure compliance with sections 296C(compliance with sustainability standards) and 296D (climate statement disclosures) of the Corporations Act 2001 between 2025 and 2027.
Australia’s accounting standards are based on those prepared by the International Sustainability Standards Board.
Nature Positive
The Australian Government published its Nature Positive Plan in December 2022, which implements:
- (in its own way) the recommendations of the Samuel Independent Review of the EPBC Act (2020);
- commitments under the Convention on Biological Diversity (incorporating the Kumming-Montreal Global Biodiversity Framework; and
- a commitment to the High Ambition Coalition for Nature and People to protect and conserve 30 percent of the world’s land by 2030.
During the last Parliament, it was proposed to introduce relevant reforms in three legislative tranches.
The first tranche was the Nature Repair Act 2023 which came into effect in 15 December 2023.
The second tranche of the legislation was to establish Environment Protection Australia, a body formed within the Department of Climate Change, Energy, the Environment and Water, that will make, and enforce, environmental approvals and which stalled in the Senate after concerns expressed by (particularly) the Western Australian Government.
The third tranche was expected to comprise:
- the repeal and replacement of the EPBC Act to permit the making of new national environmental standards, a streamlining of the approvals process (including the referrals process and consolidation of accreditation requirements), and revisions to conservation planning for threatened species and ecological communities; and
- the establishment of revised environmental offset arrangements, referred to as ‘restoration actions and restoration contributions’
which would complete the change in environmental laws from a ‘process’ to a ‘standard’ based piece of legislation, with future projects needing to comply with published standards.
Challenges
Donald Trump assumed the Presidency of the United States on 20 January 2025.
He commenced by making several executive orders.
Amongst other things, he made orders to:
- eliminate the electric vehicle mandate, the calculation of the ‘social cost of carbon’ and terminated what was called the green new deal.
- withdraw from all agreements and financial commitments made under the United Nations Framework Convention on Climate Change (including the Paris agreement) – something said that does not reflect American values; and
- ‘Investigate the causes of our country’s large and persistent annual trade deficits in goods, as well as the economic and national security implications and risks resulting from such deficits, and recommend appropriate measures, such as a global supplemental tariff or other policies, to remedy such deficits’
The latter gave rise to the 2 April ‘liberation day’ imposition of a 10% general tariff that most goods originating in Australia will be subject.
A 2 April Executive Order sets out more of the policy rationale:
Large and persistent annual U.S. goods trade deficits have led to the hollowing out of our manufacturing base; inhibited our ability to scale advanced domestic manufacturing capacity; undermined critical supply chains; and rendered our defense-industrial base dependent on foreign adversaries. Large and persistent annual U.S. goods trade deficits are caused in substantial part by a lack of reciprocity in our bilateral trade relationships. This situation is evidenced by disparate tariff rates and non-tariff barriers that make it harder for U.S. manufacturers to sell their products in foreign markets. It is also evidenced by the economic policies of key U.S. trading partners insofar as they suppress domestic wages and consumption, and thereby demand for U.S. exports, while artificially increasing the competitiveness of their goods in global markets. These conditions have given rise to the national emergency that this order is intended to abate and resolve.
………
Similarly, non-tariff barriers also deprive U.S. manufacturers of reciprocal access to markets around the world. The 2025 National Trade Estimate Report on Foreign Trade Barriers (NTE) details a great number of non-tariff barriers to U.S. exports around the world on a trading-partner by trading-partner basis. These barriers include import barriers and licensing restrictions; customs barriers and shortcomings in trade facilitation; technical barriers to trade (e.g., unnecessarily trade restrictive standards, conformity assessment procedures, or technical regulations); sanitary and phytosanitary measures that unnecessarily restrict trade without furthering safety objectives; inadequate patent, copyright, trade secret, and trademark regimes and inadequate enforcement of intellectual property rights; discriminatory licensing requirements or regulatory standards; barriers to cross-border data flows and discriminatory practices affecting trade in digital products; investment barriers; subsidies; anticompetitive practices; discrimination in favour of domestic state-owned enterprises, and failures by governments in protecting labour and environment standards; bribery; and corruption.
This departure from the existing international rules-based order and from the net-zero compact poses some challenges for decision makers, industry associations and companies.
EU Alignment
It has been reported that Trade Minister Don Farrell is backing talks that would link Pacific and European nations in response to US President Donald Trump’s sweeping global tariffs.
This would mean resuscitating a proposed free-trade agreement between the EU and Australia which failed in late 2023 because of quotas on Australian agricultural products, particularly sugar, beef and lamb, as well as the bloc’s determination to limit use of geographical food and drink terms such as feta, prosecco and romano.
A consequence of such an agreement could be greater regulatory realignment with the European Union as a matter of course and could be a relevant consideration as, for instance the Australian CBAM is redesigned.
However, care should be taken so that regulation adopted in Australia design is and does not exceed requirements in force in comparable jurisdictions, as some of them modify a number of their more ambitious net-zero regulations as the challenges of practically giving effect to them are met become apparent.
As an example. the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) imposes human rights and environmental due diligence duties on organisations with at least euro 450 million turnover in the EU, whether or not domiciled in the European Union.
However, it is now reported that the new German Chancellor is seeking a ‘streamlining’ (as opposed to seeking its repeal) as part of a ‘simplification package’ that goes towards winding back the ambition of the European Green Deal.
The NDC
This care should also be shown as the Commonwealth builds on its current carbon reduction regulatory framework through the continued development of its net zero plan, particularly as has been reported that the Commonwealth will miss its 2030 target by 14 percentage points.
Caution should be applied to ensure there is no regulatory overreach borne from trying to catch up lost ground.
Reporting
The reporting requirements will ultimately require reporting entities to report Scope 3 emissions – emissions not produced by the reporter or because of its activities but are those produced by entities participating in the company’s value chain, such as the cost of transporting products to a customer.
It is noted that even under the Biden Administration the US Security and Exchange declined to require Scope 3 reporting, in no small part because of concerns about compliance costs and the reliability data– concerns expressed in the AASB standard itself – see in particular BC 83 and 84 of AASB S2 and the dissent published in the text.
Whilst many companies are obliged to make emissions reports either to their investors or to comply with laws and regulations in force in home jurisdictions (particularly European jurisdictions) some thought will need to be given as to the cost and practicability of implementing a system that can conveniently measure scope 3 emissions.
Nature Positive and the EPA
As discussed earlier, some elements of the legislative package did not gain passage during the last Parliament.
Widespread business and industry concern over the proposed legislative overhaul was widely reported at the time, including the observation that:
The proposed transition from the current process-based EPBC Act to the new standards-based Nature Positive Act, if not managed appropriately, has the potential to make permitting processes even more complex, increasing regulatory burden, approval timelines and litigation risk as well as increasing the cost associated with offsetting impacts.
Issues that have been identified during the previous legislation development process included:
- creation of a new federal EPA in addition to state EPAs, which introduces confusion and duplication of responsibilities;
- proposed introduction of an Environmental Protection Order / stop-work order under delegated powers;
- expansion of audit powers so they can be exercised on a ‘without notice’ basis;
- imposition of civil penalties of up to $780 million;
- requirements that will increase the time and cost to the resource approval and development process.
- Consultation on the Nature Positive legislation has hitherto been on a ‘budget lock up’ basis- chosen winners getting to look at but not take away information.
It is important that net-zero target is not impacted by the imposition of regulatory duplication or untested legal requirements that may not lead to tangible environmental outcomes but may instead inhibit the efficient operation and productivity of the Australian economy.
It is of note that the new Environment Minister said in his first interview:
MURRAY WATT: Well, we did go to the election committing and recommitting, in fact, to having an independent EPA, and we need such a body with teeth to be able to assist in protecting our environment. But in terms of the details around the model of that, that is something that I’ll be consulting on.
and:
Just briefly, what sort of changes do you want to make to the EPBC Act and is it true you want to dump the term nature positive around the bill?
MURRAY WATT: Well, a couple of things there, Andrew. I mean, as I say, at this very early stage, it’s a little early for me to be saying exactly what I expect to be in that legislation. But what I do want to achieve is deliver the independent EPA that we’ve now gone to two elections promising to deliver. But I also do want to take the opportunity to look at the act more broadly and see what reforms can be made, both to protect the environment in a better way than it currently does, but also to smooth decision making processes for business. As I say, I think everyone recognises the current laws don’t achieve either of those goals and that’s what I want to do. In terms of the wording and the language, you know, I haven’t made any decisions about that, but the principle that I’m adopting is that I think it is important when we’re talking about these issues, to use language that the average person on the street understands and can buy into. I think part of my role is about building public support and public confidence in the decisions that we make in this area and the more we can be expressing our language and our terms in ways that people understand and use themselves, I think that helps build that confidence.
and:
Obviously, we do need to protect our environment, not only because of the health and environmental benefits that that provides, but there’s a range of industries in Australia that rely on a healthy industry, a healthy environment, to be able to deliver the jobs and economic benefits that we need in terms of the reforms, as I say, I’ve really just started beginning consultations on that. And you will have seen I’ll be travelling to Perth this week to meet with representatives of the WA Government, including Premier Cook, mining, environmental representatives, business representatives as well. I’m not locking myself in at this point to an exact model of an EPA, but I’ll be very interested to hear the range of views that are being put forward.
Conclusion – what this means for businesses and industry associations
As re-elected Prime Minister Mark Carney said in his victory speech on 29 April 2005:
We are once again, we are once again at one of those hinge moments of history.
Our old relationship with the United States, a relationship based on steadily increasing integration, is over. The system of open global trade anchored by the United States, a system that Canada has relied on since the Second World War, a system that well not perfect has helped deliver prosperity for a country for decades, is over.
It is clear that whilst world’s trading system (as well as how net-zero is being delivered) is in a state of flux, the ALP has a clear parliamentary capacity to give effect to its agenda.
In moving forward, companies and industry associations need to:
- Be able to identify how the intentions of government can be practically implemented within the Government’s legislative structure (noting that what are in effect the first version of all the relevant legislative designs have been published).
- Where necessary, identify proposed provisions that are impractical, explain why they are and propose possible alternative solutions that would be workable.
- Be aware how comparable jurisdictions are regulating and so be able to argue that possible Australian proposals are relatively onerous and thus placing Australian companies at a competitive disadvantage.
In turn it is to be hoped government will allow proposed legislation to be circulated with time to permit industry groups to make informed comment.
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