In brief
This year’s budget contains measures related to the energy and tech transitions, by supporting the acceleration of environment approvals and restoring the climate system.
Key takeaways
This budget aims to support renewable energy investment and data centre development while addressing federal environmental approval delays through proposed reforms to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act). It increases funding for the Clean Energy Regulator and Department of Climate Change, Energy, the Environment and Water (DCCEEW), and establishes a federal Environmental Protection Agency (EPA) from 1 July to enforce laws and streamline approvals. Additional funding targets biodiversity protection, climate reporting systems, and the integrity of the carbon credit scheme, with implications for nature markets. In light of evolving climate obligations, including recent International Court of Justice (ICJ) developments and mandatory reporting, boards are likely to face increased scrutiny of climate-related risks, alongside substantial housing investment and proposed tax reforms.
Additional details
Although it is usually State-based approvals that delay energy and tech projects, this budget has invested in streamlining approval pathways under federal environment legislation by progressing reforms to the EPBC Act. These reforms, which have been in contemplation since 2020, are now moving forward, alongside a broader program of regulatory “deep dives”, including into sectors such as data centre investment.
The budget includes a boost in funding for federal bodies such as the Clean Energy Regulator, which administers both the carbon credits scheme and the national greenhouse and energy reporting scheme, and the DCCEEW. The intention is to maximise the benefits that are expected to derive from the dual energy and tech transitions.
One of the headline commitments is funding for the long-anticipated federal EPA, with effect from 1 July 2026. The absence of a federal EPA in Australia has been conspicuous for many years and is out of step with other federations such as the United States. The new EPA will be chiefly responsible for enforcing environmental laws, strengthening environmental protections, and streamlining project approvals.
This aligns with reforms designed to reduce compliance costs for businesses while also increasing funding (more than AUD 100 million) on activities to protect Australia’s biodiversity and International Court of Justice (ICJ) half as much again (AUD 150 million) to support Australia’s relationship with the Pacific. This is consistent with further funding (AUD 20 million) directed at improving climate reporting systems and strengthening the integrity of the carbon credit scheme, with likely upside for investors in the nature repair market who are conscious of the value of green credentials to the market.
In light of evolving international and domestic developments in climate governance — including recent international legal developments and the introduction of mandatory climate reporting in Australia — boards should expect increased scrutiny around their identification, assessment and disclosure of climate-related risks and opportunities. This reflects the growing recognition that such risks are capable of being material and therefore relevant to directors’ duties under section 180(1) of the Corporations Act 2001 (Cth).
The budget also contemplates a new AUD 2 billion initiative to the Government’s now over AUD 47 billion Homes for Australia plan that fast tracks housing-enabling infrastructure projects, as well as proposed reforms to the capital gains tax and negative gearing, covered in these budget bites:
- Budget Bite: Negative gearing reforms
- Budget Bite: Capital Gains Tax reforms
A copy of the Federal Budget papers can be found here.
Sophia Cheng, Associate, Jeremy Hyman, Head of Communications, and Sky Friend, Business Development Consultant, have contributed to this legal update.