Senator David Pocock's additional comments

Introduction

1.1Australia needs a policy framework to drive industrial success as we transform our economy and become a renewable energy superpower. We need settings that will promote a manufacturing industry with secure, well-paid local jobs based on renewable energy, hydrogen and critical minerals.

1.2Other countries have moved with greater pace and ambition to seize the opportunity on offer as the world moves away from fossil fuels and builds the industry and sectors of the future. In the United States, the Inflation Reduction Act (IRA) and the Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act) have seen hundreds of billions of dollars invested to grow the industries we need to transition. In the European Union, the Green Deal also sees hundreds of billions of Euros invested to reduce emissions and foster green industry success.

1.3The Future Made in Australia (FMIA) framework is a positive step towards creating a strong industrial base in an energy-transitioning world. However, significant improvements are needed to improve transparency and accountability under the framework, to clarify that economic benefits will be retained in Australia, and ensure that funding under the framework is not used to subsidise the fossil fuel industry.

1.4I thank the committee and the secretariat for the work done on this inquiry. I also thank my colleagues in the lower house for the work they have done highlighting potential improvements to the bills. In particular, I would like to thank Dr Helen Haines MP, Mr Andrew Wilkie MP, Ms Kate Chaney MP, Ms Allegra Spender MP, Dr Monique Ryan MP, Ms Zali Steggall MP and Ms Zoe Daniel MP.

Electrification: Australian households and small businesses overlooked again

1.5Electrification is an opportunity for Australian households and small businesses to reduce energy bills and lower their carbon footprint. In a cost of living crisis and a climate crisis, the case for electrification is overwhelming.

1.6Despite this, the government has again missed an opportunity to supercharge the transition and put households at the centre. It is an opportunity seized in jurisdictions already ahead of Australia in enacting transformative industry policies.

1.7Many submitters acknowledged that the FMIA framework is largely an Australian response to the IRA.[1]The IRA contains billions of dollars in rebates and subsidies for rooftop solar, batteries, heat pumps, induction cooktops and many other consumer items.

1.8The IRA is more than two years old now, and household electrification has been heralded as a significant success.[2]Despite this, the Australian government has chosen to overlook this success.

1.9It is beyond time for the Australian Government to seize the opportunity that electrification presents in reducing cost of living pressures and achieving emissions reduction.

1.10The drafting of this bill does not lend itself to amendment to realise this opportunity. The Australian Government should bring forward a separate and substantial package to support electrification of households, particularly low-income households, rental properties and apartments.

Provide transparency and accountability in sector assessments

1.11Strong governance structures are necessary to build public confidence in the framework and to give industry the certainty required to invest in building industries of the future. Australians must be assured that the $22.7 billion in public money invested under the framework archives value for money. Of particular importance is ensuring that the National Interest Framework is applied through sector assessments before funding is allocated.

1.12The allocation of billions of dollars to PsiQuantum and SunDrive without a sector assessment has threatened to undermine public confidence. To rebuild trust, additional transparency and accountability mechanisms should be included in the bill.

1.13Submitters raised concerns around the need for greater transparency and accountability in Sector Assessments. The Grattan Institute identified ambiguity in how assessments fit into the decision making process. They believe that:

Without specifying the role these assessments will play and how they will factor into decision-making, there is a risk of falling into three classic industry policy traps: overreaching for competitive advantage, picking losers, and short-term policy thinking. The bill needs to be more explicit about how the National Interest Framework will inform and guide future policy and funding decisions so these traps can be avoided.[3]

1.14The Grattan Institute went on to recommend that the bills must ‘...make explicit how and where the Framework will guide future policy and funding decisions.’[4]

1.15Similarly, the Australian Conservation Foundation:

…strongly recommends amendment to s 9 of the FMIA Bill to make it clear that a Future Made in Australia support (as defined by s 10(2) of the FMIA Bill) is only available to projects or entities that fall within the scope of a sector for which a sector assessment has occurred. It should be a precondition of any FMIA support that the government decision-maker consider and determine that the person or project applying for that FMIA support properly falls within the scope of a sector that has been the subject of a sector assessment, and further where the sector assessment identified that the FMIA support was appropriate.[5]

1.16This approach is also supported by the Smart Energy Council, which recommends that ‘to be eligible for Future Made in Australia support, a sector assessment must be completed and presented to Parliament. This ensures that the National Interest Framework is followed and that the support is appropriate for the sector.’[6]

1.17In addition to requiring sector assessments as a prerequisite for support under the Future Made in Australia framework, there must be a high level of confidence in the sector assessments themselves. Several submitters voiced concerns that sector assessments may be vulnerable to political interference and that further safeguards are necessary.

1.18The Australian Chamber of Commerce and Industry (ACCI) submitted that ‘The sector assessments need to be independent, robust and informed by a range of views, expert advice, information sources and future market conditions that could impact the sector’s transition.’[7]

1.19This was supported by the Business Council of Australia (BCA), which highlighted the need for sector assessments to be independent in order to achieve the confidence of the business community.[8]The BCA recommended that sector assessments be conducted by the Productivity Commission, rather than by the Treasury. This recommendation has some merit, but could limit the breadth of input into sector assessments.

1.20To allow breadth and increase independence in the sector assessment process the Grattan Institute recommended that the Treasury Secretary be required to ‘invite the following agencies to provide input to the sector assessment:

Productivity Commission;

CSIRO;

Australian Competition and Consumer Commission;

Infrastructure Australia;

Climate Change Authority; and

Net Zero Economy Authority’[9]

There may be other agencies that should have input into the assessments, and this could be achieved in rules under the legislation.

Ensure adherence to the Community Benefits Principles

1.21The Community Benefits Principles must not be a ‘tick box exercise’, they must have teeth to ensure lasting benefit to Australian industry.

1.22Submitters raised concerns that adherence to the community benefits principles may not be promoted through the availability of appropriate remedies.

1.23The Australian Council of Trade Unions (ACTU) recommended that section 12 of the bill be amended to require the rules made by the Minister to include a requirement for regular publication about performance in meeting Community Benefit Principles, and remedies where there is an actual or potential breach of the principles.[10]

Ensure economic benefit flows to Australian businesses and is retained in Australia

1.24The 2024-45 Federal Budget makes a significant investment of $22.7 billion in the Future Made in Australia framework. Concerns have already been raised that funding committed to under FMIA is flowing to foreign-owned entities.[11] This has undermined public confidence that FMIA funding is squarely directed at increasing economic benefit to Australian businesses and workers.

1.25With such a commitment of taxpayer money, it is imperative that economic benefit must flow to Australians and Australian businesses. To achieve this, there needs to be a definition of an ‘Australian company’ that reflects Australian ownership and control. Under the current Commonwealth Procurement Rules, foreign owned and operating firms with an Australian Business Number (ABN) qualify as ‘Australian companies’.

1.26The government should develop a definition of ‘Australian company’ that reflects real ownership and management in Australia. A starting point for the definition should include requirements that an ‘Australian company’:

Has a valid ABN;

Is headquartered in Australia;

Is at least 51 per cent owned by Australian shareholders;

Is at least 51 per cent governed by Australian directors; and

Is not a subsidiary of a company that is not a sovereign Australian company.

1.27This definition should be integrated into the FMIA framework and used to promote retained economic benefit and allow Australian companies to compete on the global stage.

1.28Further, the government should look to strengthen the Community Benefits Principles to provide sharper focus on retained economic benefit. Maximising economic benefit retained in Australia must be a key pillar in the FMIA framework.

Put the achievement of emissions reductions goals at the heart of the framework

1.29Climate change provides the imperative for the FMIA framework. It should be clarified as the guiding object of the legislation. Submitters supported amending either or both of the objects of the bill and the Community Benefits Principles to achieve this.

1.30The ACF recommended that the bill:

…be amended to more explicitly centre the urgent need to decarbonise Australia’s economy, as the galvanising mission that justifies the public-private partnerships envisaged by Future Made in Australia. This should be implemented through amendment to both the objects and community benefits sections of the bill, to ensure the decarbonisation imperative is included at both a structural and support-specific level.[12]

1.31The Climate Council also made the case for amendments to the objects and Community Benefits Principles to highlight the imperative for climate action. They recommended that ‘the Objects of the [bill] be amended to explicitly incorporate the urgent imperative to cut greenhouse gas emissions domestically and globally.’[13] Further that the scope of community benefits be augmented ‘to recognise that new industries should also seek to minimise their own climate impact.’

1.32The Environmental Defenders Office (EDO) agreed that the bill:

1.33…should be amended to ensure Australia’s emissions reduction targets and obligations under the Paris Agreement are included in the legislative Objects, to provide an overarching goal for the scheme in line with the need to urgently decarbonise. The need to reduce emissions – through both supply and demand – must be at the heart of the FMIA framework.[14]

1.34Similarly, the Climateworks Centre recommended the addition of ‘a Community Benefits Principle reflecting Australia’s emissions reduction targets and its commitments under the Paris Agreement.’[15]

Sector Assessments should include a consideration of contribution to emissions or emissions reductions

1.35To properly integrate the imperative for climate action in the framework, there must be an analysis of emissions integrated into sector assessments.

1.36The EDO recommended that ‘analysis of the sectors’ contribution to Australia’s greenhouse gas emissions reduction targets and net zero transformation must be a mandatory consideration for all sector assessments.[16]

1.37This recommendation was supported by the Climate Council, which made a recommendation ‘to incorporate a further requirement for sector assessments to consider the direct emissions impacts of operation at scale by any sector or industry for which such an assessment is to be conducted.’[17]

The framework should not allow support to be given to the fossil fuel industry

1.38The Future Made in Australia framework is designed to assist Australians to shift away from fossil fuels and towards the green industries of the future powered by renewable energy. The door to funding the fossil fuel industry should be closed.

1.39This shift was supported by many submitters. The ACF submitted that ‘...the federal government must impose guardrails on the FMIA framework and restrictions on eligibility for FMIA supports to ensure that FMIA funding does not flow to climate wrecking fossil fuels.’[18] This recommendation was supported by the Australian Council of Social Services (ACOSS).[19]

1.40The EDO recommended that ‘the legislation should make clear that all FMIA supports cannot be used to support fossil fuel projects, infrastructure or related entities or industry.’[20]

1.41Similarly, the Investor Group on Climate Change (IGCC) recommended ’That no funds that are allocated on the basis of principles under the National Interest Framework are given to projects in legacy industries such as fossil fuels.’[21]

1.42It makes no sense to develop a framework around reducing emissions and allow the possibility of funding fossil fuels. To do so would risk allowing FMIA to be greenwashed and undermine confidence in the framework.

Concluding comments

1.43The FMIA framework is a positive reorientation of industry policy in recognition of the urgent need to reduce emissions and the opportunities presented by abundant renewable energy critical mineral resources. But it is far from perfect.

1.44Amendments are necessary to improve transparency and accountability around sector assessments, sharpen the focus on emissions reduction, and ensure that support achieves community benefits.

1.45More than that, the Australian Government should urgently bring forward a package for household electrification that will support Australians to get off gas, reduce energy bills and lower their emissions.

Recommendations

1.46The Australian Government should urgently fund a package to support the electrification of Australian households, with a focus on low-income households, rental properties and apartments.

1.47The Minister should be required to consider Sector Assessments before allocating funding to a sector.

1.48The Treasury Secretary should be required to invite input on Sector Assessments from the Productivity Commission, the Commonwealth Scientific and Industry Research Organisation, the Australian Competition and Consumer Commission, Infrastructure Australia, the Climate Change Authority, the Net Zero Economy Authority and anyone else specified in the rules.

1.49The Australian Government should promote adherence to Community Benefit Principles by requiring rules made by the Minister to include a requirement for regular publication about performance in meeting Community Benefit Principles, and remedies where there is an actual or potential breach of the principles.

1.50The objects and Community Benefits Principles sections of the bill should be amended to explicitly incorporate the urgent imperative to cut greenhouse gas emissions.

1.51The Australian Government should develop a definition of ‘Australian company’ that reflects Australian ownership and control over the company and integrate the definition into the Future Made in Australia framework.

1.52The Community Benefit Principles should be amended to sharpen the focus on retained economic benefit.

1.53Sector assessments should be required to include an analysis of direct and indirect contribution to emissions or emissions reduction.

1.54The Australian Government should provide clarity that neither the net zero transformation or economic resilience and security streams of the National Interest Framework will be used to support fossil fuel industries or associated infrastructure.

Senator David Pocock

Independent Senator for the ACT

Footnotes

[1]See for example: Australian Industry Group, Submission 19; Australian Chamber of Commerce and Industry, Submission 20.

[2]Atlantic Council, Julia Pyper, 14 August 2023, www.atlanticcouncil.org/blogs/energysource/the-ira-is-transforming-the-us-energy-system-starting-with-homes/ (accessed 6 September 2024).

[3]Grattan Institute, Submission 27, p. 2.

[4]Grattan Institute, Submission 27, p. 3.

[5]Australian Conservation Foundation, Submission 37, p. 10.

[6]Smart Energy Council, Submission 47, p. 3.

[7]Australian Chamber of Commerce and Industry, Submission 20, p. 5.

[8]Business Council of Australia, Submission 29, p. 2.

[9]Grattan Institute, Submission 27, p. 12.

[10]Australian Council of Trade Unions, Submission 33, p. 10.

[11]The Australian, Foreign cloud over $1bn solar plan, Geoff Chambers and Noah Yim, 4 September 2024, www.theaustralian.com.au/nation/politics/foreigners-can-plug-into-pms-future-made-in-australia-solar-fund/news-story/36c4bbbd82c1b662605b54902e249984 (accessed 6 September 2024).

[12]Australian Conservation Foundation, Submission 37, p. 5.

[13]Climate Council, Submission 2, p. 3.

[14]Environmental Defenders Office, Submission 35, p. 2.

[15]Climateworks Centre, Submission 53, p. 3.

[16]Environmental Defenders Office, Submission 35, p. 3.

[17]Climate Council, Submission 2, p. 3.

[18]Australian Conservation Foundation, Submission 37, p. 11.

[19]Australian Council of Social Services, Submission 50, p. 6.

[20]Environmental Defenders Office, Submission 35, p. 2.

[21]Investor Group on Climate Change, Submission 1, p. 3.