Chapter 1Introduction and background
Referral
1.1On 27 March 2024, the Senate referred the provisions of the Net Zero Economy Authority Bill 2024 (the bill) and the Net Zero Economy Authority (Transitional Provisions) Bill 2024 (Transitional Provisions bill) to the Senate Finance and Public Administration Legislation Committee (the committee) for inquiry and report by 10May 2024.
Background to the issues—the Paris Agreement and implementing Australia's transition to net zero
1.2In 2016, the Paris Agreement entered into force. It includes Australia, almost all the world's major economies, and most of Australia's trading partners.
1.3Under the Paris Agreement, over 150 nations committed to net zero greenhouse gas emissions by 2050. This huge transformation is being undertaken to reduce the level of carbon emissions being released into the atmosphere, so as 'to avert the worst impacts of climate change and preserve a liveable planet'.
1.4Australia has both international and domestic obligations to lower emissions to net zero by 2050. Internationally, as a signatory to the Paris Agreement, Australia has committed to decarbonise its economy. Domestically, Australia enshrined the Paris Agreement targets in its national law. The Climate Change Act 2022 sets out Australia's commitment to reducing net greenhouse gas emissions to 43 per cent below 2005 levels by 2030 and to zero by 2050.
1.5Reaching net zero by 2050 is a significant challenge for Australia. However, this transformation also presents a massive positive economic opportunity for Australia. The Explanatory Memorandum (EM) for the bills sets out the scale of the challenge as well as the ensuing opportunities:
The economic transformation associated with emissions reduction, which will include the inevitable updating or replacement of ageing energy assets to achieve these targets, is the biggest economic change since the Industrial Revolution.
Australia is exposed to this change and the challenges it poses due to its reliance on fossil fuels and other related resources.
Australia also has significant natural advantages that position it to prosper from the transition to net zero emissions by 2050.
Australia has the potential to harness its abundance of renewable energy and mineral endowments to create new industries and become a renewable energy superpower.
1.6The Paris Agreement also obliges participants to ensure the decarbonisation process is undertaken as a 'just transition'. This approach is broadly defined as 'ensuring that no one is left behind or pushed behind in the transition to low-carbon and environmentally sustainable economies and societies'. As the EM notes, this includes:
…the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities.
1.7Regarding industry, workers and the private sector, the EM sets out what will be required, including the need for a coordinated approach, to ensure a successful transition to net zero:
In order for Australia to successfully transition, actions to reduce emissions must occur in tandem with investment and job creation, particularly in industrial regions. Industrial changes can have significant localised and regional impacts. For example, power station closures can have concentrated impacts on employment outcomes in the regional communities in which they are located. The decarbonisation of emissions-intensive industries and facilities will help secure their future in the net zero economy. Workers will also need to be reskilled and supported to connect with new employment opportunities.
All levels of government, and the private sector, will need to work in a more coordinated way to catalyse the investment needed to support the decarbonisation of existing emissions-intensive industries, support the establishment of new industries and the creation of new jobs and other opportunities arising from the net zero transformation.
The NZEA Bill would create a new government entity with the mandate, functions and powers that enable it to ensure that Australia's transition to net zero emissions is orderly and positive.
Initial establishment of the Net Zero Authority as an Executive Agency
1.8On 5 May 2023, the Prime Minister, the Hon Anthony Albanese MP, announced the establishment of the National Net Zero Authority, to be initially established as an Executive Agency within the Department of the Prime Minister and Cabinet (PM&C) from 1 July 2023. Mr Albanese stated that the Authority was being established:
…to ensure the workers, industries and communities that have powered Australia for generations can seize the opportunities of Australia's net zero transformation.
The Authority will have responsibility for promoting the orderly and positive economic transformation associated with achieving net zero emissions.
The global transformation to a net zero economy is a massive source of economic opportunity for Australia, its regions, industries and workers.
1.9The Prime Minister outlined three main tasks for the Authority, namely to:
(a)Support workers in emissions-intensive sectors to access new employment, skills, and support as the net zero transformation continues.
(b)Coordinate programs and policies across government to support regions andcommunities to attract and take advantage of new clean energy industries and set those industries up for success.
(c)Help investors and companies to engage with net zero transformation opportunities.
1.10Information on the PM&C website notes that the government would move to establish the Agency as a statutory body, following 'detailed design and consultations with stakeholders'.
1.11PM&C further stated that the establishment of the Agency within the department was intended to 'kick-start' work on the Authority's responsibilities, and to begin some of its core functions, including 'engaging with key regions, industries, investors and others to start to develop strategies for how the Australian Government can best support positive transformation'.
1.12In June 2023, the Prime Minister announced the appointment of a Chair, the Hon Greg Combet AM, and an Advisory Board to support the design and work of a future legislated Authority.
Purpose of the bills
1.13The bills would establish the Net Zero Economy Authority (the Authority) as a new Commonwealth statutory authority to promote orderly and positive economic transformation as the world decarbonises.
1.14The Authority would do this by:
helping to facilitate the achievement of Australia's greenhouse gas emissions reduction targets;
assisting Australia's transformation as a renewable energy superpower; and
ensuring Australia's regions and workers are supported through, and benefit from, the associated economic transformation.
1.15The EM sets out more details on where this assistance would be targeted:
facilitating public and private sector participation and investment in greenhouse gas emissions reduction and net zero transformation initiatives in Australia, including in new industries;
supporting workers impacted by the net zero transformation to transition to new opportunities, including through the Energy Industry Jobs Plan (the Plan);
coordinating net zero efforts across government and key stakeholders, and in key regions, to facilitate the achievement of Australia's greenhouse gas emissions reduction targets and support Australia's transition to a net zero emissions economy; and
building community understanding, confidence and engagement with the net zero transformation.
Provisions of the bill
Net Zero Economy Authority Bill 2024
1.16The bill comprises six parts:
Part 1 provides preliminary material relating to the bill, including commencement date, title once enacted, and definition of terms and concepts.
Part 2 establishes the Authority, including setting out its establishment as a non-corporate Commonwealth entity, with a board, Chief Executive Officer (CEO), and staff, and that it is subject to the Public Governance, Performance and Accountability Act 2013 (PGPAAct). It also sets out the functions of the authority, how it should work across government, work with investors, workers, and Indigenous communities, and build awareness of the transition.
Part 3 and Part 4 include provisions relating to the Board and the CEO respectively:
Regarding the Board, Part 3 sets out its functions, its membership and the appointment of members. It also provides that the Minister may give directions to the Board about its performance, functions, and the exercise of its powers.
Part 4 provides the CEO's functions, that they operate in accordance with direction provided by the Board, and other arrangements for their appointment, remuneration and other related matters.
Part 5 sets out arrangements for the Plan, discussed more fully below.
Part 6 relates to other matters, including the establishment and appointment of a Stakeholder Panel, to give advice to the Board. It also contains arrangements for liability, annual reports and advice to Ministers, the corporate plan, publishing of reports, and delegation of functions by the Board and CEO.
The Energy Industry Jobs Plan
1.17Part 5 of the bill sets out the Plan. The Plan will be administered by the CEO of the Authority and will be a key element of the Authority's work.
1.18The Plan will be delivered in close collaboration with the Department of Employment and Workplace Relations, to ensure supports are coordinated and skills, training and employment opportunities are maximised.
Aim of the Plan
1.19The aim of the Plan will be to facilitate the transition of employees in closing coal- and gas-fired power stations and their dependent employers (such as coal mines that are reliant on a closing power station) to new employment by:
creating a consistent approach to supporting workers in closing facilities;
ensuring workers have the right supports and skills to transition to new employment;
connecting workers to other employers in the region;
complementing existing supports offered by closing employers and governments; and
aiming to fill the gap where comprehensive support packages are not readily available for workers.
Legislative framework and obligations
1.20The Plan would establish a legislated framework for supporting the future employment of employees in some closing coal-fired and gas-fired power stations, as well as dependent employers that have a commercial relationship with the closing power station and will, or will be likely to, cease a substantial part of their business operations due to the closure.
1.21The EM explains both the approach to voluntary receiving employers and the legislative obligations required from some employers closing coal- and gas-fired power stations:
the Authority would seek the participation of voluntary receiving employers, who may choose to offer employment to appropriately skilled and experienced employees from closing coal-fired and gas-fired power stations, and their dependent employers; and
closing and dependent employers would have legislated obligations to support their employees to obtain new employment, including through supporting career planning and financial advice, relevant training and the capacity of employees to pursue opportunities in receiving employers.
1.22Regarding the obligations of closing and dependent employers, the EM states that the clauses in the bill do not prescribe how the obligations should be delivered because employers vary in size, and 'there are different operational requirements and employee needs depending on the circumstances'.
Trigger notice
1.23The CEO can determine a 'trigger notice', relating to the closure of the whole or part of a coal- or gas-fired power station. This notice is the first step in initiating the Plan.
1.24Following the issuing of a trigger notice, the CEO can then undertake a 'community of interest' consultation process with employees and potentially receiving employers, with further consultations as the CEO determines appropriate.
1.25The CEO is then able to apply to the Fair Work Commission (FWC) for a 'community of interest' determination.
1.26Although the bill does not amend the Fair Work Act 2009 (FW Act), it gives the FWC a central role in the formal commencement of the Plan's processes:
A closing employer or dependent employer specified in [a FWC] determination is subject to obligations of a certain kind that are connected with facilitating transition employees of the employer to find other employment … the [FWC] may make a determination setting out the specific actions to be taken by the employer.
1.27In considering whether to make a determination, the FWC must have regard to a range of factors, including:
the object of the Net Zero Economy Authority Act;
existing supports that are available to facilitate employees to find other employment;
the number of transition employees who can participate in the Plan;
the capacity of the employer to redeploy these employees within the employer's business or associated businesses; and
the capacity of other employers in the same geographical area to offer employment to these employees.
Net Zero Economy Authority (Transitional Provisions) Bill 2024
1.28The Transitional Provisions bill sets out transitional provisions from the enactment of the bill and would make amendments to support the transition of the Authority from being an Executive Agency within PM&C to being an independent statutory body.
1.29Key provisions relate to:
the mechanism to appoint the first CEO of the Authority;
meeting requirements of the Board in its first calendar year; and
ensuring the ongoing operation of the Enterprise Agreement that applies to APS employees currently working for the Agency.
Human rights
1.30The EM contains a Statement of Compatibility with Human Rights (statement), which confirms the bills are compatible with the human rights and freedoms recognised or declared in the international instruments Australia is a party to, listed in Section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
1.31The statement acknowledges that the bills engage the following human rights in the International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR):
the right to freedom of expression (ICCPR, article 19(2));
the right to equality and non-discrimination (ICCPR, article 26);
the right to self-determination under (ICCPR, article 1) and the ICESCR (no reference provided);
the right to the highest attainable standard of physical and mental health under article (ICESCR, article 12);
the right to work (ICESCR, article 6) and the right to the enjoyment of just and favourable conditions of work (ICESCR, article 7);
the right to education (ICESCR, article 13); and
the right to privacy (ICCPR, article 17) and the right to an effective remedy (ICCPR, article 2(3)).
1.32The statement summarises the bills' compatibility with human rights as follows:
The NZEA Bill is compatible with human rights because, to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.
1.33As of 10 May 2024, no comment on the bills had been made by other committees, including the Committee for the Scrutiny of Bills and the Parliamentary Joint Committee on Human Rights.
Financial Impact of the bills
1.34The EM states that:
The establishment and operationalisation of the Authority is estimated to have a negative impact on the underlying cash balance of $189.3 million from 2023-24 to 2026-27, with funding for the operation being ongoing and indexed from 2027-28.
1.35The EM notes that this excludes costs associated with Part 5 of the bill, which sets out the Plan. It notes:
Costs for this component will be finalised after the publication of this explanatory memorandum, including departmental and administered costs associated with the Plan's implementation and operation.
Regulation impact
1.36The EM includes an Impact Analysis, Support for workers during the net zero transition. This acknowledges that:
[The] transition to a net zero future offers a significant source of economic opportunity for Australia's industries, regions and workers, but also carries risk as existing emissions-intensive industries transform or phase out. The shift to net zero emissions by 2050 must happen fairly for Australians in emissions-intensive industries and the communities they live and work in to help minimise the social impacts of this economic transformation.
1.37This Impact Analysis was commissioned by the government to 'explore options to support workers impacted by the net zero transition to access new employment, skills and opportunities'. These are:
…targeted specifically to workers associated with closing coal-fired and gas-fired generators. Consideration of broader transition initiatives, such as additional supports for workers at other emissions-intensive facilities that face transformation as the world decarbonises, are beyond the scope of this analysis. These issues will continue to be considered by the Government to ensure workers and communities are supported holistically as the net zero transition continues.
1.38The Impact Analysis notes that:
The overarching goal of policy options considered in this analysis is to minimise the potential negative economic and social impacts of these facility closures. Where these facilities represent major local or regional employers, it will be important to implement policy responses that mitigate local unemployment impacts in the immediate period following a closure–noting that power stations are concentrated in a handful of regions around Australia.
1.39The Impact Analysis also outlines the policy options it considers in detail:
Specific policy objectives identified in this analysis for policy responses that support workers at closing facilities are:
minimising involuntary unemployment when facilities close;
maximising opportunities to transition into similar employment;
providing appropriate supports, training, and skills to impacted employees; and
using to the best extent the skills and experience of employees.
Compliance cost impact
1.40The EM states that the Plan, once implemented, is 'expected to result in a total annual compliance cost of $1.5 million when the costs for individual employers are aggregated'.
Conduct of the inquiry
1.41The committee advertised the inquiry on its website and wrote to a range of key stakeholder organisations and individuals, inviting them to make a written submission by 19 April 2024.
1.42The committee published 50 submissions, which are all available on the committee's website, and listed in this report at Appendix 1.
1.43The committee held a public hearing in Canberra on Tuesday, 23 April 2024. The witness list can be found at Appendix 2.
1.44Details of the inquiry, including links to the bills and associated documents, are published on the committee's website.
Structure of this report
1.45This report comprises three chapters. This chapter provides background information relating to the bills, sets out the purpose of the bills, and provides an overview of key provisions.
1.46Chapter 2 summarises the broad support for the bills put forward in evidence.
1.47Chapter 3 considers issues raised and potential amendments proposed by stakeholders. It also sets out the committee's views and recommendations.
Acknowledgement
1.48The committee thanks all those who contributed to the inquiry by making submissions and giving evidence to the committee at the public hearing.
Notes on references
1.49References to the Committee Hansard in this report are to the Proof Hansard, so page numbers may vary between Proof and Official Hansard transcripts.