Australia's Net Zero Plan - Key Takeaways for the Energy Industry

On 18 September 2025, the Australian Government released Australia’s Net Zero Plan (the “Net Zero Plan”), setting out an ambitious multi-sectoral plan to achieve net zero greenhouse gas (“GHG”) emissions in Australia by 2050.¹The Net Zero Plan can be accessed here: https://www.dcceew.gov.au/sites/default/files/documents/net-zero-report.pdf. Demand- and supply-side measures have been announced, broadly aimed at electrification, decarbonisation, low-carbon fuels, technology deployment and carbon removals.

The Net Zero Plan follows a sequence of energy sustainability and energy security laws and policy initiatives over recent years. Prominent milestones include the Climate Change Act 2022 (which created a statutory target to reduce GHG emissions to 43% below 2005 levels), the Net Zero Economy Authority Act 2024 (which established an authority to facilitate achievement of GHG emission reduction targets) and the Future Made in Australia Act 2024 (which broadly aims to enable private investments in clean energy).

This client alert helps unpack the Net Zero Plan, focusing especially on its impact on the energy industry.

High-Level Points for the Energy Industry

Ambitious Target

• Using a GHG emissions decrease of 27% in 2024 (compared to 2005 GHG emissions levels) as a base, the Net Zero Plan sets a new target of 62-70% GHG emission reductions (against 2005 levels) by 2035. Key pathways to reach this target include rapid electrification and decarbonisation of the grid between 2030-2035, resource abatement and land-based carbon removal systems.
• This target is the driver for most measures seeking to rapidly decarbonise the Australian economy.

Five decarbonisation priorities

• The Net Zero Plan identifies five levers of decarbonisation, which are set out below.
  
  • Clean electricity across the economy.
  • Lowering emissions by electrification and efficiency.
  • Expanding clean fuel use.
  • Accelerating new technologies.
  • Net carbon removals scaled up.
    
    
• A number of measures have been set out to facilitate the achievement of each priority. Key measures are below.
  
  • Clean electricity across the economy – The Net Zero Plan enables clean electricity through the Capacity Investment Scheme (which underwrites large-scale renewables and storage projects), six declared priority offshore renewable energy zones, an allocation of $2 billion through the Clean Energy Finance Corporation to deploy clean energy technologies, and plans to streamline approvals for renewable energy projects through reforms to the Environment Protection and Biodiversity Conservation Act.
  • Lowering emissions by electrification and efficiency – Reduced emissions are facilitated by measures previously announced, like the New Vehicle Efficiency Standard and the $475 million fund supporting innovation in cleaner transport and rollout of electric vehicle charging infrastructure at key points. Other initiatives announced in the Net Zero Plan include expansion of energy performance programs, the development of a demand-side “statement of opportunity” to create market awareness of energy efficiency opportunities and the implementation of the Circular Economy Framework to double circularity by 2035.
  • Expanding clean fuel use – Anchoring clean fuels to use cases where electrification is not feasible (due to cost or lack of appropriate technologies), the Net Zero Plan commits to complementary demand- and supply-side measures such as investing $1.1 billion in new low-carbon liquid fuel production in Australia to provide drop-in clean fuel alternatives to fossil fuels and exploring pathways to incentivise offtake of low-carbon fuels to support the buildout of production in Australia.
  • Accelerating new technologies – One of the Net Zero Plan’s key features is the establishment of a $5 billion Net Zero Fund (under the National Reconstruction Fund) to support major investments in decarbonisation and energy efficiency by large industrial facilities. Other plans include scaling up research collaborations and the study, along with the UN Environment Program, of ways to improve methane emission abatement.
  • Net carbon removals scaled up – The Net Zero Plan projects the scale-up of net carbon removals through measures such as opening a second round of the Carbon Capture Technologies Program for $52 million to accelerate development of engineered carbon removal methods in addition to existing measures like the Australian Carbon Credit Units scheme.

Multi-Sectoral Approach

• The Net Zero Plan sets out sector-specific plans for electricity and energy, agriculture and land, built environment, industry, resources, and transport have been released. Quick gains through electrification in the electricity and energy sectors are anticipated. These are expected to support GHG reductions in the transport and built environment sectors.
  
  
• A few key plans of note from each sector are as follows:
  
  • Electricity and energy sector plan – The Net Zero Plan anticipates an orderly coal exit by 2035, a greater than-90% decrease in GHG emissions from generation by 2035, and an increased share of renewables in the grid by 2050. Natural gas is expected to play a critical role as back-up for renewables while energy storage scales.
  • Agriculture and land sector plan – While the sector has been noted as difficult to decarbonise due to an absence of mature, scalable solutions and other barriers, the Net Zero Plan projects decreases in GHG emissions through methane and nitrous oxide management and expanded land-based carbon removal. Other co-benefits from land restoration, like increased biodiversity and productivity, are also projected.
  • Built environment sector plan – Rapid gains are expected from electrification of buildings. Other measures such as improved energy performance (through energy efficiency and demand flexibility) and improved design (through material efficiency and embodied carbon within building materials) are expected abatement opportunities.
  • Industry sector plan – Main opportunities for GHG emission reductions are projected from improvements in energy performance, electrification and by switching to alternative fuels like hydrogen and low-carbon liquid fuels (for example, renewable diesel and sustainable aviation fuels) where electrification is not feasible.
  • Resources sector plan – The Net Zero Plan projects a decline in GHG emissions of over 33% in the resources sector through reduced global fossil demand, rapid electrification and abatement of fugitive methane emissions.
    
    
• There are various other measures, connected to other legislative frameworks, which are planned for expansion. For example, the expansion of the Guarantee of Origin Scheme is under discussion to track and verify emissions from the production of low-carbon liquid fuels and other commodities. Further, a new fuel quality standard for renewable diesel is being discussed to facilitate its supply in Australia.

Impact on the Energy Industry

• The Net Zero Plan represents an ambitious statement of intention by the Australian Government. Businesses keen to lean in on the energy transition may view the Net Zero Plan as an attractive invitation to invest in Australia due to the incentives on offer contributing to a more favourable business case compared to other markets.
• The incentives on offer for low-carbon fuels may contribute to de-risking low-carbon fuel projects. These would be complemented by demand- and supply-side measures under consideration. For example, low-carbon fuel projects experience challenges with securing binding offtake agreements. If the Australian government were to follow through with its consideration of a mandate for the consumption of low-carbon fuels, this could materially help to unlock key barriers to progress by project sponsors and developers.
• The emphasis on rapid electrification across sectors represents a massive opportunity for renewable energy and battery storage project sponsors and developers to build and scale in Australia. Combined with its natural advantages of, among other things, abundant irradiation, land availability, wind availability and geographical diversity, Australia has considerable potential to rapidly decarbonise its economy across its key economic sectors.
• The development and strengthening of standards and certifications for low-carbon fuels may represent steps towards broadly aligning specifications of low-carbon fuels produced in Australia with those in international markets like the EU, Japan and South Korea, and facilitating increased credibility of low-carbon fuels through clearer verifiability. This may give an advantage to Australian low-carbon products in avoiding challenges related to accurately capturing emission reductions from low-carbon products and decreasing exposure to carbon taxes in international markets such as the EU member states.

Worth Watching

• In the past few years, governments around the world have faced the challenge of the “energy trilemma” (that is, the challenge of securing the three objectives of energy policy - energy which is secure, sustainable and affordable) in their energy policies, which has led to difficult trade-offs. The Australian Government appears to be focused on the sustainability and security aspects of the energy trilemma, with data-driven projections that affordability will follow. The consequences of this calculated decision will bear themselves out over the coming years and are worth monitoring for policy continuity.
• The Australian Government is considering options to legislate a 70% GHG emissions reduction target. This may broadcast a stronger signal to business that the Australian Government is intent on developing and growing a low-carbon economy.

King & Spalding’s lawyers are working on some of the largest, most advanced, and complex energy transition and energy innovation projects and energy-related finance transactions around the world.