Announcement date
25 November 2024
Link to announcement
Production tax incentives to help build a Future Made in Australia
Problem being addressed
There are several hard-to-abate industrial sectors that require new energy sources to be decarbonised. These include ammonia and methanol production, steelmaking and the heavy transport sector. Renewable hydrogen can be a low-emissions substitute for hydrogen that is produced through emissions-intensive methods and has potential to replace natural gas in steelmaking.
Renewable hydrogen would support decarbonisation of these sectors. However, the current costs of producing renewable hydrogen make it uncompetitive compared with hydrogen produced through more emissions-intensive methods. There are two main cost barriers in the renewable hydrogen sector: the cost of electrolysers, and the input cost of renewable electricity.
Proposal
Provide a $2 refundable credit per kilogram of renewable hydrogen produced for up to ten years, between 1 July 2027 and 30 June 2040. To be eligible, a taxpayer would need to be corporation subject to income tax in Australia.
Eligible facilities must commence production or take a Final Investment Decision by 30 June 2030 and have a minimum capacity equivalent to a 10 megawatt electrolyser. Eligible hydrogen must be produced with an emissions intensity of under 0.6 kilograms of carbon dioxide equivalent per kilogram of hydrogen (as certified by the Clean Energy Regulator (CER) through the Guarantee of Origin (GO) scheme).
Assessed Impact Analysis outcome
Adequate
Assessment comments
To be considered 'good practice' as per the Australian Government Guide to Policy Impact Analysis, the IA would have benefitted from greater depth of analysis, particularly around the assumptions and inputs used in modelling the impacts on the economy and, further quantification and clear demonstration of a net benefit.
Regulatory burden
The Treasury estimates these measures will result in an increase in average regulatory costs of $22,000 per year, over ten years. This will consist of $100,000 per claimant for implementation, and $12,000 per year for ongoing reporting requirements.
Note: Information used in the decision making has been redacted for the public version of the IA. This information is classified Commercial-in-confidence or National Security or may refer to Confidential stakeholder submissions.