The federal government has revealed the design of the $5 billion Net Zero Fund within the National Reconstruction Fund (NRF) to support the manufacturing and energy-intensive industries to decarbonise.
The fund, announced last year, is a sub-fund of the NRF as part of the government’s 2035 emissions reduction target. $3 billion in NRF funding for clean energy projects has been reallocated towards the Net Zero Fund for higher-risk concessional lending for firms to decarbonise energy-intensive aspects of the business.
The shift means that more than a third of the NRF’s $15 billion investment funding will be deployed outside the fund’s original remit.
The Net Zero Fund’s return on its investment is lower than the NRF’s, at a target of the five-year Australian government bond rate minus 1%.
That means taxpayers are subsidising the loans, since they cost less than money government borrows on the open market to fund its current deficits.
The fund will be operational by mid-2026.
Industry, innovation and science minister Tim Ayres said the globally competitive finance delivers confidence to investors, manufacturers, heavy industry, and others.
“Backing Australian heavy industry and manufacturing to reduce its emissions and lower energy costs is a big national challenge that demands leadership, planning and an appetite for risk,” he said.
“The Albanese Labor Government is backing Australian investors, manufacturing firms, workers and innovators in our national mission to secure low emissions technologies and lower energy costs for Australia’s biggest manufacturers and producers. “
Climate change and energy minister Chris Bowen argued the focus was on reducing energy costs down for Australian industry.
“By lowering the cost of finance for clean energy upgrades, the Net Zero Fund helps big energy users invest sooner, use energy more efficiently and reduce the risks of volatile fossil fuel prices,” he said.
Loss-making
But Opposition industry and innovation shadow minister Alex Hawke said the Net Zero Fund transforms the NRF into a loss-making enterprise for green projects the private sector deems too risky.
“The changes shatter the original promise made to Australians in November 2023 that the NRF would generate a return for taxpayers: the fund’s original Investment Mandate required the NRF to achieve a return of 2-3% above the government bond rate,” he said.
“Labor is now explicitly directing the NRF to back ‘losers’. By setting a return target below the bond rate, they are admitting these green projects cannot stand on their own two feet.
“The claim that the NRF would make a profit for taxpayers was based on a false premise from day one. Now that the spin has collided with reality, Labor is rewriting the rules to hide their failure.
