China’s carbon dioxide (CO2) emissions fell by 1% in the final quarter of 2025, likely securing a decline of 0.3% for the full year as a whole.
This extends a “flat or falling” trend in China’s CO2 emissions that began in March 2024 and has now lasted for nearly two years.
The new analysis for Carbon Brief shows that, in 2025, emissions from fossil fuels increased by an estimated 0.1%, but this was more than offset by a 7% decline in CO2 from cement.
Other key findings include:
- CO2 emissions fell year-on-year in almost all major sectors in 2025, including transport (3%), power (1.5%) and building materials (7%).
- The key exception was the chemicals industry, where emissions grew 12%.
- Solar power output increased by 43% year-on-year, wind by 14% and nuclear 8%, helping push down coal generation by 1.9%.
- Energy storage capacity grew by a record 75 gigawatts (GW), well ahead of the rise in peak demand of 55GW.
- This means that growth in energy storage capacity and clean-power output topped the increases in peak and total electricity demand, respectively.
The CO2 numbers imply that China’s carbon intensity – its fossil-fuel emissions per unit of GDP – fell by 4.7% in 2025 and by 12% during 2020-25.
This is well short of the 18% target set for that period by the 14th five-year plan.
Moreover, China would now need to cut its carbon intensity by around 23% over the next five years in order to meet one of its key climate commitments under the Paris Agreement.
Whether Chinese policymakers remain committed to this target is a key open question ahead of the publication of the 15th five-year plan in March.
This will help determine if China’s emissions have already passed their peak, or if they will rise once again and only peak much closer to the officially targeted date of “before 2030”.
‘Flat or falling’
The latest analysis shows China’s CO2 emissions have now been flat or falling for 21 months, starting in March 2024. This trend continued in the final quarter of 2025, when emissions fell by 1% year-on-year.
The picture continues to be finely balanced, with emissions falling in all major sectors – including transport, power, cement and metals – but rising in the chemicals industry.
This combination of factors means that emissions continue to plateau at levels slightly below the peak reached in early 2024, as shown in the figure below.
Power sector emissions fell by 1.5% year-on-year in 2025, with coal use falling 1.7% and gas use increasing 6%. Emissions from transportation fell 3% and from the production of cement and other building materials by 7%, while emissions from the metal industry fell 3%.
These declines are shown in the figure below. They were partially offset by rising coal and oil use in the chemical industry, up 15% and 10% respectively, which pushed up the sector’s CO2 emissions by 12% overall.
In other sectors – largely other industrial areas and building heat – gas use increased by 2%, more than offsetting the reduction in emissions from a 3% drop in their coal consumption.
Clean power covers electricity demand growth
In the power sector, which is China’s largest emitter by far, electricity demand grew by 520 terawatt hours (TWh) in 2025.
At the same time, power generation from solar increased by 43% and wind power generation by 14%, delivering 360TWh and 130TWh of additional clean electricity. Nuclear power generation grew 8%, supplying another 40TWh. The increased generation from these three sources – some 530TWh – therefore met all of the growth in demand.
Hydropower generation also increased by 3% and bioenergy by 3%, helping push power generation from fossil fuels down by 1%. Gas-fired power generation increased by 6% and, as a result, power generation from coal fell by 1.9%.
Furthermore, the surge in additions of new wind and solar capacity at the end of 2025 will only show up as increased clean-power generation in 2026.
On the other hand, the growth in solar and wind power generation has fallen short of the growth in capacity, implying a fall in capacity utilisation – a measure of actual output relative to the maximum possible. This is highly likely due to increased, unreported curtailment, where wind and solar sites are switched off because the electricity grid is congested.
If these grid issues are resolved over the next few years, then generation from existing wind and solar capacity will increase over time.
Developments in 2025 extended the trend of clean-power generation growing faster than power demand overall, as shown in the top figure below. This trend started in 2023 and is the key reason why China’s emissions have been stable or falling since early 2024.
In addition, 2025 saw another potential inflection point, shown in the bottom figure below. It was the first year ever that energy storage capacity – mainly batteries – grew faster than peak electricity demand in 2025 and faster than the average growth in the past decade.
China’s energy storage capacity increased by 75GW year-on-year in 2025, while peak demand only increased by 55GW. The rise in storage capacity in 2025 is also larger than the three-year average increase in peak loads, some 72GW per year.
Peak demand growth matters, because power systems have to be designed to reliably provide enough electricity supply at the moment of highest demand.
Moreover, the increase in peak loads is a key driver of continued additions of coal and gas-fired power plants, which reached the highest level in a decade in 2025.
The growth in energy storage could provide China with an alternative way to meet peak loads without relying on increased fossil fuel-based capacity.
The growth in storage capacity is set to continue after a new policy issued by China’s top economic planner the National Development and Reform Commission (NDRC) in January.
This policy means energy storage sites will be supported by so-called “capacity payments”, which to date have only been available to coal- and gas-fired power plants and pumped hydro storage.
Concerns about having sufficient “firm” power capacity in the grid – that which can be turned on at will – led the government to promote new coal and gas-fired power projects in recent years, leading to the largest fossil-fuel based capacity additions in a decade in 2025, with another 290GW of coal-fired capacity still under construction.
Reforming the power system and increasing storage capacity would enable the grid to accommodate much higher shares of solar and wind, while reducing the need for new coal or gas capacity to meet rising peaks in demand.
This would both unlock more clean-power generation from existing capacity and improve the economics and risk profiles of new projects, stimulating more growth in capacity.
Peaking power CO2 requires more clean-energy growth
China’s key climate commitments for the next five-year period until 2030 are to peak CO2 emissions and to reduce carbon intensity by more than 65% from 2005 levels. The latter target requires limiting CO2 emissions at or below their 2025 level in 2030.
The record clean-energy additions in 2023-25 have barely sufficed to stabilise power-sector emissions, showing that if rapid growth in power demand continues, meeting the 2030 targets requires keeping clean-energy additions close to 2025 levels over the next five years.
China’s central government continues to telegraph a much lower level of ambition, with the NDRC setting a target of “around” 30% of power generation in 2030 coming from solar and wind, up from around 22% in 2025.
If electricity demand grows in line with the State Grid forecast of 5.6% per year, then limiting the share of wind and solar to 30% would leave space for fossil-fuel generation to grow at 3% per year from 2025 to 2030, even after increases from nuclear and hydropower.
Such an increase would mean missing China’s Paris commitments for 2030.
Alternatively, in order to meet the forecast increase in electricity demand without increasing generation from fossil fuels would require wind and solar’s share to reach 37% in 2030.
Similarly, China’s target of a non-fossil energy share of 25% in 2030 will not be sufficient to meet its carbon-intensity reduction commitment for 2030, unless energy demand growth slows down sharply.
This target is unlikely to be upgraded, since it is already enshrined in China’s Paris Agreement pledge, so in practice the target would need to be substantially overachieved if the country is to meet its other commitments.
If energy demand growth continues at the 2025 rate and the share of non-fossil energy only rises from 22% in 2025 to 25% in 2030, then the consumption of fossil fuels would increase by 3% per year, with a similar rise in CO2 emissions.
Still, another recent sign that clean-energy growth could keep exceeding government targets came in early February when the China Electricity Council projected solar and wind capacity additions of more than 300GW in 2026 – well beyond the government goal of “over 200GW”.
Chemical industry
The only significant source of growth in CO2 emissions in 2025 was the chemical industry, with sharp increases in the consumption of both coal and oil.
This is shown in the figure below, which illustrates how CO2 emissions appear to have peaked from cement production, transport, the power sector and others, whereas the chemicals industry is posting strong increases.
Even though chemical-industry emissions are small relative to other sectors – at roughly 13% of China’s total – the pace of expansion is creating an outsize impact.
Without the increase from the chemicals sector, China’s total CO2 emissions would have fallen by an estimated 2%, instead of the 0.3% reported here.
Without changes to policy, emission growth is set to continue, as the coal-to-chemicals industry is planning major increases in capacity.
Whether these expansion plans receive backing in the upcoming five-year plan for 2026-30 will have a major impact on China’s emission trends.
Another key factor is the development of oil and gas prices. Production in the coal-based chemical industry is only profitable when coal is significantly cheaper than crude oil.
The current coal-to-chemicals capacity in China is dominated by plants producing higher-value – and therefore less price-sensitive – chemicals such as olefins and aromatics, as feedstocks for the production of plastics.
In contrast, the planned expansion of the sector is expected to be largely driven by plants producing oil products and synthetic gas to be used for energy. For these products, electrification and clean-electricity generation provide a direct alternative, meaning they are even more sensitive to low oil and gas prices than chemicals production.
Outlook for China’s emissions
This is the latest analysis for Carbon Brief to show that China’s CO2 emissions have now been stable or falling for seven quarters or 21 months, marking the first such streak on record that has not been associated with a slowdown in energy demand growth.
Notably, while emissions have stabilised or begun a slow decline, there has not yet been a substantial reduction from the level reached in early 2024. This means that a small jump in emissions could see them exceed the previous peak level.
China’s official plans only call for peaking emissions shortly before 2030, which would allow for a rebound from the current plateau before the ultimate emissions peak.
If China is to meet its 2030 carbon intensity commitment – a 65% reduction on 2005 levels – then emissions would have to fall from the peak back to current levels by 2030.
Whether China’s policymakers are still committed to meeting this carbon intensity pledge, after the setbacks during the previous five-year period, is a key open question. The 2030 energy targets set to date have fallen short of what would be required.
The most important signal will be whether the top-level five-year plan for 2026-30, due in March, sets a carbon intensity target aligned with the 2030 Paris commitment.
Officially, China is sticking to the timeline of peaking CO2 emissions “before 2030”, which was announced by president Xi Jinping in 2020.
According to an authoritative explainer on the recommendations of the Central Committee of the Communist Party for the upcoming five-year plan, published by state-backed news agency Xinhua, coal consumption should “reach its peak and enter a plateau” from 2027.
It says that continued increases in demand for coal from electricity generators and the chemicals industry would be offset by reductions elsewhere. This is despite the fact that China’s coal consumption overall has already been falling for close to two years.
The reference to a “plateau” in coal consumption indicates that in official plans, meaningful absolute reductions in emissions would have to wait until after 2030. Any increase in coal consumption from 2025 to 2027, before the targeted plateau, would need to be offset by reductions in oil consumption, to meet the carbon intensity target.
Moreover, allowing coal consumption in the power sector to grow beyond the peak of overall coal use and emissions implies slowing down China’s clean-energy boom. So far, the boom has continued to exceed official targets by a wide margin.
In addition, the explainer’s expectation of further growth in coal use by the chemicals industry indicates a green light for at least a part of its sizable expansion plans.
The Xinhua article recognises that oil product consumption has already peaked, but says that oil use in the chemicals industry has kept growing. It adds that overall oil consumption should peak in 2026.
Elsewhere, the article speaks of “vigorously” developing non-fossil energy and “actively” developing “distributed” solar, which has slowed down due to recent pricing policies.
Yet it also calls for “high-quality development” of fossil fuels and increased efforts in domestic oil and gas production, suggesting that China continues to take an “all of the above” approach to energy policy.
The outcome of all this depends on how things turn out in reality. The past few years show it is possible that clean energy will continue to overperform its targets, preventing growth in energy consumption from fossil fuels despite this policy support.
The key role of the clean-energy boom in driving GDP growth and investments is one key motivator for policymakers to keep the boom going, even when central targets would allow for a slowdown. It is also possible that the five-year plans of provinces and state-owned enterprises could play a key role in raising ambition, as they did in 2022.
About the data
Data for the analysis was compiled from the National Bureau of Statistics of China, National Energy Administration of China, China Electricity Council and China Customs official data releases, as well as from industry data provider WIND Information and from Sinopec, China’s largest oil refiner.
Electricity generation from wind and solar, along with thermal power breakdown by fuel, was calculated by multiplying power generating capacity at the end of each month by monthly utilisation, using data reported by China Electricity Council through Wind Financial Terminal.
Total generation from thermal power and generation from hydropower and nuclear power were taken from National Bureau of Statistics monthly releases.
Monthly utilisation data was not available for biomass, so the annual average of 52% for 2023 was applied. Power-sector coal consumption was estimated based on power generation from coal and the average heat rate of coal-fired power plants during each month, to avoid the issue with official coal consumption numbers affecting recent data.
CO2 emissions estimates are based on National Bureau of Statistics default calorific values of fuels and emissions factors from China’s latest national greenhouse gas emissions inventory, for the year 2021. The CO2 emissions factor for cement is based on annual estimates up to 2024.
For oil, apparent consumption of transport fuels – diesel, petrol and jet fuel – is taken from Sinopec quarterly results, with monthly disaggregation based on production minus net exports. The consumption of these three fuels is labeled as oil product consumption in transportation, as it is the dominant sector for their use.
Apparent consumption of other oil products is calculated from refinery throughput, with the production of the transport fuels and the net exports of other oil products subtracted. Fossil-fuel consumption includes non-energy use such as plastics, as most products are short-lived and incineration is the dominant disposal method.
The post Analysis: China’s CO2 emissions have now been ‘flat or falling’ for 21 months appeared first on Carbon Brief.
Analysis: China’s CO2 emissions have now been ‘flat or falling’ for 21 months
Harjeet Singh is a climate activist and strategic advisor to the Fossil Fuel Treaty Initiative, as well as founding director of the Satat Sampada Climate Foundation.
For thirty years, global climate talks perfected policy paralysis around the primary cause of the climate crisis: fossil fuels. Within the UNFCCC negotiations, the “consensus card” was played with surgical precision by the fossil fuel industry and wealthy producer nations to block meaningful action.
For decades, talks were restricted to the “demand side” – reducing emissions – while the “supply side” – the extraction of oil, gas, and coal – was treated as a forbidden subject. This so-called progress was a treadmill, leading nowhere despite plenty of sweat.
The breaking point: from Belém to Santa Marta
The failure peaked at COP30 in Belém, where, despite widespread support, the final outcome contained no fossil fuel phase-out mandate. Instead, the world watched as the COP30 Presidency announced a “roadmap” initiative at the very end of the talks – a face-saving measure that lacked formal standing in the process.
The halls of Belém were once again crawling with lobbyists, ensuring that “consensus” remained a tool for delay. Recognising the UNFCCC logjam, Global South countries in the Fossil Fuel Treaty Initiative demanded a series of dedicated conferences.
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Santa Marta summit kick-starts work on key steps for fossil fuel transition
The conference offers some 60 nations help to develop roadmaps to shift their economies away from coal, oil and gas, and make international trade green -
Santa Marta: Ministers grapple with practicalities of fossil fuel phase-out
Around 60 governments that want to make progress on transitioning away from coal, oil and gas are meeting in Colombia to work out how they can do it an equitable way
Colombia, the biggest producer among them, broke the status quo by pioneering this new path: the First International Conference on Transitioning Away from Fossil Fuels, joined by the Netherlands as co-host.
The pioneering conference in Santa Marta in late April moved us from the “if” to the “how”, signalling a shift from airy pledges to the reality of implementation. But as the dust settles, a more ancient struggle is resurfacing: the struggle for the “pen”.
The invisible hand of control
History shows that when developed nations can no longer block a process, they attempt to colonise it. In Santa Marta, we witnessed the opening gambit of a familiar play – exclusion followed by takeover. Critics signalled this early on in an open letter, calling out the systemic disregard for African lives and environments in global policy and the persistent marginalisation of Indigenous Peoples’ voices and concerns.
Under the guise of “technical support”, wealthy nations fought to steer the outcome of workstreams towards Global North-dominated institutions. Despite the expertise they may bring, why are the recognised bodies for this process exclusively based in an area representing only 20% of the world’s population?
The hastily assembled report containing the “Chairs’ Takeaways” from Santa Marta requires scrutiny and raises the following concerns:
- The Roadmap Trap: Connecting national transition plans to the Science Panel on the Global Energy Transition (SPGET) and the NDC Partnership. These bodies, largely dominated by Western experts, risk imposing frameworks that treat sovereign developing nations as markets for the private sector. Will “science” be used to legitimise a Global North-centric status quo while ignoring debt, trade and finance rules, and other forces that shape national policy?
- The Financial Architecture: Pushing the International Institute for Sustainable Development (IISD) to lead the work on macroeconomic dependencies on fossil fuels. Expertise matters, but whose stability is going to be prioritised? Is it the communities losing their livelihoods, or the global financial systems that grew fat on fossil fuel rents?
- The Trade Filter: Bringing the Organisation for Economic Co-operation and Development (OECD) – a club of wealthy nations – into “producer–consumer alignment”. This is a coup to ensure the international trade system keeps serving the West and its elites under the guise of “coordination”.
The “dos and don’ts” for developed nations
For decades, the responsibility of rich nations to provide public finance for climate action in vulnerable countries has been replaced by private sector “leverage”. Developed nations must stop using “climate finance” as a tool to open new markets for their multinational corporations and put actual, grant-based finance on the table to support the transition in the Global South.
They should also refrain from forcing every initiative back into the UNFCCC gridlock, where meaningful progress on a fossil fuel phase-out has been systematically blocked.
Finally, it is critical that the Santa Marta process is recognised as a sovereign space for historically silenced nations to hold polluters accountable, rather than being treated as a showroom for Western exports.
This requires addressing the hypocrisy of so-called “front runners”. Canada, France, Ireland, Australia and Norway attend these conferences as “leaders” while greenlighting oil and gas expansion. You cannot lead a transition while pouring fuel on the fire. Leadership requires immediately ending expansion; anything else is an expensive photo-op.
Unity as the ultimate tool
For developing nations, the path forward is radical unity. Global North diplomacy often seeks to divide and conquer through bilateral deals that bypass collective power. Developing nations must refuse to be cowed.
This is a chance to move beyond tools that prioritise debt and trade over development. Collectively, the Global South can build technical and financial frameworks that advance energy sovereignty and justice. South-South cooperation must be the primary engine of a fair transition that holds historical polluters accountable.
The road to Tuvalu 2027 – reclaiming the agenda
The announcement that Tuvalu will co-host the second conference in 2027 is a political necessity. Tuvalu, a least developed country, is a living symbol of the climate crisis and a vanguard of justice.
Tuvalu must have the power to set the agenda from day one. This cannot be another “safe space” for dialogue without commitment, as seen at the first conference. The road to Tuvalu must advance a mechanism that gained wider support in Santa Marta but was ignored in the Chairs’ Takeaways: a Fossil Fuel Treaty.
We need a framework to manage the decline of fossil fuel extraction based on fair shares and equity, turning international cooperation into support for resilient, renewable economies.
The process has only just begun. Santa Marta was the spark, but Tuvalu must be the engine room of implementation. The Global South must take the pen to script the transition rooted in equity and justice.
The post Developing countries must hold the pen to script the fossil fuel transition appeared first on Climate Home News.
Developing countries must hold the pen to script the fossil fuel transition
Campaigners working to limit the use of controversial sun-dimming technology have praised the Europe’s foreign ministers for warning of the risks such technology poses, but opinions remain split over whether it merits more research, with the European Union keeping its position open for now.
At a joint council meeting in Luxembourg, ministers representing the EU’s 27 member states signed off on a statement agreeing for the first time that they were “concerned that large-scale climate interventions, in particular solar radiation modification (SRM), pose significant risks for the climate, the environment, security and geopolitics”.
Their statement, issued in late April, called for a moratorium on deployment of SRM technologies, as well as “the full application of the precautionary principle to geoengineering” and for the EU to engage in international talks on international governance arrangements, including those related to research.
SRM refers to any deliberate attempt to reduce the amount of heat which reaches the Earth from the sun. This could be carried out by artificially brightening clouds or injecting aerosols into the atmosphere, which could reduce or reverse global warming but risk severe and unpredictable side-effects.
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The risks of carrying out SRM are widely acknowledged but climate campaigners and scientists remain divided on to what extent and how its effects should be researched, with some arguing that such work normalises it and encourages its deployment.
Experts on both sides of the debate welcomed the EU’s statement but made contrasting calls on what should happen next. A more pro-research group said the EU should encourage responsible research into SRM’s effects while more anti-research campaigners said the EU should prevent research that could lead to SRM’s deployment and agree not to use it.
Responsible research
Giulia Neri, the interim director of climate interventions at the Brussels-based think-tank Centre for Future Generations (CFG), which supports research into SRM, told Climate Home News that the EU’s statement sends “an important and timely signal on the need for rules governing SRM”.
She added that the fact it was issued by foreign – not climate – ministers shows “a growing recognition that SRM is a geopolitically relevant technology and not merely a climate-related issue”.
Her colleague, CFG adviser on climate interventions, Matthias Honneger added that the EU nations’ ministers in charge of research “might also consider how responsible public research under European oversight can help maintain Europe’s influence”.
This is especially important, Honneger said, as “private and global actors increasingly dominate what we know about this technology and its risks and benefits”.
A well-funded US-Israeli company Stardust claims to be developing the ability to carry out SRM and is seeking customers – including the US government – to pay for them to do so.
Impossible to test
Mary Chuch, who campaigns against geoengineering for the Center for International Environmental Law, also welcomed the foreign ministers’ statement.
She said it was right to emphasise “the risks of highly speculative geoengineering technologies, centre the precautionary principle and reinforce the longstanding moratorium under the Convention on Biological Diversity”.
How Shell is still benefiting from offloaded Niger Delta oil assets
But, rather than calling for more research, she and political scientist Frank Biermann called for the EU to join governments in Africa and the Pacific in calling for an international non-use agreement on solar geoengineering.
“As an immediate first step, the European Union must prevent research that could lead to the development and use of solar geoengineering technologies,” Biermann said.
Church said that solar geoengineering is “inherently unpredictable” and that it was “impossible to fully test for intended and unintended impacts without prolonged large-scale implementation”.
De facto moratorium
The council’s conclusion did not weigh in on the research debate, only resolving to engage in talks on the governance of research.
But European Commissioner for Startups, Research and Innovation Ekaterina Zaharieva said in 2024 that research should continue although it should be “rigorous and ethical, and it must take full account of the possible range of direct and indirect effects”.
Also in 2024, the Swiss government attempted to get countries at the United Nations Environment Assembly (UNEA) to set up an expert group on SRM. But this failed due to opposition from the African Group, Colombia, Mexico and others, and Switzerland did not try again at the last UNEA in December 2025.
SRM is currently legal in most nations. But there has been a de facto global moratorium in place on geoengineering – which includes SRM – since 2010, when it was agreed by governments under the Convention on Biological Diversity, with exceptions for small-scale scientific research studies.
The post EU warns on solar geoengineering but research debate grinds on appeared first on Climate Home News.
https://www.climatechangenews.com/2026/05/08/eu-warns-on-solar-geoengineering-but-research-debate-grinds-on/
In 2026, the dangers of fossil fuel dependence have been laid bare like never before. The illegal invasion of Iran has brought pain and destruction to millions across the Middle East and triggered a global energy crisis impacting us all. Communities in the Pacific have been hit especially hard by rising fuel prices, and Australians have seen their cost-of-living woes deepen.
Such moments of crisis and upheaval can lead to positive transformation. But only when leaders act with courage and foresight.
There is no clearer statement of a government’s plans and priorities for the nation than its budget — how it plans to raise money, and what services, communities, and industries it will invest in.
As we count down the days to the 2026-27 Federal Budget, will the Albanese Government deliver a budget for our times? One that starts breaking the shackles of fossil fuels, accelerates the shift to clean energy, protects nature, and sees us work together with other countries towards a safer future for all? Or one that doubles down on coal and gas, locks in more climate chaos, and keeps us beholden to the whims of tyrants and billionaires.
Here’s what we think the moment demands, and what we’ll be looking out for when Treasurer Jim Chalmers steps up to the dispatch box on 12 May.
1. Stop fuelling the fire
2. Make big polluters pay
3. Support everyone to be part of the solution
4. Build the industries of the future
5. Build community resilience
6. Be a better neighbour
7. Protect nature
1. Stop fuelling the fire
In mid-April, Pacific governments and civil society met to redouble their efforts towards a Fossil Fuel Free Pacific. Moving beyond coal, oil and gas is fundamental to limiting warming to 1.5°C — a survival line for vulnerable communities and ecosystems. And as our Head of Pacific, Shiva Gounden, explained, it is “also a path of liberation that frees us from expensive, extractive and polluting fossil fuel imports and uplifts our communities”.
Pacific countries are at the forefront of growing global momentum towards a just transition away from fossil fuels, and it is way past time for Australia to get with the program. It is no longer a question of whether fossil fuel extraction will end, but whether that end will be appropriately managed and see communities supported through the transition, or whether it will be chaotic and disruptive.
So will this budget support the transition away from fossil fuels, or will it continue to prop up coal and gas?
When it comes to sensible moves the government can make right now, one stands out as a genuine low hanging fruit. Mining companies get a full rebate of the excise (or tax) that the rest of us pay on diesel fuel. This lowers their operating costs and acts as a large, ongoing subsidy on fossil fuel production — to the tune of $11 billion a year!
Greenpeace has long called for coal and gas companies to be removed from this outdated scheme, and for the billions in savings to be used to support the clean energy transition and to assist communities with adapting to the impacts of climate change. Will we see the government finally make this long overdue change, or will it once again cave to the fossil fuel lobby?
2. Make big polluters pay
While our communities continue to suffer the escalating costs of climate-fuelled disasters, our Government continues to support a massive expansion of Australia’s export gas industry. Gas is a dangerous fossil fuel, with every tonne of Australian gas adding to the global heating that endangers us all.
Moreover, companies like Santos and Woodside pay very little tax for the privilege of digging up and selling Australians’ natural endowment of fossil gas. Remarkably, the Government currently raises more tax from beer than from the Petroleum Resource Rent Tax (PRRT) — the main tax on gas profits.
Momentum has been building to replace or supplement the PRRT with a 25% tax on gas exports. This could raise up to $17 billion a year — funds that, like savings from removing the diesel tax rebate for coal and gas companies, could be spent on supporting the clean energy transition and assisting communities with adapting to worsening fires, floods, heatwaves and other impacts of climate change.
As politicians arrive in Canberra for budget week, they will be confronted by billboards calling for a fair tax on gas exports. The push now has the support of dozens of organisations and a growing number of politicians. Let’s hope the Treasurer seizes this rare window for reform.
3. Support everyone to be part of the solution
As the price of petrol and diesel rises, electric vehicles (EVs) are helping people cut fuel use and save money. However, while EV sales have jumped since the invasion of Iran sent fuel prices rising, they still only make up a fraction of total new car sales. This budget should help more Australians switch to electric vehicles and, even more importantly, enable more Australians to get around by bike, on foot, and on public transport. This means maintaining the EV discount, investing in public and active transport, and removing tax breaks for fuel-hungry utes and vans.
Millions of Australians already enjoy the cost-saving benefits of rooftop solar, batteries, and getting off gas. This budget should enable more households, and in particular those on lower incomes, to access these benefits. This means maintaining the Cheaper Home Batteries Program, and building on the Household Energy Upgrades Fund.
4. Build the industries of the future
If we’re to transition away from fossil fuels, we need to be building the clean industries of the future.
No state is more pivotal to Australia’s energy and industrial transformation than Western Australia. The state has unrivaled potential for renewable energy development and for replacing fossil fuel exports with clean exports like green iron. Such industries offer Western Australia the promise of a vibrant economic future, and for Australia to play an outsized positive role in the world’s efforts to reduce emissions.
However, realising this potential will require focussed support from the Federal Government. Among other measures, Greenpeace has recommended establishing the Australasian Green Iron Corporation as a joint venture between the Australian and Western Australian governments, a key trading partner, a major iron ore miner and steel makers. This would unite these central players around the complex task of building a large-scale green iron industry, and unleash Western Australia’s potential as a green industrial powerhouse.
5. Build community resilience
Believe it or not, our Government continues to spend far more on subsidising fossil fuel production — and on clearing up after climate-fuelled disasters — than it does on helping communities and industries reduce disaster costs through practical, proven methods for building their resilience.
Last year, the Government estimated that the cost of recovery from disasters like the devastating 2022 east coast floods on 2019-20 fires will rise to $13.5 billion. For contrast, the Government’s Disaster Ready Fund – the main national source of funding for disaster resilience – invests just $200 million a year in grants to support disaster preparedness and resilience building. This is despite the Government’s own National Emergency Management Agency (NEMA) estimating that for every dollar spent on disaster risk reduction, there is a $9.60 return on investment.
By redirecting funds currently spent on subsidising fossil fuel production, the Government can both stop incentivising climate destruction in the first place, and ensure that Australian communities and industries are better protected from worsening climate extremes.
No communities have more to lose from climate damage, or carry more knowledge of practical solutions, than Aboriginal and Torres Strait Islander peoples. The budget should include a dedicated First Nations climate adaptation fund, ensuring First Nations communities can develop solutions on their own terms, and access the support they need with adapting to extreme heat, coastal erosion and other escalating challenges.
6. Be a better neighbour
The global response to climate change depends on the adequate flow of support from developed economies like Australia to lower income nations with shifting to clean energy, adapting to the impacts of climate change, and addressing loss and damage.
Such support is vital to building trust and cooperation, reducing global emissions, and supporting regional and global security by enabling countries to transition away from fossil fuels and build greater resilience.
Despite its central leadership role in this year’s global climate negotiations, our Government is yet to announce its contribution to international climate finance for 2025-2030. Greenpeace recommends a commitment of $11 billion for this five year period, which is aligned with the global goal under the Paris Agreement to triple international climate finance from current levels.
This new commitment should include additional funding to address loss and damage from climate change and a substantial contribution to the Pacific Resilience Facility, ensuring support is accessible to countries and communities that need it most. It should also see Australia get firmly behind the vision of a Fossil Fuel Free Pacific.
7. Protect nature
There is no safe planet without protection of the ecosystems and biodiversity that sustain us and regulate our climate.
Last year the Parliament passed important and long overdue reforms to our national environment laws to ensure better protection for our forests and other critical ecosystems. However, the Government will need to provide sufficient funding to ensure the effective implementation of these reforms.
Greenpeace has recommended $500 million over four years to establish the National Environment Agency — the body responsible for enforcing and monitoring the new laws — and a further $50 million to Environment Information Australia for providing critical information and tools.
Further resourcing will also be required to fulfil the crucial goal of fully protecting 30% of Australian land and seas by 2030. This should include $1 billion towards ending deforestation by enabling farmers and loggers to retool away from destructive practices, $2 billion a year for restoring degraded lands, $5 billion for purchasing and creating new protected areas, and $200 million for expanding domestic and international marine protected areas.
Conclusion
This is not the first time that conflict overseas has triggered an energy crisis, or that a budget has been preceded by a summer of extreme weather disasters, highlighting the urgent need to phase out fossil fuels. What’s different in 2026 is the availability of solutions. Renewable energy is now cheaper and more accessible than ever before. Global momentum is firmly behind the transition away from fossil fuels. The Albanese Government, with its overwhelming majority, has the chance to set our nation up for the future, or keep us stranded in the past. Let’s hope it makes some smart choices.
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