Sustainability Impact April/May 2026 – What you need to know
The latest edition of Sustainability Impact unpacks what the Federal Budget delivered for sustainability, from energy investments to environmental protections. We also explore new carbon crediting methods under the Australian Carbon Credit Units, the latest data insights for the Safeguard Mechanism, a Series A raise for an innovative battery recycling company, and more.
POLICY
Sustainability and the Budget
This month’s Federal Budget was handed down with a range of measures relevant to sustainability, against a backdrop of global energy instability and rising inflation. Key announcements included:
- Energy: The Budget featured a AUD 14.8 billion Strengthening Australia’s Fuel Resilience Package, including AUD 7.5 billion for the Fuel and Fertiliser Security Facility and AUD 1.1 billion for the Cleaner Fuels Program to support domestic low-carbon liquid fuels (LCLF).
- Transport: AUD 500 million over 10 years was committed to the Active Transport Fund for walking and cycling infrastructure, alongside AUD 1.75 billion in equity for the Australian Rail Track Corporation to support a modal shift from road to rail.
- Metals and minerals: Up to AUD 1 billion was committed to support the lower-emissions transition of the Boyne Aluminium Smelter. A Critical Minerals Strategic Reserve was also announced, backed by AUD 1 billion from the expanded AUD 5 billion Critical Minerals Facility.
- Housing affordability: The AUD 2 billion Local Infrastructure Fund aims to support enabling infrastructure for up to 65,000 new homes, while AUD 100 million from the Housing Australia Future Fund seeks to improve housing for First Nations communities in remote areas.
- Environment: The Budget allocated AUD 250 million to establish a National Environment Protection Agency (NEPA), alongside targeted funding for faster approvals, circular economy initiatives, nature repair and conservation programs.
Why does it matter?
For many customers, policy certainty and government support are key external factors shaping sustainability strategies and investment decisions. The Federal Budget provides greater clarity on the policy direction ahead, embedding sustainability across a broad range of funding measures and reform initiatives.
These measures are likely to influence the pace and distribution of investment, with implications for Australia’s decarbonisation pathway and infrastructure development.
Smart Energy Council conference spotlights renewables progress
The Smart Energy Council conference, held in Sydney in early May, highlighted ongoing growth in renewable energy, which exceeded 50 per cent of Australia’s electricity generation in Q4 2025 under favourable market conditions.
Speaking at the conference, Australia’s Minister for Climate Change and Energy, Chris Bowen, noted that wholesale electricity prices fell 12 per cent year-on-year in Q1 this year, driven by increased solar and battery penetration, and that total coal-fired generation declined more than 4 per cent year-on-year, while gas recorded its lowest quarterly average in 25 years.
Distributed energy has also experienced rapid uptake with more than 380,000 home batteries installed under the federal government’s Cheaper Home Batteries Program, representing 10.7 gigawatt hours of storage.
The Climate Change and Energy Minister also pointed to a sharp uptake of electric vehicles, which have reached 27.5 per cent of new vehicle sales as of April 2026. However, soaring fuel prices may also be contributing to the current surge in EV popularity.
Why does it matter?
While Australia is yet to fully achieve a structural shift in the energy system, the trends highlighted during the conference indicate Australia’s energy transition has reached a meaningful milestone for renewable electricity generation. However, system dynamics remain complex, marked by pricing volatility, curtailment and the evolving role for thermal generation in the National Electricity Market (NEM).
The next phase of the transition is increasingly focused on system integration. Periods of high renewable output are also associated with more frequent low or negative pricing, reflecting supply-demand mismatches and network constraints. In this context, battery storage and other firming technologies are playing a growing role, helping to moderate price volatility and reduce curtailment over time.
Electrification trends are also beginning to play a role. Growing uptake of electric vehicles introduces a new source of flexible demand, with the potential to absorb excess renewable generation through smart charging and, over time, support system balancing.
New methods build on ACCU reform
Farmers, businesses and First Nations communities look set to benefit from new and updated carbon crediting methods under the Australian Carbon Credit Units (ACCU) scheme.
Key developments announced by the Federal Government include the introduction of two new savanna fire management methods. These methods enable more accurate crediting of strategic fire practices, by recognising carbon stored in specific types of savanna vegetation. They build on long-established First Nations land management approaches, particularly the use of low-intensity “cool” burns in the early dry season, which help reduce the risk of unplanned, high-intensity bushfires and associated emissions.
Australian farmers may gain new opportunities to earn carbon credits through revisions to an ACCU method being developed by Meat and Livestock Australia. The updated method would incorporate the latest science on methane-reducing feed additives for livestock, building on the Beef Cattle Herd Management method, which expired in September last year.
The Australian Resources Recovery Council is also updating waste and resource recovery methods aimed at increasing diversion of mixed solid waste from landfill and supporting greater production of fertilisers and biofuels.
Why does it matter?
The introduction of these new methods builds on broader reform of the ACCU Scheme by expanding its reach into sectors where direct decarbonisation is more challenging, such as agriculture and waste management, while embedding cultural and economic benefits for First Nations peoples via the new savanna fire management methods.
The expansion of ACCU methods also represents opportunities for diversified revenue streams and risk-mitigation tools across the agricultural, waste and resource recovery sectors, and signals continued government investment in market-based mechanisms to support Australia's net-zero transition.
Broader reform of the ACCU Scheme was explored in the February/March issue of Sustainability Impact.
Safeguard Mechanism data insights
The release of the 2024–25 Safeguard Mechanism data last month provides a clearer picture of how Australia’s largest industrial facilities are navigating tightening emissions constraints.
The data shows that while covered emissions declined modestly by 2.3% over the year, facilities collectively surrendered 13.4 million units, including 10.8 million Australian Carbon Credit Units (ACCUs) and 2.6 million Safeguard Mechanism Credits (SMCs), reflecting the increasing pressure of declining baselines.
A notable shift this period is the stronger reliance on offsets. ACCU usage rose materially compared to 2023–24, pointing to a growing dependence on purchased abatement to manage excess emissions, rather than reductions delivered on-site. SMC issuance declined, suggesting fewer facilities were able to outperform their baselines by a meaningful margin.
For facilities where ACCU surrender exceeded 30% of baseline obligations, disclosure requirements have shed further light on the underlying drivers. Explanations pointed to the inherent challenges of decarbonisation, particularly for greenfield projects and assets in ramp-up phases, the lag between capital investment and realised emissions reductions, constrained access to commercially viable abatement technologies, and site-specific or infrastructure limitations.
Why does it matter?
The Safeguard Mechanism covers facilities responsible for around 30 per cent of Australia’s carbon emissions, and the 2024–25 data shows tightening baselines are starting to place limits on industrial pollution in line with Australia’s 2030 and net-zero targets.
Declining baselines are driving structural decarbonisation by reducing the ‘emissions headroom’ - the gap between a facility's allowed emissions limit and its actual current emissions. However, the combination of modest on-site emissions reduction and increased ACCU use suggests many facilities are still relying on carbon units while industrial decarbonisation technologies scale up.
These findings will inform the 2026–27 Safeguard Mechanism review, which will assess whether current policy settings are strong enough to meet Australia’s emissions targets and Paris-aligned commitments, or whether additional constraints or incentives for industrial decarbonisation are required to accelerate progress.
INNOVATION
Battery recycling system gains support
Groundbreaking lithium-ion battery recycling technology has gained significant backing with WA recycling startup Renewable Metals raising AUD 12 million in an oversubscribed Series A funding round led by the Clean Energy Finance Corporation (CEFC) and managed by Virescent Ventures. This brings total funding secured to more than AUD 38 million since inception, including support from Australian and UK governments.
Renewable Metals has developed a patented alkali-based hydrometallurgical process that can achieve more than 95 per cent recovery of lithium, cobalt, nickel, copper and manganese from lithium-ion batteries. This includes up to 30 per cent more lithium recovered than conventional acid-based methods, at lower cost and with less environmental impact.
Its battery recycling system can handle multiple lithium-ion battery types and input formats, making it adaptable across various battery markets and waste streams. The latest funding supports continuous operations at the company’s demonstration plant in Kewdale WA, a Front End Engineering and Design (FEED) study for its first commercial facility in the NSW Hunter region, and an expansion of its team to strengthen technology, product quality, feedstock flexibility and support growth.
Why does it matter?
Renewable Metals’ technology is a key innovation in the circular economy.
The recovery of critical minerals from end-of-life batteries is emerging as a key sovereign capability as EV and battery storage uptake accelerates. However, lithium-ion battery recycling capacity is currently concentrated in China, with large volumes of battery waste exported offshore for processing.
Developing domestic recycling capacity would not only strengthen Australia’s critical minerals supply chains but also reduce reliance on overseas processing and advance circular economy objectives by recovering valuable materials for reuse. This aligns with the Federal Government’s AUD 5 billion Critical Minerals Facility, as well as the AUD 17 million committed to circular economy policy in this year’s Budget, plus broader efforts to build more resilient, lower-emissions industrial supply chains.
WESTPAC IN ACTION
Climate adaptation and resilience in focus
Is climate adaptation and resilience the next frontier for sustainable finance? This question was explored at a recent Westpac customer event, where industry experts discussed the challenge of pricing climate risk and how escalating natural disasters are driving investors to look for resilience. Westpac IQ features a wrap-up of the event, plus insights on the business case for adaptation in the real estate and healthcare sectors. Read it here.
Sustainable Finance Market Update Q1 2026
Catch up on recent market news and insights across international and domestic sustainable finance landscape in Westpac IQ’s recap of Q1 2026, available here.
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