About Better Futures Australia

Better Futures Australia (BFA) is a cross-sectoral alliance that strengthens and accelerates climate leadership across the real economy by uniting business, local government, agriculture, energy, First Nations organisations, finance, health, social services, unions, and academia. Our network of over 300 organisations represents over seven million Australians across economic and societal sectors who are leading the rollout of climate solutions in their communities and industries.

Throughout 2025, we have maintained ongoing dialogue with the Government on climate policy. This included coordinating engagement from business leaders, local governments, and transport stakeholders calling for climate action aligned with a 1.5°C pathway, fossil fuel phase-out, and just transition; participating in policy consultations on sectoral decarbonisation pathways; and convening cross-sector dialogues, such as roundtables on COP Action Agenda implementation.

Better Futures Australia Pre-Budget Submission 2026-27

30 January 2026

The 2026-27 Budget will prioritise fiscal sustainability. We support this. Inaction on climate will cost Australia’s economy over $19 billion in lost agricultural and labour capacity by 2030 alone while the annual damage by extreme weather events will cost $80 billion. True fiscal sustainability requires addressing climate risks and restructuring revenue streams away from fossil fuel dependence.

As Australia co-hosts COP31 with Türkiye and Pacific partners, this Budget is an opportunity to demonstrate that climate investment strengthens fiscal sustainability, while backing international commitments with concrete domestic action.

1. Revenue Reform for Climate Action

In 2024-25, Australia's fossil fuel subsidies reached a record $67 billion across the forward estimates period, representing a significant cost to taxpayers. Reforming or eliminating these subsidies represents a significant opportunity to strengthen fiscal sustainability while demonstrating commitment to phasing out fossil fuels, a core demand from Pacific partners, the international community, and domestic stakeholders alike.

1. Polluter Pays Levy: Implement a levy on major industrial polluters and fossil fuel exporters for carbon pollution, with a portion of proceeds returned to households and small businesses to offset energy cost increases. Covers approximately 80% of Australia's emissions targeting approximately 140 sites (fewer than 60 companies) plus importers. Raises average revenue of $22.6 billion annually between 2026 and 2050, with approximately 50% returned to households in first decade.
   
   
2. Gas Revenue Reform: Implement one of the following approaches to ensure Australians receive fair return from gas resources:
   
   
   • Petroleum Resource Rent Tax Reform (PRRT): Replace broken PRRT with transparent 25% export levy on gas, raising more than $17 billion annually. The current PRRT system allows gas exports worth $170 billion to pay no royalties and minimal tax, with gas exporters receiving more than half their gas royalty-free from the Australian government; or
     
     
   • Fair Share Levy: Norway-style levy on large profits earned from Australia’s gas resources. Raises average revenue of $13 billion annually between 2026 and 2050.
     
     
3. Fuel Tax Credit Scheme (Fossil Fuel Diesel Rebate): Cap at $20 million annually per company to end unnecessary billions flowing to big miners while protecting small businesses and agriculture. This reform stops coal and iron mining subsidies that currently cost taxpayers billions annually and undermines climate policy.

Globally, for every dollar spent on nature protection, $30 is spent destroying it. Ending fossil fuel subsidies is necessary to address this fiscal imbalance.

These reforms collectively could raise over $40 billion annually, demonstrating Australia is serious about fossil fuel phase-out, signalling to investors that fiscal policy aligns with climate goals, and building long-term economic resilience through the polluter pays principle.

Revenue from these reforms should prioritise climate adaptation for local governments and Natural Resource Management organisations, clean transport infrastructure, industrial decarbonisation, and just transition support.

2. Priority Funding Recommendations

We recommend the following priority investments:

Local Government Adaptation Fund

$400 million annually for councils with direct allocation based on climate risk. Supports infrastructure upgrades, urban greening, nature-based solutions, and community planning.

The National Climate Risk Assessment revealed acute vulnerability yet the National Adaptation Plan provided no new funding. Local governments bear the brunt of climate impacts while lacking resources to build resilience.

Nature-Based Solutions for Disaster Resilience

$20 million for 20 nature-based solutions trials by regional NRM organisations delivering proof-of-concept for landscape-scale disaster resilience, climate mitigation and adaptation.

$94.5 million ($18.9 million per annum to 2029-30) to scale up NRM regional processes for protection, adaptation, and recovery of biodiversity and natural capital in extreme weather events.

Investing $1 in proactive disaster risk reduction returns $2-$11 in savings on post-disaster recovery. Nature-based solutions provide low-cost, high-impact alternatives to grey infrastructure while delivering regional employment, health, and biodiversity benefits.

Triple International Climate Finance

$11 billion over 2025-2030, new and additional funding to aid budget (not rebadged Official Development Assistance). Increase development projects with principal climate focus to 30% of ODA by 2030.

As COP31 co-hosts, Australia’s credibility depends on concrete support for climate-vulnerable nations. The failure of developed countries to meet climate finance obligations undermines trust and progress across all COP negotiating streams. Pacific partners whose survival depends on 1.5°C need to see concrete support, not just words.

First Nations Ranger Programme Expansion

Double the number of First Nations rangers, establish fund for ranger training and capacity building, substantially increase (at least double) funding for Indigenous Protected Area programme, ensure equal employment opportunities for female rangers by 2030.

Indigenous land stewardship delivers direct climate solutions and mitigation pathways through biodiversity conservation, carbon sequestration, cultural revitalisation, and economic empowerment.

Electrify Everything Loan Scheme (EELS)

$2.8 billion over three years (2024-2027) to establish universal household electrification financing through government-backed, property-secured loans repayable when property is sold or by choice. Includes EELS administration ($300M), concessional loans ($2B), Zero Emission Communities demonstration projects ($340M), Level 2 EV charger networks ($95M), and National Electricity Market rule review ($10M), as costed by the Parliamentary Budget Office.

Current programmes exclude low-income households and those without access to traditional credit. EELS removes financial barriers regardless of income. Fully electrified households save $1,630 annually on energy bills, $4,100 including electric vehicles; and reduces household energy emissions by 64%. Modelling shows consumers save $1.7 trillion by 2050, with real budget cost just 1/20th of consumer savings.

3. Supporting Sectoral Recommendations and Considerations

The following recommendations represent important cross-sectoral policy priorities that complement the investments listed in Section 2.

Climate Adaptation and Resilience

• Expand Disaster Ready Fund to meet demand for community-led adaptation.
• Fully fund National Health and Climate Strategy implementation.
• Direct Safe Work Australia to develop new Work Health and Safety (WHS) regulations that lay out employers’ obligations to protect workers from extreme heat, poor air quality, climate disasters, and vector-borne illnesses.
• Update National Construction Code to include climate resilience and fund resilience retrofits of public buildings including schools, social housing, and aged care.
• Fund Coalition for High Ambition Multilevel Partnership (CHAMP) implementation (multi-level governance coordination) delivering on COP28 commitment.
• Fund research into safe, scalable nature-based climate solutions including carbon sequestration, ecosystem restoration, and climate resilience measures through CSIRO and research institutions.

Transport Decarbonisation

Transport accounts for 22% of Australia’s emissions and is one of few sectors where emissions continue rising.

• Strengthen Clean Car Discounts, New Vehicle Efficiency Standards, and the National Electric Vehicle Strategy; reject electric vehicle road user charges.
• Expand electric vehicle incentives for low-income households and regions; support zero-emission specialist vehicles; and fund heavy vehicle electrification.
• Expand infrastructure investment for electric vehicle charging stations, expanding the integration between solar PVs, batteries, and electric vehicles.
• Fund zero-emission buses, rail electrification, cycling and walking infrastructure (mode shift priority).
• Incentivise anti-idling policies and the development of a federal Clean Air Act.
• Support intermodal freight hubs and new freight rail infrastructure.

Built Environment and Urban Planning

• Support transport-corridor oriented development, prioritising density in urban areas around public transport, minimising urban sprawl while integrating transport and land-use planning.
• Improve home energy efficiency standards and the provision of green spaces in urban heat centres. Estimates project heatwaves reduce labour productivity by about $8.7 billion yearly, or about 0.4% of GDP.

Household Electrification

• Continue funding popular subsidies and incentives like Cheaper Home Batteries, New Vehicle Efficiency Standards, and FBT EV exemption to drive electrification more broadly.
• Work with states and territories to introduce minimum standards for rentals requiring electrification on appliance replacement.
• Expand means-tested assistance ensuring low-income households and renters can access solar, batteries, heat pumps, and efficient appliances.
• Partner with local government and community organisations to ensure that hard-to-reach households are supported to access upgrades.
• Address equity gap through community engagement alongside financial support. Current programmes favour households with upfront capital: owner-occupiers report 50% solar uptake vs 18% for renters and social housing residents, with low-income households locked out despite potential annual savings of $3,000-$6,000.

Health and Climate

• Fund health ecosystem (professional networks, community organisations, workforce training) beyond the Australian Centre for Disease Control (CDC) coordination unit.
• Fast-track Australian association to Horizon Europe pillar on environment and health research; establish ongoing NHMRC targeted calls.
• Support health sector decarbonisation (emissions monitoring, renewable energy integration).
• Integrate health in all policies across transport (air quality), adaptation (heat health), energy (fuel poverty), nature (mental health).

Green Industry and Just Transition

• Fund Net Zero Industrial Precinct Programme through unallocated budget within National Reconstruction Fund money for first-of-a-kind green commodities (iron, steel, aluminium), and breakthrough clean industries.
• Emissions-intensity requirements for public infrastructure procurement.
• Ensure all projects integrate First Nations co-governance, local employment, benefit-sharing, worker transition support.
• Invest in and support the Collie (WA) Just Transition program through targeted net zero industry attraction or industry enabling funding.

COP31 Partnership and Implementation

• Fund WHO (World Health Organisation) climate and health meetings in Australia (March/August 2026).
• Support implementation of Belém Action Mechanism for just transition under the Just Transition Work Programme.
• Support Cities and Hubs region leadership; Pre-COP partnership with Pacific (October 2026).
• Ensure increased First Nations blue zone accreditation and inclusion in official Australian delegations at COP31. Fund support for Australian First Nations leaders to attend and participate as rights-holders, not observers.
• Increase funding and support for leaders of impacted Pacific communities to attend COP31, including increased blue zone accreditation for frontline communities.
• Align with Pacific demands: fossil fuel phase-out, grant-based finance, loss and damage, adaptation funding.

Intergenerational Fairness

• Reform Treasury budget costings to include forecast costs of future disasters and credible second-order savings from near-term adaptation investments. Allow departments to fund adaptation proposals with demonstrated long-term savings including across portfolios.
• Review the social discount rates for climate projects, factoring in long-term social and environmental benefits of project implementation, while recognising climate inaction as a growing contingent liability for the Commonwealth.
• Establish mechanisms assessing budget decisions' long-term impacts on climate, natural capital, and wellbeing.
• Recognise that fossil fuel subsidy reform generates revenue for climate investment without spending cuts that burden future generations.

Reforming fossil fuel subsidies and redirecting revenue toward strategic climate investments strengthens fiscal sustainability while positioning Australia for success in a decarbonising global economy. Aligning the federal budget with a 1.5°C pathway is an economic imperative that demonstrates our commitment as COP31 co-hosts.

We welcome the opportunity to discuss these recommendations with Treasury and can provide further information upon request.

Sincerely,

Jordan Hodgson

Acting Director, Better Futures Australia

References

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