CPD’s submission to the proposed design of the Net Zero Fund – a sub-fund of the government’s National Reconstruction Fund – calls for the fund to invest in the next generation of innovation in new technology and business models, adopt more innovative approaches to financing, and incorporate mechanisms that ensure a fair return for society.
CPD’s recommendations aim to ensure the fund, and more broadly the government, focuses on investing in new technologies that catalyse new, green industries with the potential to make Australia a renewable energy superpower.
CPD’s submission to the Net Zero Fund makes four key recommendations with a focus on the need to invest in innovations in new technologies and business models.
The Net Zero fund was announced alongside Australia’s 2035 climate target as a $5 billion carve out of the $15 billion National Reconstruction Fund. The fund is aimed at:
CPD makes the following recommendations, which align with our Ideas to Industries report:
1. Funding decisions through the Net Zero Fund should align with the Commonwealth Government’s National Interest Framework. The NRFC should prioritise the deployment of new technologies and new business models.
2. The investment mandate and risk appetite for the Net Zero Fund should enable it to aggressively catalyse new economic activity:
3. The mandate for the Net Zero Fund should encourage it to pursue concessional lending and innovative financing – framing these as expected and necessary activities, rather than framing any departure from commercial-style lending as a last resort.
4. The Net Zero Fund should make use of profit-sharing mechanisms, to increase the potential for funding continuity and ensure a fair return to society.
Australia faces an urgent need to adapt to a rapidly changing global economy, where climate targets reduce demand for fossil fuels and emissions-intensive products, on which Australia’s economy has relied for decades. Our level of economic complexity – a measure that typically reflects a country’s ability to absorb shocks and respond dynamically to global changes – is currently 105th out of 145 countries, just behind Botswana and Zambia. Building new industries to diversify the economy depends on investment across the different stages of innovation, from R&D to commercialisation in research, innovation, and supporting the development of new markets.
There is an important role for government to play here in addressing gaps left behind by generally risk-averse private sector finance. Public spending via vehicles like the Clean Energy Finance Corporation and National Reconstruction Fund currently favours technologies that are already commercially viable or most of the way there – therefore generating a safe return for the government – but the greatest need for capital is at the earlier stages of innovation. The Net Zero Fund should be enabled to take more risk to help deliver on our goals to strengthen economic resilience and accelerate the net zero transition.
