The 2025 federal election marks a pivotal moment for Australia’s energy transition and climate policy. With a strengthened majority, the Labor government is expected to accelerate decarbonisation and provide greater policy certainty. We explore what this means for renewable energy and carbon market participants.
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The 2025 Australian federal election has brought a wave of optimism for the energy transition and climate policy, with the Labor Party securing a historic majority.
This victory not only marks a significant shift in the political scene but also creates a buoyant outlook for renewable energy and carbon markets.
It affirms Labor’s commitment to achieving 82% renewable energy by 2030, while reinforcing that nuclear energy remains off the table for the foreseeable future, following its rejection at the ballot box.
In this article, we delve into the implications of Labor's majority win for energy and carbon markets, the anticipated impact of Australia's new 2035 Nationally Determined Contribution (NDC), and the critical role of the energy sector in achieving these ambitious climate goals.
We also explore the expected intensification of decarbonisation mandates under the Safeguard Mechanism, the likely introduction of a carbon border adjustment mechanism (CBAM), and other key initiatives aimed at driving Australia's transition to a low-carbon future.
Whether you're a developer, investor, buyer, corporate, or trader in renewable energy or carbon markets, this article provides valuable insights into the opportunities and challenges that lie ahead.
The landslide Labor victory will see Prime Minister Anthony Albanese govern Australia in the country’s 48th Federal Parliament. A likely increase of at least 13 seats from the previous term to more than 90 Lower House MPs means Labor stands to govern with an historic majority, in contrast to the minority government predicted by many polls in recent months.
Labor’s decisive win in the 2025 election gives it a strong mandate to implement its agenda and is expected to have a buoyant influence on renewable energy and carbon markets. This was felt in the general sentiment and increased level of activity as markets opened on Monday morning.
However, the final seat count in both the House of Representatives and the Senate still matters, especially for energy and climate policy.
While Labor already has a majority, picking up more of the still-undecided seats would further strengthen its position in Parliament. This is important because energy and climate reforms are often long-term, complex, and politically contested. A larger majority gives Labor more confidence to pursue bolder, more ambitious policies, and makes it harder for future governments to reverse course.
These policies - like large-scale transmission upgrades, home battery subsidies, and emissions caps - require years of planning, investment, and regulatory change. A stronger electoral mandate also boosts private sector confidence, encouraging investment in renewables and clean technology by signalling policy stability.
Political commentators suggest that the repudiation of the Liberal Party at this election will force its entire ethos and policies to be reviewed – including the proposed nuclear policy spearheaded by Ted O’Brien MP, the Shadow Minister for Climate Change and Energy in the previous Coalition opposition.
The sweeping majority in the House of Representatives means that Labor holds a strengthened mandate to carry out its policies over the coming term and provides confidence and stability in the ongoing policy direction for carbon and energy markets. The diminished ranks of the opposition threaten its viability as a serious alternative for the foreseeable future.
Though the makeup of the new Senate is not yet confirmed, it appears that Labor is on-track to improve its representation in the Upper House, increasing numbers from 25 seats in the previous parliament to at least 28.
Notably, this would not enable the party to turn bills into law without collaboration, as a majority of the Senate’s 76 seats are required to pass a bill. At the time of writing, the Coalition stands to shed approximately 4-6 senators from its ranks, from 30 in the last parliament to around 24-26.
Markets participants will be closely monitoring the impact of increased representation of Labor and the Greens in the Senate - particularly as it may shape the anticipated update to Australia’s Nationally Determined Contribution (NDC) under the Paris Agreement.
The energy and climate policies that Labor took to the election are well known, but the scale of ambition will rest on the next NDC.
The government is expected by the international community and the UN to announce a 2035 NDC that is more ambitious than the current 2030 target. This is a significant win for the climate movement as even the current target was at risk if the Coalition was elected to power.
The current target of 43% reduction by 2030 on 2005 emissions levels could become anywhere in the range of 60-75% on 2005 levels by 2035, putting Australia on track with peers with similar economic conditions and commit the country to its fair share of decarbonisation to limit global temperature increases.
This level of ambition would require a comprehensive and coordinated effort across all sectors.
The new NDC will therefore set the stage for the final detail behind Labor’s climate and energy policies and initiatives. The electricity sector itself will need to continue to play a significant role, as will the country’s largest emitters under the Safeguard Mechanism.
The likely increase in Australia's NDC will require economy-wide decarbonisation, with the energy sector continuing to play a pivotal role in this transition.
Electrification will become even more critical in the coming years. The shift towards electric vehicles, electrified industrial processes, and renewable energy sources will be essential to reduce emissions across various sectors.
However, it is likely that, once the election dust settles, it will become evident that the electricity sector is currently not doing enough to meet these demands.
To address the current renewable energy bottlenecks, several policies and initiatives will need to be implemented. The current challenges include slower than desirable development of large-scale renewables and storage due in part to slow environmental and planning approvals, and slow development of renewables transmission network augmentation including increases in interconnection and development of Renewable Energy Zone infrastructure.
One key measure is the expansion of the Rewiring the Nation Fund, which aims to upgrade and expand the electricity grid to accommodate more renewable energy. This will be crucial in ensuring that renewable energy can be efficiently transmitted and distributed across the country.
Another key measure will be the completion of the Nelson Review of the National Electricity Market Wholesale Market Settings and implementation of recommendations.
A standout initiative is the $2.3 billion Cheaper Home Batteries Program, set to roll out in July. This scheme aims to make home batteries more affordable and may introduce certification like the Small-scale Technology Certificates (STC) scheme that revolutionised the solar industry. A market-based approach could drive significant uptake of home batteries, much like the solar boom a decade ago.
Investment in utility-scale batteries is also likely to be a priority. These large-scale energy storage systems are essential for balancing supply and demand, especially as the share of intermittent renewable energy sources like wind and solar increases.
Additionally, emerging certification frameworks such as Renewable Energy Guarantees of Origin (REGOs) and guarantee-of-origin schemes will play a vital role in promoting transparency and accountability in the renewable energy market.
Development and implementation of the Green Aluminium Production Credit scheme and similar schemes to support development of green metal and other industries will also be important to increasing the adoption of renewable energy in Australia.
We can expect the next term of government to intensify decarbonisation mandates in the Safeguard Mechanism and ACCU market to complement its energy transition policies.
This may include increasing the annual emissions decline rates for facilities covered under the Safeguard Mechanism, steepening the decarbonisation trajectory for sectors such as oil and gas, transport, waste, mining, and manufacturing.
Decarbonisation efforts are expected to be supported through the continuation of Powering the Regions Fund grants for hard-to-abate industries. The recently announced Low Carbon Liquid Fuels scheme will further support the sustainable fuels industry and be critical for the decarbonisation of the transport sector as well.
Looking to policy trends abroad, stronger mandatory decarbonisation targets impacting internationally trade-exposed industrial goods such as cement, fertiliser, and aluminium will amplify the need for policy measures to protect Australian industry from being unfairly disadvantaged compared to their overseas counterparts.
As such, we can expect this term of government, with a strengthened NDC and potentially steeper Safeguard baseline decline rates following the scheduled 2026/27 Safeguard Mechanism review, that industry will call for the implementation of a carbon border adjustment mechanism (CBAM).
Stronger decarbonisation obligations will also require the government to improve the functionality and efficiency of the ACCU market, particularly the process and timelines for developing new ACCU methodologies.
This is all within the context of Australia continuing its bid to host COP31 in 2026, with Adelaide selected as the city to host the annual UN climate conference if Australia’s bid is successful against Turkey.
In terms of nature, we can expect Australia to continue its progress towards delivering the Nature Positive target by 2030. In the last three years, we have established the Nature Repair Market (NRM), its first methodology, the Biodiversity Assessment Instrument, and the country’s first National Ecosystem Accounts. Together, these solutions build the foundations for scaling nature accounting and investments.
A Labor majority win means the continuation of the Saving Australia’s Bushland Program, with an investment of $250 million towards projects under the NRM. We also hope to see the resumption of developments for the Nature Positive Bill 2024, which plans to establish a nature watchdog called Environment Protection Australia and strengthen compliance measures.
The 2025 federal election marks a pivotal moment for Australia’s energy transition and climate policy.
With a strengthened mandate, the Labor government is poised to accelerate decarbonisation across the economy—anchored by a more ambitious 2035 NDC, expanded renewable energy infrastructure, and enhanced market mechanisms.
Yet, realising this vision will require overcoming persistent bottlenecks in planning, transmission, and investment.
As Australia positions itself as a global climate leader, and potential host of COP31, the alignment of policy certainty, private sector confidence, and regulatory reform will be critical.
The opportunity is clear: to deliver the transformation needed for our clean energy future and build a resilient, low-carbon economy. Now is the moment to align ambition with action and realise the economic and environmental dividends that lie ahead.
If you have any questions about what any of these developments mean for your organisation or strategy, get in touch with our team of energy and carbon market experts. We'd love to help.
Power shift: What Labor’s election victory means for Australia’s energy and carbon markets
