Industry Research and Development (Carbon Capture Technologies Program) Amendment Instrument 2026

EXPLANATORY STATEMENT

Issued by the authority of the Minister for Climate Change and Energy

Industry Research and Development Act 1986

Industry Research and Development (Carbon Capture Technologies Program) Amendment Instrument 2026

Purpose and Operation

Section 33 of the Industry Research and Development Act 1986 (the Act) provides a mechanism for the Minister to prescribe programs, by disallowable legislative instrument, in relation to industry, innovation, science or research, including in relation to the expenditure of Commonwealth money under such programs.

The Minister for Industry and Science has delegated the Minister’s power under subsection 33(1) to the Minister responsible for administering the Climate Change Act 2022 under subsection 33(6) of the Act to prescribe Carbon Capture Technologies Program (the Program). This is currently the Minister for Climate Change and Energy.

The statutory framework provided by section 33 of the Act enables a level of flexibility to provide authority for Commonwealth spending activities in relation to industry, innovation, science and research programs. This allows the Government to respond quickly and appropriately to the need to implement innovative ideas and pilot programs on an ongoing basis and as opportunities arise. Prescribing programs in legislative instruments provides transparency and parliamentary oversight of Government programs and spending activities, whilst reducing administrative burden on the Commonwealth.

Once a program is prescribed under section 33, subsection 34(1) allows the Commonwealth to make, vary or administer arrangements in relation to activities under the prescribed program. Arrangements may include contracts, funding agreements or other arrangements, and may provide for money to be payable by the Commonwealth to one or more third parties. The power conferred on the Commonwealth by subsection 34(1) may be exercised on behalf of the Commonwealth by a Minister or an accountable authority of a non-corporate entity, or by their delegate (under section 36).

The program was prescribed in the Industry Research and Development (Carbon Capture Technologies Program) Instrument 2023 (the Principal Instrument) under section 33 of the Act. The funding for the Program was secured through the Department of Climate Change, Energy, the Environment and Water (the Department) 2022-23 Budget. The Program provides $32.6 million over five years as part of the Australian Government’s commitment to support research, development and demonstration of emerging and priority carbon dioxide capture, carbon dioxide transport and carbon dioxide utilisation technologies.  

The Industry Research and Development Amendment (Carbon Capture Technologies Program) Instrument 2026 (the Amendment Instrument) amends the Principal Instrument to enable the funding to support the research, development and demonstration for carbon dioxide capture, carbon dioxide utilisation and carbon dioxide removal technologies, including carbon dioxide storage technologies and other technologies that are integral to those technologies. These technologies are commonly referred to as “carbon management technologies”.

The amendment clarifies the purpose of the Program to:

• accelerate the development of emerging priority CO2 capture, utilisation, and removal technologies
• support research, development and demonstration to advance technological and commercial readiness of novel or emerging carbon capture, utilisation and removal technologies in hard-to-abate industries such as cement, chemicals and steel
• demonstrate verifiable permanence of CO2 sequestered via a range of utilisation applications
• support capability development in novel or emerging carbon removal technologies.

Funding authorised by the Principal Instrument comes from Program 1.1: Reducing Australia’s greenhouse gas emissions, Outcome 1, as set out in the Portfolio Budget Statements 2022, Budget Related Paper No. 1.3, Climate Change, Energy, the Environment and Water Portfolio (https://www.dcceew.gov.au/sites/default/files/documents/dcceew-2022-23-pbs.PDF) at page 23 and 36.

The Program is administered by the Department of Climate Change, Energy, the Environment and Water.

The Program is a competitive, merits-based grants program and will be delivered by the Business Grants Hub and in accordance with the requirements of the Commonwealth resource management framework, including the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and the Commonwealth Grant Rules and Guidelines 2024. 

To be eligible to apply for the program, applicants must propose a project aimed at researching, developing or demonstrating carbon dioxide capture, carbon dioxide utilisation and/or carbon dioxide removal technologies in Australia. Activities eligible for grant support may include those associated with design, construction, testing or research, development and deployment of such technologies.

Grant applications will be assessed based on merit criteria, which will include the alignment of proposed activities with program objectives, the capability and capacity of the applicant to deliver the activity outlined in the application and the impact that any grant support will have on the activity. 

Further information regarding the grant opportunity will be provided through grant opportunity guidelines. These guidelines will be published on business.gov.au and GrantConnect (grants.gov.au).  

Spending decisions will be made by the Program Delegate, who is responsible for administering the Program, taking into account the recommendations of an assessment against the Program guidelines. The Program Delegate is a Senior Executive Service (SES) officer who holds delegation under the relevant financial frameworks, including under the PGPA Act and sections 34 and 35 of the Act. The SES officer would be an appropriate person who would have relevant expertise in, and understanding of, the subject matter, and be able to perform relevant functions in accordance with the Commonwealth resource framework.

As the Program is an open competitive grant that supports the implementation of policy decisions made by the Government, the Program will not be subject to merits review. Merits review of the Program would not be appropriate as the grants allocate a finite amount of funding, from which all potential claims for a share of the resource cannot be met. Overturning an original decision not to provide a grant to an applicant would affect an allocation already made to another party, making merits review inappropriate for the Program.

The Administrative Review Council has recognised that it is justifiable to exclude merits review in relation to decisions of this nature (see items 4.11 to 4.15 of What decisions should be subject to merits review?).

Persons who are otherwise affected by decisions or who have complaints about the Program will be able to provide feedback to the Department. The Department investigates any complaints about the Program in accordance with its complaints policy and procedures. If a person is not satisfied with the way the Department handles the complaint, they may lodge a complaint with the Commonwealth Ombudsman.

Statement of the Relevance and Operation of Constitutional Heads of Power

For the purposes of subsection 33(3) of the Act, the Principal Instrument as amended by the Amendment Instrument specifies that the legislative powers in respect of which it is made are the following:

Trade and commerce power

Section 51(i) of the Constitution empowers the Parliament to make laws with respect to ‘trade and commerce with other countries, and among the states.

The Program will strengthen competitiveness for emissions intensive, trade exposed industries including hard‑to‑abate industrial sectors. By accelerating carbon management technologies the Program can support firms to remain competitive in global markets and maintain export viability.

Corporations power

Section 51(xx) of the Constitution empowers the Parliament to make laws with respect to ‘foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth’.

In Williams v Commonwealth (2014) 252 CLR 416 (Williams No 2), the High Court, considering section 32B of the Financial Management and Accountability Act 1997 (the FMA Act), held (at [50]) that:

A law which gives the Commonwealth the authority to make an agreement or payment of that kind is not a law with respect to trading or financial corporations. The law makes no provision regulating or permitting any act by or on behalf of any corporation.

However, the relevant provisions of the Act are substantially different to the provisions considered by the High Court in Williams No 2. Section 34 of the Act corresponds to section 32B of the FMA Act considered by the High Court in Williams No 2. However, the FMA Act contained no provision in terms equivalent to those of section 35 of the Act. Subsection 35(2) of the Act limits the arrangements made under section 34 so that, where a party to an arrangement made under section 34 is a constitutional corporation, the arrangement must be subject to a written agreement containing terms and conditions under which money is payable by the Commonwealth. The corporation must comply with the terms and conditions. The activities of the corporation are therefore regulated through the terms and conditions made under each agreement pursuant to subsection 35(2) of the Act.

Further, subsection 35(3) of the Act provides that the agreement must provide for circumstances in which the corporation must repay amounts to the Commonwealth.

Constitutional corporations will be eligible to receive benefits under the Program prescribed by the Principal Instrument, should they be successful in the grant process. The benefits conferred by the Program will be directed to assisting those corporations in the conduct of their ordinary activities (generally involving some aspect of carbon management such as carbon dioxide capture and utilisation). The Program will impose terms and conditions on those corporations under a grant agreement in accordance with section 35 of the Act, in relation to receipt of benefits under the Program. The terms and conditions will set out what the funding may be used for, and the circumstances in which it must be repaid.

External affairs powers

Section 51(xxix) of the Constitution empowers the Parliament to make laws with respect to ‘external affairs’. The external affairs power supports legislation implementing Australia’s international obligations under treaties to which it is party. Australia has obligations relevant to this Principal Instrument under the following treaties discussed below.

Australia is a party to the United Nations Framework Convention on Climate Change (UNFCCC) and has relevant obligations, particularly under Article 4 to address climate change and its impacts including by:

• formulating, implementing, publishing and regularly updating national, and where appropriate, regional programs containing measures to mitigate climate change by addressing anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol, and measures to facilitate adequate adaptation to climate change (Article 4.1(b));
• promoting and cooperating in the development, application and diffusion, practices and processes that control, reduce or prevent anthropogenic emissions of greenhouse gases in all relevant sectors (Article 4.1(c)); and
• adopting national policies and taking corresponding measures on the mitigation of climate change, by limiting its anthropogenic emissions of greenhouse gases and protecting and enhancing its greenhouse gas sinks and reservoirs (Article 4.2(a)).

The Kyoto Protocol also includes obligations for Australia to take action to reduce emissions. In particular, Article 10(b) requires parties to formulate, implement and report upon climate change mitigation and adaptation programs.

Australia is also a party to the Paris Agreement. Article 4 of the Paris Agreement requires Parties to ‘aim to reach global peaking of greenhouse gas emissions as soon as possible’ (see Article 4.1) and provides that ‘each Party shall prepare, communicate and maintain successive nationally determined contributions that it intends to achieve’ and ‘pursue domestic mitigation measures, with the aim of achieving the objectives of such contributions’ (see Article 4.2). Specifically, Australia’s most recent Nationally Determined Contribution is to reduce net national greenhouse gas emissions by 62-70 per cent below 2005 levels by 2035.

The Program seeks to encourage the research, development and demonstration of carbon management technologies to reduce and remove greenhouse gas emissions in Australia, especially in hard-to-abate sectors. These technologies have the potential to significantly reduce Australia’s emissions, contributing to treaty obligations. Applicants to the Program will be required to provide an assessment of the nature and quantity of emissions reduced through the proposed activity.

Power to grant financial assistance to States

Section 96 of the Constitution empowers the Parliament to ‘grant financial assistance to any State on such terms and conditions as the Parliament thinks fit’.

The Program may provide funding to a state government, agency or authority to undertake research, development and demonstration activities relating to carbon management technologies. 

Territories power

Paragraph 122 of the Constitution empowers the Parliament to ‘make laws for the government of any territory’.

The Program may provide funding to a territory government, agency or authority to undertake research, development and demonstration activities relating to carbon management technologies. 

Authority

Section 33 of the Act provides authority for the Amendment Instrument.

Consultation

In accordance with section 17 of the Legislation Act 2003, the Attorney-General’s Department and the Department of Industry, Science and Resources have been consulted on the Amendment Instrument.

The Department has previously engaged with industry and research stakeholders; Commonwealth, state and territory governments; and international agencies regarding the Program. As the Program has already undergone extensive consultation, it was considered unnecessary to undertake additional consultation in relation to clarifications made by the Amendment Instrument. 

Other

Further details on the Amendment Instrument are set out in Attachment A.

The Amendment Instrument is compatible with the human rights and freedoms recognised or declared under section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. A full statement of compatibility is set out in Attachment B.

ATTACHMENT A

Details of the Industry Research and Development (Carbon Capture Technologies Program) Amendment Instrument 2026

Section 1 – Name of Instrument

1.       This section specifies the name of the Amendment Instrument as Industry Research and Development (Carbon Capture Technologies Program) Amendment Instrument 2026 (the Amendment Instrument).

Section 2 – Commencement

1.       This section provides that the Amendment Instrument commences on the day after registration on the Federal Register of Legislation.

Section 3 – Authority

1.       This section specifies that the Amendment Instrument is made under section 33 of the Industry Research and Development Act 1986 (the Act).

Section 4 – Schedules

1.       This section provides that the Industry Research and Development (Carbon Capture Technologies Program) Instrument 2023 (the Principal Instrument) is amended in accordance with the Schedule to the Amendment Instrument.

Schedule 1 – Amendments

Item 1 – Section 4

1.       This section inserts a new defined term and definition “carbon management technologies” into the Principal Instrument. It is intended that defined term carbon management technologies includes carbon dioxide capture, carbon dioxide utilisation and carbon dioxide removal technologies, including carbon dioxide storage technologies and other technologies that are integral to those technologies.

Item 2 – Subsections 5(2) and (3)

1.       This item amends subsection 5(2) to enable the program to provide funding to support the research, development and demonstration of carbon management technologies.

1.       This item also amends subsection 5(3) to ensure the purpose of the program accelerates the research, development and demonstration of emerging and priority carbon management technologies to:

• broaden the application of carbon management technologies to include hard-to-abate sectors (including the cement, chemicals and steel sectors), other non-energy industrial emissions and negative emissions technologies; and
•   assist in reducing the costs of such technologies.

Item 3 – Section 6

1.       This item replaces section 6 which, specifies the powers of the Parliament for the purposes of subsection 33(3) of the Act, to include trade and commerce with other countries, and among the States (within the meaning of paragraph 51(i) of the Constitution.

1.       The item continues to specify the following powers that were included in the Principal Instrument:

• foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth (within the meaning of paragraph 51(xx) of the Constitution);
• external affairs (within the meaning of paragraph 51(xxix) of the Constitution) as it relates to measures that would assist Australia to meet its obligations under one or more of the United Nations Framework Convention on Climate Change (particularly Article 4); the Kyoto Protocol (particularly Article 10), or the Paris Agreement (particularly Article 4); 
• matters in respect of which this Constitution makes provision until the Parliament otherwise provides (within the meaning of paragraph 51(xxxvi) of the Constitution) together with section 96 of the Constitution
• the government of a Territory (within the meaning of section 122 of the Constitution)

Item 4 – Section 7

1.   This item repeals the existing section 7 and substitutes a new section 7 which specifies the eligibility criteria relating to the program for the purposes of subsection 33(4) of the Act.

1.   This item provides that the eligibility criteria relating to the program includes the requirement that research, development and demonstration in relation to, or for the purposes of:
   • supporting fossil fuel production or fossil fuel energy generation; and
   • supporting the extraction of coal or natural gas, including via enhanced petroleum recovery or other means;

are not eligible activities for funding under the program. This is because the intent of the program is to broaden the application of carbon management technologies to include hard-to-abate sectors (including the cement, chemicals and steel sectors), other non-energy industrial emissions and negative emissions technologies.

ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Industry Research and Development (Carbon Capture Technologies Program) Amendment Instrument 2026

The Industry Research and Development (Carbon Capture Technologies Program) Amendment Instrument 2026 (Amendment Instrument) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Amendment Instrument

The purpose of the Amendment Instrument is to amend the Industry Research and Development (Carbon Capture Technologies Program) Instrument 2023 (the Principal Instrument) to extend the Carbon Capture Technologies Program (the Program) to include broader carbon management technologies and update terminology. In particular the intention is to enable funding to be provided to support the research, development and demonstration of carbon management technologies. The purpose is to accelerate the research development and demonstration or emerging and priority carbon management technologies to broaden the application of carbon management technologies to include hard-to-abate sectors (including the cement, chemicals and steel sectors), other non-energy industrial emissions and negative emissions technologies; and to assist in reducing the costs of such technologies.

Human rights implications

This Amendment Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Amendment Instrument is compatible with human rights as does not raise any human rights issues.

The Hon Chris Bowen MP

Minister for Climate Change and Energy