The latest Australian federal budget, handed down on Tuesday night, pledges unprecedented support to making Australia a “renewable superpower”. Yet a new gas strategy that preceded it promises to keep Australia and its Asian energy partners tethered to this fossil fuel for decades. While fiscal commitments now favour Australia’s greener energy engagement, Canberra should wind back broader regulatory support to gas. This would quicken the timeframe in which Australia might provide for both the energy security needs of Asia and the climate security needs of the Pacific.
Language in the new “Future Gas Strategy” suggests it is a significant foreign policy win. But this only seems true if one considers the national interest as lying in the narrow provision of the improved bankability of export LNG projects. The alternative strategic argument that has most supported the strategy – that Australian gas is uniquely suited to enhancing Asian energy security and even decarbonisation – is deeply flawed.
To give the government some credit, it has pledged no new public finance will flow from its new strategy. It has also clearly wrestled with thorny questions on climate and meeting domestic energy needs. In the end, however, the strategy clearly incentivises sustained use of a key fossil fuel when momentum should be heading in the opposite direction. It neglects any serious consideration of redirecting export-destined gas to domestic use, in favour of developing new fields. In pledging recognition of the relevance of gas “through to 2050 and beyond”, it has created a self-fulfilling prophecy for welcoming investment over this period. Despite its claims to the contrary, Canberra has also done this without an assured pathway for managing the emissions associated with this.
There is nothing inherently “secure” about LNG or any imported fossil fuel.
Australia’s major LNG markets, led by Japan, have ably abetted domestic industry in lobbying for these outcomes. Japanese officials, energy executives and think tankers have, have in recent years denounced what they consider to be growing Australian impositions on gas for climate and other reasons. South Korea and a smattering of other Asian countries have also been strong Australian critics.
These Asian countries have mostly foregrounded their energy security concerns around Australian gas. Some have also positioned Australian gas as central to their decarbonisation journeys. The head of Japan’s Inpex, Takayuki Ueda, outlined the totality of Asian concerns in March 2023. He argued Canberra curtailing LNG would force the region to use more coal, turn to authoritarian fossil fuel providers, and even threaten “the rules-based international order” and international peace.
Despite the histrionics, the importance of energy security can’t be underestimated. It has taken on added salience in the chaos following Russia’s war in Ukraine. The key role that Asian energy customers, Japan in particular, play in broader regional affairs has made it difficult for Canberra to ignore such pleas. Australian officials will thus be gladdened by Asia’s positive response to the new strategy.
Yet there is too much at stake to take past criticisms on face value. Closer inspection often finds them wanting. There is nothing inherently “secure” about LNG or any imported fossil fuel. The opposite is often true: while Europe saw some short-term carbon-intensive energy reversion post-Ukraine, its more substantial move was towards an accelerated transition. This has allowed it to more effectively decouple from Russia and develop more accessible and, in the longer run, likely more affordable domestic energy. Contrary to Ueda’s claims, there is also no proof that LNG pushes out coal in Asia. Research commissioned by Australian LNG exporter Woodside, indeed, contradicts this claim.
Also, in defiance of explanations, many Asian countries remain dependent on imported fossil fuels less because of geophysical difficulties in deploying renewables and more because of resolvable policy dynamics. A 2023 study found solar, wind, and batteries could generate 90% of Japanese power by 2035, lowering its power bill by 6% and nearly eliminating LNG and coal imports. Korean assessments produce similar findings. In both cases, the challenges appear more rooted in the influence of vested interests that depend on fossil fuels for their economic competitiveness.
More worrying still, some LNG importers are using, or at least planning to use, less gas. They are thus seeking Australian guarantees more to develop new markets than advance domestic energy security. Recent analysis has, for example, found Japanese utilities are likely oversupplied with gas for the foreseeable future and looking to market volumes elsewhere, including in Southeast Asia. As well as helping to cover Canberra’s shortfalls in public finance to Australian gas, Tokyo is ably supporting these endeavours, which also aid Japanese construction and technology firms.
Australia’s latest budget commits $22.7 billion to the “A Future Made in Australia” plan, to catalyse investment in export-focused green energy sectors such as renewable hydrogen, critical minerals, green metals, and renewable technologies. Australia will also look to build regional markets for these, with its Asian partners. Such efforts are vital to improving the national climate change response, which is of far more long-term strategic importance than guaranteeing fossil fuel investment security. Australia pivoting in this manner is particularly vital to existentially threatened Pacific countries, who have called for a rapid regional phaseout of all fossil fuels, with no special dispensation for gas.
Nobody seriously argues Australia might instantly guarantee the energy security of its Asian partners via renewable energy and green goods. But efforts such as new gas strategy should not signpost the desirability of long-term fossil fuel investments, particularly not to countries who appear to not be taking their energy transitions seriously and even exporting their flawed policies. The result can only be further delay.
