Australia’s 2035 Climate Target: Opportunities and Risks for Investors
The Albanese government has confirmed Australia’s 2035 emissions reduction target, aiming for a 62–70 per cent cut below 2005 levels. For investors, the announcement provides certainty on direction, but also highlights the difficulty of balancing ambition with achievability.
What Was Announced
Prime Minister Anthony Albanese described the target as a “responsible” choice, noting it was backed by the Climate Change Authority (CCA) and achievable with proven technologies. (1) (2)
According to the Australian Financial Review, the government’s target was pitched at the lower end of expectations, after industry groups pressed for less aggressive action. The AFR noted that while some business leaders wanted deeper cuts to drive investment, others warned that pushing beyond 70 per cent would carry significant cost pressures on industry. (3)
The AFR also reported that Labor’s choice will demand “difficult decisions” around fossil fuel approvals, grid planning, and industrial emissions policy. Investors should be prepared for sharper scrutiny on high-emitting projects and sectors. (4)
Benefits: Why Investors Should Take Note
The policy shift creates a framework for capital allocation across multiple sectors.
Energy infrastructure buildout: The CCA’s sector pathways require rapid growth. Modelling shows six-fold increases in storage, quadrupling of wind, and tripling of solar capacity by 2035. This scale represents opportunities in transmission, storage, and renewable generation assets.
Policy-driven financing: The government allocated another $2bn to the Clean Energy Finance Corporation to accelerate stalled projects, and $5bn through the National Reconstruction Fund for industrial decarbonisation. For investors, this means lower barriers to entry in capital-intensive areas like green hydrogen and low-carbon fuels.
Clarity for long-term capital: AFR commentary stressed that a firm 2035 target helps superannuation funds, infrastructure investors, and global capital pools benchmark projects against national direction. It reduces the ambiguity that has long plagued Australian energy policy.
Risks: Where Investors Must Be Cautious
There are clear downsides that investors cannot ignore.
Target too low? Critics, including progressive business groups and environmental advocates, argue that the target risks being inadequate. The Climateworks Centre suggested announced policies already support a 66–71 per cent reduction, raising questions about whether the government’s lower bound adds meaningful ambition. (5)
Execution gap: The AFR highlighted that no new large-scale wind projects reached financial close this year, despite the modelling assuming massive expansion. This underscores a real risk that capacity targets remain aspirational without streamlined approvals and stronger incentives.
Sectoral hurdles: Heavy industry, resources and agriculture contribute over half of emissions. While opportunities exist in renewable gas, hydrogen and electrification, many solutions are not yet commercial. AFR analysts warned this will force government into politically tough calls on compliance and regulation.
Investor confidence: Some commentators described the target as “weak” or a “minimum commitment.” If markets perceive the policy as politically compromised rather than science-led, the risk premium on Australian projects could rise.
Investment Outlook
For investors, the 2035 target provides direction, but there is also a need for discipline:
Prioritise near-term winners – Solar, storage, and transmission will see capital flows regardless of whether ambition increases beyond 70 per cent.
Hedge sector risk – Exposure to heavy industry should be coupled with monitoring of regulatory frameworks, as compliance costs may rise.
Follow government money – Projects aligned with CEFC and NRF priorities will be de-risked through blended financing.
Scrutinise delivery – Investors should pay attention to execution metrics such as new project approvals, financial closes, and transmission milestones, not just headline targets.
The Bottom Line
The 62–70 per cent emissions reduction target represents progress, but not without challenge. For investors, the positives are clear: certainty of direction, government-backed finance, and vast opportunities in renewables and storage. The risks are equally clear: a target that may be too conservative, execution gaps in critical infrastructure, and lingering policy credibility concerns.
Australia’s path to 2035 is set — but delivery will determine whether the opportunities translate into returns. For investors, vigilance and selectivity will be just as important as enthusiasm.
References
G. Parkinson, RenewEconomy, Albanese sets emissions target of 62 to 70 pct, CEFC gets extra $2 billion to fast-track stalled renewables, 18 September 2025. https://reneweconomy.com.au/albanese-sets-emissions-target-of-62-to-70-pct-after-accepting-cca-advice-and-acting-on-the-science/
M. Rae, The Energy, ‘Minimum commitment’: Australia to cut emissions by 62-70% by 2035, 18 September 2025. https://theenergy.co/article/2035
R. Cropp, AFR Labor heading for a world of political pain on climate, 18 September 2025. https://www.afr.com/policy/energy-and-climate/labor-heading-for-a-world-of-political-pain-on-climate-20250918-p5mw0z
R. Cropp, AFR ‘Lean in’: Labor lays out bold climate vision with fresh targets 18 September 2025. https://www.afr.com/policy/energy-and-climate/labor-commits-to-62-70pc-range-for-emissions-cuts-by-2035-20250918-p5mw0q
G. Parkinson, RenewEconomy, Australia’s modest climate target: This is what collective failure looks like, 18 September 2025. https://reneweconomy.com.au/australias-modest-climate-target-this-is-what-collective-failure-looks-like/
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