Setting the Stage for 2026 - Tim Buckley Ep64

Quick 2025 retrospective We see the Climate Energy Finance's role as to provide a narrative difference to the mainstream media, and to try to leverage global / non-US developments to better inform Australia's understanding of the energy system transformation, the threats and opportunities for Australia.

Our three main pillars of conversation in 2025 were;

China BESS - Batteries were likely to surprise, and they certainly did, even CEF's most bullish expectations. Australia's opportunity to go faster with some wins and many frustrations. And Carbon peaked emissions in 2024, flat to down in 2025 – despite 5% GDP growth. Big themes 2026 – From Grant McDowell

• In 2025 we discussed the rise and rise of China. In 2026 I think we'll see the rise and rise of the middle powers.
• New world disorder is opening up opportunities for China to collaborate with the middle powers, and beyond. China has learned from the mistakes of the Belt Road Initiative and seeking to collaborate.
• China's EVs are displacing over one million barrels of oil demand a day. The middle powers are moving from molecules to electrons for clean electricity and transport.
• Middle powers are tired of being lumbered with decades long expensive fossil generators are now leaning into many small and cheap. See Ethiopia's ban on petrol and diesel vehicle imports.
• Carbon trajectory – EU CBAM helps set a new market for world trade and carbon polluting countries. So once again we'll be following the work of Ember and Lauri Myllyirta.
• And our conversations will naturally include Australia. I'll be watching our energy transformation closely as we face a chicken and egg problem. As coal generation is extended investors are reluctant to back utility scale wind and solar projects. Which then allows the coal generation to extend. Utility scale batteries will play a role, however wind generation is key and every effort should be made to deploy, deploy, deploy.

Lets review each of those in turn. - Tim Buckley

1. China's "Small and beautiful", a positive reframing of the BRI to a more win-win-win approach.
   1. Mark Carney's middle powers speech, the India-UK FTA, and countries across Africa et al embracing electrification and energy independence,
   2. Small and beautiful, a reframing of the BRI to a more win-win-win approach.
   3. CEF has tracked >US%210bn of OFDI in cleantech since 2023.
   4. CEF has another major report pending on this, looking at China going global in resources and resource-value-adding over the last 3 years.
2. Carbon trajectory - 100% agree.
   1. China will spend the next 2 years expanding their national ETS by 50% to cover major industrial sectors, and then when ready, they'll starting talking about international alignment with the EU CBAM. Meanwhile, they will get ready.
   2. Japan's GX-ETS strategy includes carbon pricing being launched from April 2026, covering 60% of national emissions, a floor and ceiling price out to 2035, by 2030 A$18=46/t, then doubling again by 2035.
3. Australia electricity generation problems - True
   1. The CIS has to move from a lot of large scale announcements through to delivering projects into FID and construction, at speed and scale. Jury still out.
   2. AEMO 4QCY2025 Scorecard confirms this – strong growth in the pipeline across Australia, but not enough generation getting through FID.
   3. We are making progress. Great to see this week AEMO QED 4QCY2025 talk about RE being >50% for 4QCY2025 and the result was a near halving of electricity prices.
   4. And a lot of the media framing of the heatwaves of the last few weeks in South East Australia was how CER and solar is increasing grid resilience and providing power when most needed. A very positive reframing.

Other CEF priorities in 2026:

1. Fuel Tax Credits
   1. Re FTC - In December 2025, Battery-electric heavy duty trucks crossed 50% of new sales in China. That is profound for accelerating the electrification of everything story (think passenger EV adoption, energy independence, a $50bn pa onshoring on energy supply into Australia) and for CEF's work in diesel fuel rebate reform, give we need to embrace this, rather than keep providing an $11bn imported diesel fuel subsidy headwind to decarbonisation of mining and trucking.
2. Safeguard mechanism review
3. Green metal exports
4. Government capital deployment still too slow

And it wouldn't be a talk with CEF without talking about China, again and again! The new installs out for December 2025 this week are mind-blowing, again.