DBrief: From climate reporting to gas security: What businesses need to know

In this episode of DBrief, Louise McGrath speaks with Australian Industry Group Director of Climate and Energy Tennant Reed about the growing number of climate and energy policy decisions shaping Australia's path to net zero.

Tennant explains why many companies are still focused on getting their heads around climate reporting requirements, what "material risk" looks like in practice, and how businesses should think about both transition risks and the physical impacts of climate change.

The conversation also explores the future role of gas in Australia's energy system, the challenges of scaling renewable gas, and why debates about energy security often oversimplify a much more complex reality. Looking ahead, Louise and Tennant discuss the opportunities emerging from new battery technologies and why Australian businesses should pay close attention to the energy transition already underway.

Key takeaways

• Many organisations are still treating climate-related financial disclosure as a compliance task, but its long-term value will depend on improving business decisions and risk management
• Climate reporting requires businesses to assess both transition risks and physical risks, including impacts on assets, employees, supply chains and customers.
• Renewable gas has an important role to play for some hard-to-electrify industrial processes, but cost and scale remain significant challenges.
• Gas reservation can improve energy security and reduce exposure to international price shocks, but it cannot solve Australia's gas supply challenges on its own.
• Energy security will require a combination of new gas supply, renewable gas, electrification and infrastructure investment.
• Public debates about gas often overlook the different roles it plays across the energy system, particularly as a source of backup and flexibility.
• Falling battery costs and improving battery technologies are creating new opportunities for businesses, transport and energy users across the economy.

Contact the Industry Development & Policy team.

Louise McGrath (00:13.55)

Welcome back to DBrief, the podcast where we explain policy to industry and industry to policymakers. I'm Louise McGrath , Head of Industry Development and Policy at the Australian Industry Group, and I'm joined today by Tennant Reed, Australian Industry Group's Director for Climate and Energy. Welcome back, Tennant.

Tennant Reed (00:30.85)

Thanks for having me back, Louise.

Louise McGrath (00:32.694)

If you're a new listener, you may not know that the D in Debrief stands for the three Ds: digitalization, decarbonization, and diversification. And Tenet, as our director for climate and energy, you really are at the front line of our pathway to net zero. And I'm very grateful that you've lifted your head above the wall of submissions coming your way at the moment to give us an understanding of where we are at the moment. And if you look across all the climate and energy consultations landing on your desk right now,

What's the common thread? What is industry actually most worried about?

Tennant Reed (01:05.912)

So I would put everything into two broad buckets right now. One is about working through all the next steps beyond existing policy towards the new 2035 national emissions targets that were adopted late last year, and the net zero goal for 2050. And then the second bucket is about.

Dealing with a series of massive energy disruptions. And there are a lot of connections between those things. But broadly on the policy side, we've got the safeguard mechanism review, which is the main lever the federal government has to reduce emissions at large industrial and resources facilities. We've got a review of how to foster a renewable gas industry. I think we'll might talk a bit more about that later.

Ditto for low-carbon liquid fuels. There's a streamlining of being considered of the climate-related financial disclosure system that was recently made mandatory. And coming soon, there's a review of the new vehicle efficiency standard, which in the last year or two has started encouraging greater fuel efficiency in light vehicles. On the disruption side, we've got

Fuel security and fuel prices and how to respond to that through policy. The massive growth of electricity demand from data centers and how do we meet that demand and what obligations should there be? gas security and prices and a reservation policy to try and address that. And relevant to how do we meet.

The data center demand growth and meet all the new electricity demand growth for electric vehicles, which are taking off like a, well, like an electric rocket in response to high fuel prices. Where's all the electricity supply going to come from? The electricity services entry mechanism is a major redesign of the electricity market. So it's a lot. I would say the two things that impact the most.

Tennant Reed (03:26.924)

businesses right now or in the near future are the fuel prices part and climate-related financial disclosure, which is expanding over well, it's expanding quite a bit this year. And then it'll expand even more to more businesses from one July next year.

Louise McGrath (03:45.144)

Well, let's deep dive into the climate related financial disclosures. We can't do everything that you've just listed, but let's just go into a couple of them. So in our submission, we argue that climate reporting should focus on genuinely material information and avoid becoming just a compliance exercise. And it also cautions against excessive insurance requirements and unnecessary reporting costs. So it was sold as a way to help companies make better decisions. Are we seeing that happen?

Or are businesses mostly treating it as a reporting exercise?

Tennant Reed (04:19.785)

So far, this system, which says you've got to do similar forms of reporting on the ways that climate will create risks or opportunities for your business to the financial reports that all businesses above a certain size do already. This system, as of today, has covered very large businesses those with sort of a billion dollars or more of assets, $500 million or more of income, 500 plus employees. And even they have found year one a lot of work. And they have been very focused on just spinning up the internal capacity or the relationship with external advisors to minimally comply and to understand

What is a climate scenario? What are the physical risks facing their assets? what are the the forms of emissions information that are that are going to be relevant? Now, from one July this year, 2026, businesses with their first financial reporting year starting on or after that date came in, that have a smaller size. So $200 million of income, $500 million of assets, $250 plus employees. From one July next year, businesses starting their own financial reporting cycle will be caught if they are at $100 million a year of income, $50 million of assets, $100 plus employees. That's much, that's a lot of businesses. And

And they too are almost certainly going to spend their first year or two just grappling with how do you tick the boxes? There's not a lot of end value in just the box ticking. What ultimately this needs to do, if it's going to have value that justifies the paperwork involved, is to inform better business decisions through better awareness.

Tennant Reed (06:44.856)

By the businesses themselves and those who invest in them, of how energy transition will relevantly impact their operations or their markets or their suppliers, and how physical impacts of climate change will create risks to be managed for their employees, their assets, their their supply chains and their customers. So that's that's a new territory. There is inevitably going to be some getting to know the lay of the land before anybody's really very effective in the use of this information. And I don't think for the most part that businesses are at that point yet. They're just getting used to it and more are coming in.

Louise McGrath (07:35.478)

One of the strongest themes in our submission is that reporting should focus on those material risks and as you say, not ticking boxes. But what's an example of that material risk? What does it actually mean in practice?

Tennant Reed (07:48.524)

Yeah. So I mean, ultimately the meaning is, is an investor ultimately going to care about this information? If you in the same way that they would care if your business did not disclose a $50 million debt, will they care about something that you haven't disclosed on in terms of your exposure? So for example, suppose that you

A business that fabricates large pieces of haulage equipment for coal mining. And your largest customer by far is a pure play thermal coal miner who exports to China. You are very exposed to energy transition in China. your your major line of business.

May be in turmoil if there is a large reduction in importation of thermal coal in China because of energy transition there. That's material. Also, you probably know that already. and your customer knows that already. that's pretty clear. A thing that doesn't matter, almost certainly, to any investor anywhere is.

Your business's usual courier service uses diesel vans to transport parcels. you could do an exercise of chasing down, like what are the emissions associated with your business's reliance on parcels. If like that might be material if you are Australia Post. If you are not Australia Post, it's probably not gonna be material. The bit of this that is probably the least familiar and the least clear to businesses.

Not only where to draw the line, but like what even is the underlying exposure is around physical risk. Because some businesses just won't have transition related opportunities or threats. But every business has an asset somewhere, an employee somewhere, a customer somewhere, and a supply chain. And the exposure of those things to, for instance, the coastal inundation.

Tennant Reed (10:11.598)

Of port infrastructure for the export of LNG. that's a a physical risk that large energy businesses have been focused on on managing, building in durability to those assets for some time. That's the kind of physical material risk that will be on the radar of more businesses as they get through the the meat and potatoes of this reporting regime.

Louise McGrath (10:47.298)

This may be out of the scope of your experience, Tan, but for instance, at the moment there's significant floods in Thailand, which have in the past really disrupted our supply chains because particularly our automotive companies are really integrated into the Thailand's automotive systems. Now there's a bit of debate whether these floods are climate related or mismanagement or whatever, but is that the sort of thing that companies would have to think about and report on, or is it is that a bit too esoteric?

Tennant Reed (11:17.644)

No, so absolutely. It things like changes to flood risk, flash floods, changes to the amount of rainfall. For instance, if you are a food processor plugged into a an agricultural supply chain and there is expected to be a drying of on average of the the regions where you source your product currently,

That's very material. extreme heat impacts on employees or on infrastructure. I if people may remember about fifteen years back when in in Melbourne, when rail infrastructure, rails buckled under the impact of a an extreme heat episode then and you

Couldn't get employees where they needed to go for a a few days until that was sorted out. so some of these things will be too far away from the the zone of control and operations of a business to be foreseeable or manageable. Some things will be material. there is more information than ever available about expected changes to not just global climate, but more local averages and extremes for rainfall, for coastal inundation, for heat, and other impacts. There's much more available than there used to be. The challenge here is grappling with sources of information that most of us haven't had to look at.

But also the range of uncertainty about what scenario we will wind up doing business in, living under. it's no longer likely that the world is going to limit temperature rise to one point five degrees, which is the the most challenging goal of the Paris Agreement. we are almost certainly going to blow through one point five degrees in the next few years, as on a rolling average basis.

Tennant Reed (13:43.294)

but how much further we go before we arrest the increase in temperatures and and at least stabilize it, we don't know. And the impacts will be larger the longer it takes to get to that point. There's many consequences of that. One of them is needing to think about just how robust your assets, your occupational health and safety arrangements for employees, your contingency planning for what if there is a major disruption to a key supplier, and so on. Just how much resilience you need to be building into your planning.

Louise McGrath (14:28.27)

Well, lots for for companies to look at there and to think about. So let's move on quickly because we've got a lot to cover. renewable gas. So our submission argues that some industrial users will remain difficult to electrify and that renewable gas could play an important role, but the cost gap remains a major challenge. On the face of it, renewable gas sounds like a silver bullet, but is it really?

Tennant Reed (14:51.65)

Well, it has one great thing going for it, which is for the specific version of renewable gas, because it covers a few things, but biomethane. biomethane is gas produced from things like anaerobic digestion of municipal waste or or food waste, which is upgraded to be so close.

To the natural gas specification for what can be injected into the gas grid, that you can just use it in any equipment or process that you would ordinarily use natural gas in. So that's extremely convenient. that's a huge advantage if you don't need to upgrade a boiler or replace pipes so that they could manage hydrogen in them.

Or you don't need to replace your and and rebuild your whole site around the footprint of a an industrial heat pump, for example. So that's great. It does come with two drawbacks, though. One is it is costly. there's different levels of cost based on different pathways to make biomethane. And the cheapest pathway, which is to to gather up the

Biogas that leaks out of existing landfills, gather it up instead of letting it leak away, and clean it up to upgrade it to biomethane. That's somewhere not too distant from where natural gas prices have risen to in Eastern Australia. In some cases, it might be just cost competitive on its own. There's not a lot of that potential. There's some, but there's not that much.

If you've got to go and build new digesters to handle putrescuble waste, or even more costly, go out and gather a bunch of agricultural residues together and then digest those, that can get quite expensive. The the other drawback is there is only so much of it that we're going to be able to make. the amount of we we are not going to grow.

Tennant Reed (17:16.258)

the number of and and size of landfills in Australia to scale up biomethane production. there's only so much vitreskable waste that we're going to produce, although there's like a decent amount. And then agricultural residues, if you there's quite a lot of those, but again, it can get very expensive. So when we're only going to be able to substitute a chunk of current gas demand with biomethane, and somebody's going to have to cover the cost gap. Although we could shrink that cost gap if we get smarter in the ways that we do the production through learning by doing and through scale benefits that can offset that push to higher costs as we go to larger but more expensive input feed stocks. That's a silver bullet with a lot of asterisks on it.

Louise McGrath (18:19.24)

That's right, does seem very limited. I would did speak to a member once who had a chicken processing facility and they had sort of a closed loop system with the the chicken waste w was fed into some sort of I don't really understand the science of it, but something that produced gas and then that was sort of like a closed loop system. I guess there will be sort of some standouts like that, but where do you think renewable gas would genuinely make the biggest difference?

Tennant Reed (18:46.552)

So those industrial uses that seem like they're gonna want something that that quacks like natural gas for a very long time to come, if not forever, are those that need either a a chemical feedstock. so if you are making ammonia to make fertilizer or explosives, then that is a process today almost everywhere, entirely built around natural gas, around turning methane into hydrogen and then adding a nitrogen to the hydrogen to make ammonia. Now, you could make the hydrogen through electrolysis, and we had a huge burst of excitement in Australia and worldwide around the prospects of of that hydrogen pathway for a lot of purposes. And, you know, excitement has turned to disappointment. I wouldn't say it's over for hydrogen, but it's clearly not going to be the Swiss Army knife of energy that many people hoped. it's not going to solve everything. and then some things you could we where you need high grade process heat, like you are running a a metal smelter.

You today you will be using either natural gas or coal. now biomethane would be physically a great substitute for that. is it going to be attractive to do electrification of high grade heat? For low grade heat, if you've got a greenfield site, yes, electrification looks extremely viable, if not very attractive.

Medium grade heat, if you've got a couple of hundred degrees tops temperature need, it's a maybe. There are technically perfectly viable solutions and it just well, can you make the economic stack up? Very high grade heat. electrification looks very challenging. Now, biomethane could also be cost challenging. so i I would say there is there is still

Tennant Reed (21:09.272)

caution, even from those businesses who think, yes, they they will need this, the question is, well, but can they e can they even use biomethane and still be viable, or will they just need natural gas? Of course, there's also the question of can they afford the natural gas either? which has been a real question in recent years.

Louise McGrath (21:28.504)

That's right. And so we might take a break here and come back and talk about natural gas and a potential reservation of our gas reserves.

--- Break ---

Louise McGrath (21:52.942)

Back to DBrief, where I'm speaking with Tennant Reed around a whole range of climate and energy-related submissions. The tenant, we touched on biogas, but of course, traditional or usual gas, I'm not sure what the right term is, still has an important role to play in the Australian economy. And we have done a lot of work in supporting a gas reservation framework that where the objectives should be adequate supply.

Lower prices and reduce exposure to international price shocks while maintaining investment incentives. Gas reservation used to be almost taboo in national energy policy discussions, but now we're debating how to design it. What's changed?

Tennant Reed (22:34.84)

So I would say three things. One is that we have had two global gas crises in four years. We're not feeling the current gas crisis so much within Australia, but in Europe, the price of gas is three times what it was six months ago, before the war in Iran constrained the

One of the biggest global exporters of natural gas. So it's more obvious than it used to be that gas security is actually something that that needs a lot of attention and can't just be assumed, even in a country that physically has a lot of gas. Two is we've tried a lot of band-aid solutions whether that be the the heads of agreement with this voluntary series of pseudo deals between the federal government and gas exporters, the emergency export control powers, the domestic gas security mechanism, which never got invoked and for a long time wasn't actually technically usable at all, and the mandatory gas code of conduct, which is in force at the moment which is trying to put a a price anchor on gas. I think everybody, even fans of that system, would agree it's a it's a messy fix after the fact. Then the third thing is we are now getting towards the end of the initial contracting periods for the East Coast gas export facilities. So no reservation or other security arrangement was put in place before the final decisions on those facilities and their export contracts. And no government has wanted to unpick those contracts after the fact, very understandably. But we're now more than halfway through those contracts. One of them is expiring in five years' time, the rest in around 2035. And so it's sort of now or never, or at least now or not for another 20 years, on putting in place

Tennant Reed (24:52.682)

some rules to underpin the next wave of contracts and ensure that there is secure access to natural gas or fossil gas or methane, if you're just a science y type person, for Australian energy users.

Louise McGrath (25:12.45)

And you've made the point the reservation alone can't solve Australia's gas challenges. What else needs to happen alongside it?

Tennant Reed (25:19.662)

So we're gonna need the actual physical development of new gas supply. the reservation can motivate that, but it still requires people to go out and actually build expanded pipelines from Queensland to New South Wales and Victoria, because that's where increasingly most of the domestic gas will come from and flow to rather than from Victoria's Bass Strait to Victoria and New South Wales. Bastrate is rapidly declining. Queensland is where most of the gas is physically at in the eastern half of the country. you'll also need the regulatory approvals to enable all of that to happen. biomethane can make a contribution in the eastern half of the country. It could maybe supply in the long term.

10 to 20% of the demand that's expected to remain for natural gas over the next few decades. And you because you're not going to be able to supply biomethane affordably for everything, and because there is still, despite, you know, swings and roundabouts in political discussion.

This long-term quest for net zero emissions and very deep emissions reduction, you're gonna want to electrify those gas uses where it makes sense. Doesn't make sense for everything. And some buildings or equipment have such a a long useful life in them that you're you're not going to replace or or deeply renovate them on a whim. but for a lot of low grade heat, it looks like heat pumps, induction cooking, various forms of electrotech boosted by batteries are going to be, if not already, a a more attractive option, especially when you've got a a blank sheet of paper. So it's really gonna need to be a a wall of energy security with many individual bricks in it.

Tennant Reed (27:44.606)

the reservation is very helpful to get and well, if if it's done well, very helpful to get security of the fuel that is the key fuel for so many businesses today. And we just need to make sure that the the actual gas to meet that reservation requirement is able to be produced while we transition those uses where there is a viable transition option.

Louise McGrath (28:13.602)

You mentioned the swings and roundabouts of the political cycle. Do you think we're now finally having a mature conversation about gas? We're still trapped in that debate where one side seems to want to ban it and the other side th thinks we need it forever. Have we found a middle ground or a way to have that conversation?

Tennant Reed (28:30.99)

I don't think we have overall. I think it's a very black and white discussion and and a very blurry discussion too. because I I think there are a lot of people still who are like gas is the doesn't matter what the question is, gas is the answer. And there are a lot of people who are like, Gas is is terrible. we we must wash our hands of it as fast as possible. and I think one area where we see this vibes based rather than detail oriented approach a lot is in electricity. So gas is today an important piece of the electricity system at in particular, there are gas-fired peaking plants. the most familiar ones are basically an aviation jet engine burning methane instead of jet fuel. And the thing about them is they, like a jet engine, can spin up very fast and run for as long as you need them to run. And they serve as flexibility in the electricity system when something else drops out or demand surges up.

These gas peakers can come in. That role is falling away as big batteries and fleets of small batteries, which can spin up. Well, I mean, they don't even need to physically do anything. they can instantly or almost instantly respond and fill in these supply gaps or or demand surges for short but lengthening periods.

But the thing that gas peakers also do is they serve as insurance or backup for when you have like a really big extended problem, like a a major generator explodes, as has happened a couple of times in Queensland in the last few years, and you have months or years of a gap in the market to fill.

Tennant Reed (30:47.368)

or you've got a low wind period for a week across the whole East Coast in the middle of winter when days are short and heating demand is high, and you've got a many, many hours of continuous gap to fill. And the thing about those problems is they don't happen all the time. They happen once in a while. A battery is a very expensive solution to that problem, a gas generator that sits around doing nothing most of the time, but can run for it two weeks if you need it.

That's great insurance. Now, all that that I said is completely different to running a gas-fired power plant to supply day in, day out, baseload 24-7 power as your your plan A of where you're getting power, which would be very expensive given the price of gas in Australia. not so expensive in the United States, but they've got a different market to us you don't tend to see a lot of distinctions being clearly drawn between role of gas in backup and roll of gas in bulk energy in in public discourse. And so some people are saying, well, we've got problems with not enough electricity supply. The answer is gas.

Like you you need to go a few layers deep on on on that to have a a plan that works. Equally, people saying, look, batteries are getting so good. That's why we don't need to worry about more gas supply. there is no indication that batteries will ever get good enough that it would make financial sense to have many hundreds of gigawatt hours of battery capacity sitting around not for five pm on a weekday when people are getting in and turning on appliances and solar is coming off, but for the once in a blue moon when it is low wind and low sun across the whole east coast for two weeks at a time. that's just, you know, s setting fire to a huge pile of capital to to try and do that. So I

Tennant Reed (33:10.336)

My nerdy appeal is for everyone to pay some attention to the footnotes before getting too certain that gas is the answer or the villain, in in whatever context.

Louise McGrath (33:28.046)

Well, I think there's certainly one thing we can't be accused of is vibe submissions. I think, especially in this area. It's very detailed, very measured. And I really encourage anyone who's interested in the topic to to have a look at our submissions to get the the true story. Now, Tenet, with your energy hat on, there's a lot of things globally we could talk about. I mean, Iran's still going, you know, where's fuel going to be? All that kind of stuff. I'd like to end on a positive note though, and and let's look to the future.

So I do want to highlight that Australian Industry Group and Austrade are together leading a Team Australia business mission to COP thirty-one in Turkey to showcase Australian green economy capability and connect businesses with global buyers, investors, and partners. And you and Alex Metrezky, who's on our team, has have been working very hard, Alex being chief cat herder in getting them all together. Now a lot

Tennant Reed (34:22.488)

Yeah.

Louise McGrath (34:25.014)

Well, a lot of people hear COP and think climate negotiations. Why should Australian businesses care and why would they attend?

Tennant Reed (34:34.168)

So there's an incredible amount of stuff that happens around these global climate conferences. Yes, they are a place of negotiation among 190 plus countries to try to get to more effective, more coordinated approaches to what is fundamentally a a global problem. But they're also

The number one place to learn about what is going on in markets around the world, a place where you can hear from or go up and chat to senior figures in the electricity industry in China. What is going on there? where you can hear from leading companies and practitioners in transport, in

Heavy industry of different sorts, basic materials, where you can get more contact and more sense of what is going on in one place, really, than anywhere else in the world. And where you can hang hang your shingle out and show what your capabilities are in the Australian pavilion, which is one of the most heavily trafficked popular places to go at a cop these days, not just because our Australia's minister for for climate, Chris Bowen, will be running the negotiations this year. actually, people go to the Australia Pavilion because we have the best coffee. and because of that, it's an incredibly vibrant place where you can bump into people from Senior roles in business and government from around the world, and a bunch of people from within Australia too, that actually you would struggle to get into the diary of if you were trying to meet them in Australia. So I'm a cop tragic. I think it's an incredible place. And I'm really looking forward to helping connect 20 businesses from Australia with.

Tennant Reed (36:53.182)

everything that there is to learn and to opportunities to to talk back and and demonstrate what their businesses can offer in Antalya Turkey this November.

Louise McGrath (37:08.184)

Yes, we should never underestimate the soft power of coffee diplomacy. I think now D fact graduates is one of their key skills they have to bring to the party, sparista skills. now we understand that there will be a podcast booth on the Australian Pavilion. So we hope to have some messages, some you know, stories straight from the floor. So that will be exciting. But just as we sort of run out of time now, tenants, so just you know, thinking about everything we've covered from Climate reporting, gas security, renewable gas cop. If you're talking directly to business leaders trying to navigate all of this, what's the one thing they should be paying attention to over the next 12 months?

Tennant Reed (37:48.746)

That is a hard question because there's so many things going on. But I think that the battery revolution that is happening, or the multiple overlapping battery revolutions that are happening, are going to present really interesting opportunities of different sorts to a lot of different businesses. For some of them. It will be about the installation of a battery in their own facility to either shave their demand from the grid or help get more value out of their own electricity generation. and and that's a that's a space where Australian Industry Group, I think, will have more to offer and more to say in the near future.

But for others, it's going to be about building batteries into their products to change the way that those can be used. or it's going to be about the ways that electric vehicles are becoming relevant not just for like urban family's second car, but for trucking, for heavier roles.

And there's a there's a lot of discovery that we're going to do about how to integrate those new energy vehicles. so all of these things are are different fields, but they all have the common driver of batteries are getting really cheap and really good. and some different chemistries are emerging that are opening up new niches. So you know, we

Could talk about the tidal wave of data center development and all the opportunities for different businesses in supplying that or what they're going to do with the AI services that the data centers enable. But I'll stay more physical and say sticking batteries in things in different ways is going to be interesting to a lot of different businesses over the next 12 months.

Louise McGrath (40:06.402)

Yeah, I think you're right. And I think even just changing the way we talk about batteries from calling them batteries to sort of mobile energy or, you know, energy on the move, that that sort of thing help might help people reframe how they think about, you know, just a block of battery.

Tennant Reed (40:52.402)

Yeah.

Louise McGrath (40:58.402)

All right. Well, Tennant, thanks very much. that's all we've got time for. Thanks for listening. If you have any comments or questions, you know, you can find both of us on LinkedIn or you can email us on [email protected] If you found this podcast by a link or on our website, please do subscribe on your usual podcast platform and leave a review. It does help people to find us. And we'll speak in a couple of weeks.