The federal government has recently released its new 2035 carbon reduction targets, setting out an ambitious pathway for deep emissions reductions across the economy. The announcement has sharpened the national debate about how quickly Australia can decarbonise, and which sectors will be asked to carry the heaviest load. In parallel, the Net Zero Australia project — a collaboration between the University of Melbourne, the University of Queensland and Princeton University — has published updated modelling that lays out a technical roadmap for how the country might realistically achieve those goals.

Together, the targets and the modelling frame both the scale of the opportunity and the formidable challenges that lie ahead.

Electricity Generation – Doing the Heavy Lifting

The electricity sector is the natural workhorse of the transition. Solar, wind, and batteries are proven, scalable, and increasingly cost‑competitive. Yet the challenges of delivery are already evident.

Snowy 2.0, once heralded as a flagship storage project, has been plagued by delays and cost overruns. Transmission projects such as Victoria’s VNI West, critical to connecting renewable generation to demand centres, are mired in planning disputes, community resistance, and escalating costs. Victoria’s offshore wind industry, touted as a cornerstone of the state’s renewable future, is still struggling to get out of the starting blocks amid regulatory uncertainty and supply chain bottlenecks.

These are not isolated setbacks. They are structural hurdles that will only intensify as the build accelerates. Setting ambitious targets is the easy part; delivering the infrastructure at the required pace is the real challenge.

Net Zero Australia – a Technical path to Net Zero

The Net Zero Australia (NZAu) project’s latest modelling provides us with a clear but somewhat daunting picture of the road to net zero. Released in September 2025, the Phase 2 analysis suggests that under realistic assumptions, Australia may not meet the 2035 target band. Even in their most ambitious scenarios, the Commonwealth’s 2030 and 2035 milestones are only achieved later — around 2031 and 2038 respectively.

The Net Zero Australia review examines the nation’s progress and challenges in achieving its climate targets, offering insights into the technological, economic, and policy pathways shaping Australia’s journey towards net zero emissions.

This is a reminder that ambition must be matched by delivery capacity, capital, and social licence. The NZAu team’s work also highlights the sheer scale of the build required: renewable capacity additions of 10 per cent year on year, transmission expansion at twice today’s levels, and the rapid rollout of storage. These are growth rates far beyond anything Australia has achieved before and should provide a strong call to action on just how much work there is to do here.

What About Exports?

While the domestic decarbonisation task is immense, it is still overshadowed by the carbon embodied in Australia’s fossil fuel exports. In 2022, Australia exported around 339 million tonnes of coal. When combusted overseas, that coal alone releases in the order of 800–900 million tonnes of CO₂ — more than one and a half times Australia’s total annual domestic emissions.

By comparison, the federal government’s 2035 target requires cutting domestic emissions by 62–70% below 2005 levels. That equates to reducing annual emissions from about 612 Mt CO₂‑e in 2005 to roughly 185–230 Mt CO₂‑e by 2035. In other words, the entire 30‑year domestic decarbonisation task is smaller than the carbon embodied in a single year of coal exports.

This is not to suggest that domestic targets are misplaced — they are essential for credibility, investment, and building the clean industries of the future. But it highlights the complexity of Australia’s position. Coal and LNG exports remain central to GDP, government revenues, and regional employment. Unlike the electricity sector, where the technological pathway to decarbonisation is relatively clear, the future of fossil fuel exports depends on global demand, trade relationships, and the pace of energy transitions in Asia.

The Net Zero Australia modelling reflects this complexity. Their Phase 2 scenarios treat Australia as a closed system, assuming fossil fuel exports decline gradually in line with international pledges rather than disappearing overnight. By contrast, the government’s 2035 targets exclude exports entirely, focusing only on domestic emissions. Reconciling these two realities — a decarbonising domestic economy alongside a still‑carbon‑intensive export base — is one of the most difficult strategic questions Australia faces.

Beyond Electricity: Harder‑to‑Abate Sectors and the Case for Carbon Capture

Electricity may be the anchor of Australia’s decarbonisation strategy, but it cannot deliver the transition on its own. Heavy industry, transport, agriculture, and land use all need to make smaller but still vital contributions. The difficulty is that these sectors are inherently harder to decarbonise. Steel, cement, aluminium, and LNG processing are emissions‑intensive by design. Freight and aviation remain stubbornly dependent on liquid fuels. Agriculture and land use can reduce their footprint through better practices, but they are unlikely to generate large offsets for others.

Incremental efficiency gains and retrofits will help, but they will not be enough. New technological approaches are essential — from low‑carbon industrial processes and advanced biofuels to hydrogen and synthetic fuels. Above all, carbon capture and storage (CCS) must move from the margins to the mainstream. The Net Zero Australia modelling shows that CCS is required in every credible pathway, with 50–70 million tonnes of CO₂ stored annually by 2050.

That scale of deployment is not likely to happen without strong and clear policy incentive. It requires deliberate investment in geological storage hubs, pipeline networks, and capture facilities at industrial sites. It also demands regulatory clarity, long‑term policy frameworks, and public confidence that storage can be done safely and permanently. CCS is not a silver bullet, but without it, Australia cannot credibly decarbonise its hardest‑to‑abate sectors while maintaining industrial competitiveness.

The Capital Intensity of Transition

Both government targets and NZAu’s scenarios converge on one point: the transition is capital intensive. Estimates suggest more than a trillion dollars in cumulative investment is required by mid‑century, with the lion’s share directed to renewables, storage, and transmission.

For 2035, this means unprecedented growth rates in solar, batteries, and transmission lines. If these builds falter, the system will lean harder on CCS, gas peaking, or delayed abatement — each with its own risks and costs. Investors, policymakers, and regulators must therefore focus not only on ambition but on execution: approvals, supply chains, workforce capability, and community engagement.

Targets, Ambition, and Realism

Targets and ambition matter. They set direction, galvanise investment, and signal seriousness. But our ability to get there must be grounded in realism.

The next stage of Australia’s transition will not be judged by the boldness of its targets, but by whether we can maintain reliable energy supply while continuing to promote economic productivity. That balance — between ambition and delivery, between decarbonisation and prosperity — will determine whether the 2035 targets become a milestone achieved or another aspiration deferred.