Australia’s energy transition is reshaping the economy. The latest Intergenerational Report 2026 and FWPA’s Building a Low-Carbon Future for Australia point in a similar direction, consistent with a transition beyond net zero. The Intergenerational Report’s projections point to a renewables-dominated electricity grid, and a declining fuel-excise base up to 2050.
A grid dominated by renewables
Figure 1, based on the latest Intergenerational Report 2026, shows the energy mix from 2026 to 2050 under a scenario involving significant investment in the energy transition. Coal generation, which supplied around 170 TWh in 2009–10, declines steadily and falls below 5 TWh after 2035. Generation from wind, large-scale solar and rooftop solar expands significantly, increasing total electricity generation from roughly 200 TWh to more than 450 TWh by 2049–50 as electrification spreads across the economy.
This is not a business-as-usual (BAU) scenario. It depends on sustained and significant investment in generation, transmission and energy storage. As this investment occurs, the electricity used to power sawmills and other forest and wood product operations become progressively cleaner, even without changes to the industry’s own equipment.
Figure 1: Australian Energy Mix Transition in the Intergenerational Report 2026
Source: Intergenerational Report 2026, p.61. Note: TWh stands for terawatt-hours.
The fiscal signal from fuel excise
The same transition has a budget consequence. Figure 2, also from Intergenerational Report projections, shows gross fuel excise falling from around 0.9 per cent of GDP in 2025-26 to under 0.2 per cent by 2065-66. Net fuel excise falls further, less than 0.1 per cent of GDP.
This scenario assumes broad adoption of electric transport, improving energy efficiency while reducing the use of taxable fossil fuels. As fuel consumption declines, so too does the fuel-excise revenue base that has traditionally supported roads and other public services.
For industries that transport heavy loads, such as forestry and wood products, the implications are significant. Exposure to non-renewable fuels is likely to become a smaller long-term cost risk, while transport infrastructure, logistics and fleet planning may need to adapt to a more electrified transport system. Firms that anticipate and plan for these changes early will be better positioned to manage the transition.
Figure 2: Declining Fuel Excise Tax in the Intergenerational Report 2026
Beyond net zero, and sooner
Figure 3 presents the FWPA Beyond Net Zero pathway, which builds on the baseline scenario with more decisive steps to lower emissions within the industry. Net emissions start at around 1.4 MtCO₂e a year in 2023 and fall steadily, reaching net zero in 2033. They then turn negative, stabilising at roughly -0.4 MtCO₂e a year from around 2040.
That result is consistent with the pace of change in Figures 1 and 2. A cleaner grid reduces the emissions from mill operations. Falling fuel dependence cuts transport and harvesting emissions. Meanwhile, growing forests and wood products continue to store carbon. The central pathway assumes that investment and policy remain on course, consistent with the assumptions and projections in the Intergenerational Report 2026.
Figure 3: Decarbonisation Pathway Beyond Net Zero in the Forest and Wood Products Industry
Source: FWPA https://fwpa.com.au/news/three-future-pathways-for-our-industry-to-achieve-emission-reductions/
Conclusion
The three figures tell one story. A well-funded energy transition delivers a renewables-led grid by 2050. That transition reduces fuel-related tax revenue, changing the policy environment for transport-intensive industries. And the forestry and wood products sector can reach net zero around 2033, two years ahead of the 2035 mark, and then contribute net removals. The priority is now enabling the investment that underpins all three trends.
