The timber industry’s decarbonisation pathway

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
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.

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Source & chart credit: Forest & Wood Products Australia (FWPA)