Carbon capture funding not right for ARENA, Labor says

The decision, which comes amid a flare up of internal divisions following last weekend's NSW state byelection defeat, has prompted the Coalition to accuse the Opposition of "walking away" from jobs in the energy sector.

New regulations which came into effect this month have expanded the remit of ARENA, allowing it to invest in the suite "low emissions" technologies the federal government has picked to lead Australia's energy transition.

The move, first flagged last year, will allow the agency to fund carbon capture and storage, so-called "blue" hydrogen, soil carbon and new storage technologies.

But Labor wants the regulations torn up.

Opposition climate and energy spokesman Chris Bowen said Labor would move a disallowance motion in parliament in an attempt to have scrapped what he described as a "cynical attempt to push ARENA into non-renewable technologies". The Greens have already declared their opposition to the changes.

"I'll give you a hint. The 'R' in ARENA stands for renewable," Mr Bowen told reporters at Parliament House on Tuesday.

"That's its job. And that's the job Labor will defend."

"ARENA is for renewable energy. If the government wants to invest in things like carbon capture and storage, then they can consider re-instigating the [former] Labor government programs."

In an attempt to stoke divisions within the Morrison government, Mr Bowen said the "lite-Green" Liberals who championed environmental action would have to explain to their electorates why they opposed Labor's proposal.

A spokesman for Energy and Emissions Reduction Minister Angus Taylor lambasted Labor's plan.

"Labor have walked away from blue-collar jobs. Now they're walking away from jobs in energy efficiency, hydrogen and electric vehicles," he said.

"Anthony Albanese said he wanted to support these jobs in his budget-in-reply speech.

"Not two weeks later, Albanese and Labor are blocking programs that will create those same jobs."

The Morrison government believes its planned $20 billion investment in new energy technologies over the next decade will create 160,000 jobs, and set Australia on a path of achieving net zero emissions around the middle of the century.

The federal government has been heavily criticised for not setting more ambitious climate action targets and continuing to pursue its so-called "gas-fired recovery" from the COVID-19 recession.

It last week confirmed Snowy Hydro Limited would be handed up to $600 million to build a new gas-fired power plant at Kurri Kurri, in the NSW Hunter Valley.

Mr Bowen on Tuesday took another swipe at that decision, saying the project - for which the business case remains under wraps - was a "misuse of taxpayer money".

He said the decision would also hand the government-owned Snowy Hydro a near monopoly over the gas peaking market in NSW.

"Snowy Hydro is amassing, on Angus Taylor's watch, a large degree of market power," he said.

"They already have a gas-fired power station at their disposal, which operates less than 1 per cent of the time. Now, why didn't the government ask them why they don't turn that on more often."

The Kurri Kurri plant announcement exposed divisions within Labor, with local MPs Joel Fitzgibbon and Meryl Swanson voicing support for the project in defiance of the party's leadership.

Tensions have been further inflamed after Labor's resounding defeat in the Upper Hunter byelection, with Mr Fitzgibbon threatening to quit if the party didn't "wake up to itself".

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