Timely development of an Australian green iron industry would mean a $250bn export uplift and 1 billion tonne per annum reduction in global carbon emissions.
A new report released today by independent public interest think tank Climate Energy Finance, Green Metal Statecraft: Forging Australia’s Green Iron Industry, finds that failure to invest now to pivot towards green iron would mean Australia risks a halving of its $138bn iron ore export revenues, as global importers, including China, decarbonise and restructure their steel supply chains and reorient to regions. China accounts for 86% of Australia’s iron ore exports.
Repositioning Australia as a leader in green iron exports has the potential to double the value of its current iron ore exports to more than $250bn annually, securing its economic prosperity into the future.
This requires Australia's world #1 reserves of iron ore to be processed onshore pre-export using renewable energy.
Australia is by far the world’s biggest iron ore exporter, with a 56% export market share. Iron ore accounts for a third of Australia’s total resource and energy export revenues.
The report identifies the clear strategic threat that Australia will relinquish its global lead in iron ore, with devastating economic consequences, unless it urgently prioritises green metal statecraft – a suite of strategic national-interest policy and investment incentives to kickstart a green iron export industry.
The emissions implications are profound. Steelmaking produces 6.7% of global emissions, over 3.6 billion tonnes annually (making it the world’s 5th highest emitter behind China, USA, EU27 and India). A pivot by Australia to exporting green iron would reduce global emissions by 1 billion tonnes per year (more than twice Australia’s annual domestic carbon emissions).
SEE ONE-PAGE REPORT AT A GLANCE.
SEE RECOMMENDATIONS AND EXECUTIVE SUMMARY.
CEF DIRECTOR, REPORT CO-AUTHOR TIM BUCKLEY, FORMER MD OF INVESTMENT BANK CITIGROUP SAID:
“Australia has long discussed our nation’s potential to be a renewable energy and zero-emissions trade superpower. We continue to talk, thinking about the race ahead, even as other nations are already off and running. It is beyond time Team Australia got to the start line and commenced. Green iron is the single largest investment opportunity for Australia, but the downside risks of failure to act are profound.
We need government financial support for the first-of-a-kind deployments of green iron at commercial scale here, to develop the “learning by doing” and supply chain capacities needed, even as we work with our key Asian trade partners to build momentum towards an explicit price on carbon emissions in regional trade to drive private investment in steel supply chain decarbonisation.
This is key to limiting the use of government subsidies, and to creating the market signal for the accelerated investment in green iron needed to help our key trade partners decarbonise their economies at the speed and scale the climate science dictates.
We are presented with a massive export revenue opportunity that has the potential to double the value of our current $138bn pa of iron ore exports. We can’t afford to continue to let it pass us by.”
LEAD AUTHOR MATT POLLARD, CEF NET ZERO TRANSFORMATION ANALYST SAID:
“Australia’s world leading iron ore producers have extracted huge returns on investment as China prioritised expansion of its steel mills. However, China likely has peaked in steel output, and we are now at the precipice of a rapid shift towards decarbonisation in our largest and most profitable export market, with major implications for Australian iron ore exports.
This pivot will require a massive re-orientation of steel supply chains to regions with advantages such as exceptional renewable energy resources – like Australia, potentially. But this is a global race. As we showcase through the report, other jurisdictions are rapidly emerging to become global hubs for lower-emission iron and steel production. Australia’s advantage, producing low-cost, high-margin, mid-grade unprocessed iron ore, is under threat.
This demands that we act now to establish capabilities in production of green iron, value-adding our iron ore onshore pre-export using our firmed renewables.
To solve the challenges of green iron, Australia urgently needs a coordinated, whole of economy response. We recommend a National Green Iron and Steel Strategy, with demand and supply side measures such as a trilateral Clean Commodities Trading Company (Australia, South Korea and Japan); a $20bn Future Fund mandate to enable renewables powered processing of green metals; $500m to the CSIRO for RD&D in commercialisation of green iron tech; a DFAT/Austrade mandate to build collaboration on an Asian Carbon Border Adjustment Mechanism, creating a premium price signal for our green iron in international trade; and measures to accelerate investment in firmed renewable energy at scale.”
PROFESSOR ELIZABETH THURBON, INTERNATIONAL POLITICAL ECONOMY, UNSW (foreword author) said:
"Australia stands at a nation-defining crossroads with our country's economic, energy and environmental security at stake. We can ignore these challenges and suffer a massive hit to our lives and livelihoods. Or we can confront these challenges head on, and not just survive but thrive in the global clean economy-in-the-making, while reaping the huge national security-enhancing rewards on offer.
This demands the embrace of an ambitious green metal statecraft – precisely as outlined in this vital report."
MARILYNE CRESTIAS, HEAD OF POLICY & ADVOCACY, CLEAN ENERGY INVESTOR GROUP, representing investors with a portfolio value of ~$24bn & >11GW of renewables across >70 power stations, said:
“In the global race to green iron exports, Australia has numerous competitive advantages – such as abundant and cheap renewables – that we must capitalise on. However, having the right policies, market settings and incentives is critical to unlock the necessary wave of investment.
Now is the time to redouble our efforts, and clean energy investors stand ready to enable the necessary transition of Australia's exports to green iron products.”
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MEDIA:
AJ: +61 428 278 880 Sydney AEDT annemarie@climateenergyfinance.org
Tim Buckey direct: + 61 408 102 127 AEDT tim@climateenergyfinance.org