20 OCTOBER 2025

Welcome to our news round-up. See previous issues here.

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CHINA-US CRITICAL MINERALS SUPPLY CHAIN WAR PUTS AUS IN BOX SEAT

As the Trump administration deepens its tariff trade war with China, the latter has placed fresh curbs on export to the US of the rare earths and critical minerals indispensable to the production of clean energy tech, as well as defence, computing and AI capabilities. China controls 80-90% of the global supply, holding vast reserves, and dominates processing after investing early and strategically. But Australia has major skin in this game too. We have the world’s largest supply of lithium and abundant reserves of cobalt, nickel, manganese, graphite and rare earths. Currently, our biggest customer is our #1 trade partner, with >90% of our lithium going to China. 

Now, Australia is being courted by the US as a potential key strategic partner in diversifying and securing its supply against the escalating backdrop of China-US tensions and retaliatory trade restrictions. Diversification of global critical mineral supply chains will be high on the agenda in talks between PM Albanese and President Trump this week.

Negotiating our way between our biggest customer – the globally dominant force in all zero emissions technologies and industries of the future – and our traditional security ally is fraught. Trump has forced the world to think very differently about the now strategically-challenged concepts of old about the workings of a free market capitalist global trade system with respect to the energy transformation and geopolitics.  

The playing field is being reshaped by megatrends such as the US walking away from global free trade and turning to protectionism, as well as escalating climate change. The rise and rise and rise of China is a defining feature of our age, now playing out in China’s winning efforts to decarbonise and the epic battle to control the resource supply chains that will determine geopolitical supremacy in the decades ahead. China of course does not operate on a western capitalist free markets model, but invests strategically in its own long term national interest – as it has done in establishing overwhelming global dominance in critical minerals refining onshore.

A savvy geopolitical lens is required to navigate these shifting trade, energy and national security dynamics, with a contemporary view of the new world order that serves our national economic interest. In the minerals trade, currently we ship mostly raw rocks, failing to capitalise on the opportunity to substantially increase the value of our exports, a pattern that sees us languishing at a shocking 105 out of 145 nations on the Harvard Economic Complexity Index, having slipped from the 60s two decades ago. 

A critical and urgent priority should be to position Australia as more than a quarry, leveraging our natural advantages to move up the global value chain by expanding onshore processing and refining capacity, capturing the resulting geostrategic advantages, supply certainty and economic returns that are key to our future prosperity and energy and national security.

In April, the Albanese government created a Critical Minerals Strategic Reserve with an initial $1.2bn investment; $200m for operation, funding and stockpiling and $1bn of capital to invest. This remains in the design phase and will not be operational until the second half of 2026. The reserve builds on the $4bn Critical Minerals Facility, boosted to $5bn in April 2025, a loan program administered by Export Finance Australia. One of the first investments was $400m in loans to Alpha HPA to process ultra high-purity alumina (used in semiconductors and lithium batteries) in Queensland. Other support includes a $185m loan to Renascor Resources to fast track its Siviour Graphite Project in South Australia and packages of $1.65bn and $800m to rare earth producers Illuka Resources WA and Arafura Resources NT respectively.

This is commendable, but there is significant opportunity for Canberra to go further. The PM should review the MP Materials deal, which saw the Pentagon invest US$400m in the US rare earths miner at the same time as providing a guarantee of a 10-year offtake agreement at a price double the then market rate. 

The idea of leaving rare earths trade to a free market when the ‘free market’ is a tiny fraction of the game is flawed, and demonstrably outmoded in the above context. Our Critical Minerals Strategic Reserve should be deployed to provide price guarantees for producers as part of the government’s plan, and there is strong speculation that this is under consideration. 

However, in our view both a long term price floor and offtake agreements should form part of a strategic, integrated and mission-led approach to managing Australia’s green industrial transition coordinated at the highest levels of government – ‘Green Energy Statecraft’. This should include a Clean Commodities Trading Initiative as proposed by Elizabeth Thurbon. The government backed CCTI would support early-stage market formation by contracting for supply of value-added products like refined minerals and green iron, then selling, holding, or redistributing clean commodities as markets evolve. This would help de-risk early investment — including in onshore processing — by strategically deploying the government’s balance sheet to provide price and offtake certainty to underwrite value-adding investments and crowd-in private capital.

The current superpower showdown puts Australia in something of a box seat. Let’s be smart about it, and grasp this exceptional opportunity to take a more sophisticated approach to energy and commodities diplomacy that moves us from “dig and ship” backwater to key player in the emerging net zero global economy. We need to move fast, or be left behind. If not now, when?

>>> Read Tim’s commentary in the FT.

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NEW QLD LNP ENERGY ‘POLICY’ A LURCH IN THE WRONG DIRECTION 

The apparently socialist Queensland LNP has released its new climate luddite’s guide to the future of energy in the form of the state’s energy roadmap. 

Despite private investors having not invested a single cent in new fossil fuel electricity capacity in the state since 2010, Premier Crisafullu and Treasurer Janetzki have decreed it is time to turn back the clock a couple of decades and sink considerable public largesse into subsidies for  new fossil fuel plants – as well as burn $1.6 billion of taxpayer funds in attempting to keep existing end-of-life fossil clunkers sputtering. Sure to work brilliantly, until it spectacularly doesn't.

Remember the catastrophic explosion at Callide in 2021 in Queensland? Or the frequent outages and unreliability of the Liddell and Eraring coal clunkers here in NSW? Or the financially catastrophic failure of the state owned Muja AB coal clunker in WA in 2017?

Rio Tinto is voting with its feet, announcing the closure of its 1,680MW Gladstone coal fired power plant in 2029, six years ahead of the previous goal. Obviously Janetzki and Crisafulli know more about energy than the single biggest user of electricity in Australia.

Let’s ignore the rapidly rising catastrophic social, health, environmental and economic impacts of coal and gas, like the cripplingly escalating costs of flood insurance and increased unavailability of insurance at any price highlighted in the same week by the Insurance Council. 

The new policy repeals the previous 80% renewables by 2035 target. It trashes the former government’s landmark 10 year Energy and Jobs Plan which would have seen coal power retired in the state by 2035. Our partner Stephanie Bashir of Nexa Advisory put it aptly in The Guardian: “The Queensland Government has delivered a cul de sac, not a roadmap. Queenslanders are being saddled with the most expensive energy option. Extending coal, which is already unreliable and expensive, means more outages, higher bills and less investment in cheap renewable alternatives, like wind and solar backed by batteries.”

Hear, hear! This is a sorry reversal after excellent progress in transforming QLD from a coal colossus into a clean energy behemoth under the previous Labor government, as CEF analyst Matt Pollard wrote in our February 2024 report and – as always when the climate-denying fossil fuel mates get the wheel – the people and climate will pay. 

The stakes just got higher. QLD is Australia’s highest-polluting state, responsible for 28% of emissions, and our national climate target was just boosted to a 62-70% cut in emissions by 2035. It makes it even more imperative and urgent that the federal government and other states accelerate the clean energy transition if we are to have any hope, as a nation, of achieving our climate and energy goals and reaping the enormous benefits for all.

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CAPACITY INVESTMENT SCHEME PUTS ON ANOTHER 6.6GW

On a brighter note, Climate Change and Energy Minister Chris Bowen has announced successful outcomes of the government’s flagship clean energy and storage Capacity Investment Scheme Tender 4. The selected 20 projects will provide 6.6GW of clean generation to the National Electricity Market (NEM), with this tender round oversubscribed by a factor of 4, bringing in $17bn in new investment, subject to execution.

Of the successful projects, 12 hybrid projects have been selected, which will also provide storage capacity of 11.4GWh, highlighting yet again that BESS is proving to be the key technology disruption of global energy markets in 2025. All are expected to be operational by 2029. Under the expanded CIS, which energy Minister Bowen lifted from 32 to 40GW of generation and storage this year, regular competitive tenders are to be held until 2027 at six month intervals in an effort to drive firmed renewables into the system at scale and speed to meet the government’s 2030 82% renewables target.

As Giles Parkinson at Renew Economy notes, solar battery hybrid projects have emerged as the dominant technology, winning the most project and the bulk of capacity…The most interesting thing about the results is the re-emergence of solar, mostly paired with big batteries to create solar battery hybrid projects that have trumped wind energy both in terms of overall capacity and in project numbers.

The majority of forecast generation is still sitting with wind, assuming that all award winners get built, but we note solar and BESS can be built much more rapidly and with less social licence to operate resistance by are communities deceived by the fossil fuel propaganda to delay.

The projects selected have strong local community and First Nations engagement judged against the assessment criteria, as well as meaningful, contractually binding social licence commitments:

* $291m of shared benefits for their local communities. ✅

* $348m worth of initiatives for local First Nations groups. ✅

* Over $17 billion in local content ✅

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NET ZERO FUND DESIGN UNDERWAY

Tim was pleased to join other experts last week in a consultation with Assistant Industry Minister Tim Ayres on the design of the newly announced Net Zero Fund, a $5bn allocation within the National Reconstruction Fund to support industrial decarbonisation. This is part of the government's Net Zero Plan announced in September to underpin the new federal climate target of a 62-70% reduction in emissions by 2035. 

In our view, the Fund should act as the Commonwealth’s catalytic capital provider for industrial and manufacturing decarbonisation. It should take higher risk, take patient, longer term public equity positions and/or accept lower rates of return where markets will not, and coordinate closely with the Net Zero Economic Authority (NZEA) and Clean Energy Finance Corporation (CEFC) to deliver large scale, regional and transformational outcomes. 

By embedding flexible instruments, targeted concessionality and strong regional linkages, the Fund can leverage the expanding role of carbon pricing under the Safeguard Mechanism and accelerate Australia’s path to a competitive, decarbonised industrial economy that aligns with and accelerates our Future Made in Australia (FMIA) and net zero before 2050.

>>> See our full submission on the design of the Fund led by our partner the Climate Capital Forum.

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BAILOUTS GALORE FOR BIG SMELTERS – THERE HAS TO BE A BETTER WAY

The fossil fuel industry is the GOAT at privatising the profits (mostly to offshore tax havens) and socialising the costs, Just imagine the Glencore billionaires sitting in Switzerland rolling in the cash from Australian taxpayers who just handed over another $600m subsidy to “rescue” its Mount Isa copper smelter, courtesy of the federal and QLD governments.

With bailouts for other major industrial energy users on the table – $2.4bn to Dodgy Sanjeev Gupta / GFG Alliance’s Whyalla Steelworks is a case in point, the Tasmanian government just footed the $20m bill for a manganese shipment to GFG’s Liberty Bell Bay smelter only to immediately find their agreed terms flouted, and Rio now has the begging bowl out for billions in subsidies to “save” its Tomago aluminum smelter –  there has got to be a better way. Oliver Yates has proposed one to permanently solve both the decarbonisation and cost issues and align public-private objectives. As he wrote in the AFR:

“Instead of handing over the $2 billion in subsidies or tax credits Tomago –and its part-owner, Rio Tinto – is reportedly seeking, the government should seize the opportunity to repower our manufacturing base with sustainable solutions, generating a return for taxpayers and offering certainty to workers. We could invest using a scheme finance vehicle (SFV) – a tried and tested idea that works. … 

An SFV would allow the government to contract for clean energy directly using power purchase agreements and on-sell it at a stable price to the smelter. With government credit support and concessional debt from special investment vehicles like the CEFC and the National Reconstruction Fund, we can significantly cut the cost of capital for developers, triggering the rapid build-out of around 3 GW of renewables and storage.”

In CEF’s view, this is a long-term solution worth serious consideration that would go a massive way to permanently slashing energy costs and emissions.

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THE GAS CARTEL IS RIPPING US OFF, CHAPTER 653

An excellent report from the ABC’s Ian Verrender explains how Santos is behind our soaring electricity and mortgage costs.

Back in 2011 Santos's then-CEO David Knox announced Santos would lead a consortium to build a massive LNG export facility on Curtis Island, near Gladstone. Knox at the time said: “Already Australia's largest domestic gas producer, GLNG confirms Santos as a major energy supplier to the growing economies of Asia." Despite earlier internal concerns, Santos forged ahead with a plant twice the size originally planned. There was just one problem. A large portion of the gas reserves it thought would be sufficient to feed this export monster proved to be too difficult to tap.

Given the consortium already had signed long-term supply contracts with Asian buyers, it was left severely short and in a bind.

The solution? Siphon gas from the domestic market. The end result has been that domestic gas prices on Australia's east coast have trebled, resulting in surging electricity prices that have put Australian households and energy-intensive businesses under extreme pressure. 

For decades East Australia had some of the lowest cost domestic methane gas supply in the world, at A$3-4/GJ. Now East Australia has some of the highest cost domestic gas supply in the world. This regulatory failure cripples the competitiveness of our downstream industries, and costs every East Australian in terms of hyperinflation of energy costs – direct for gas, and indirect through gas' pricing setting role in electricity.

BlueScope CEO Mark Vassella rightly flagged in his National Press Club address this month that Australian manufacturing capacities are being gutted by the gas cartel. Australia pays >3x the price that Qatar and US domestic industry and consumers pay. 

We are being price-gouged for access to our very own public gas by multinationals who add insult to injury by paying bugger all or no PRRT or corporate tax here. For a decade both major parties have been complicit, whether by pandering to the cartel in failing to reserve gas for Australians and enforce price constraints, or derelicting their duty to tighten the tax regime to get some return for the people on the cartel’s rampant private profiteering off our sovereign assets.

Corporate tax data released by the government this month and analysed by The Australia Institute confirms this. Santos racked up a tenth straight year paying zero corporate tax from a total of $48 billion in sales, and PRRT revenue has hit a 3-year low, down to $1.5 billion from a peak of $2 billion in 2022. As the TAI’s Rod Campbell said: “The new tax data shows, yet again, that big gas is taking the piss out of Australians.” 

Instead of parroting cartel talking points – e.g., that our massive gas exports keep the peace in the Indo-Pacific – Resources Minister Madeleine King should take a lesson from history to better understand why 'working with' big gas, which created the problem, is ridiculous. They are playing us. We need a solution that works for Australians and our downstream industries, not one to further enrich the multinationals, nor the Japanese Ambassador, bought and paid for by Mitsui and INPEX, core players in the cartel profiting by onselling the Australian gas we ship offshore to them. Former Industry Minister Ed Husic has demanded federal intervention to combat this practice.

Time to electrify everything, starting with households, and for a Gas Substitution Roadmap nationally. Victoria has led the way. It’s beyond time to cease allowing new build domestic household gas appliances. Let’s ensure the limited supply of our own sovereign gas the cartel so magnanimously allows us to access goes to the highest-use purposes – high-temperature heat in our manufacturing sector.

Australians have paid for the existing gas infrastructure for the last 50 years. When the cartel generously offers to let us have a gas reservation on the products of expensive new gas exploration projects, our response should be a resounding NO. We should reserve 20% of existing lower-cost gas, and set and enforce a maximum domestic price well below A$10/GJ. That would solve the problem. There is more than enough existing uncontracted gas available. And let the methane swindlers export any expensive new gas they develop.

And by the way, gas is killing people, which casts a bit of a pall over the very concept of new development. New research on Woodside’s Scarborough LNG project reveals that its harms, including increased mortality, are tangible and quantifiable down the level of numbers of deaths, meaning the proponents can no longer sit in their counting houses counting out their money and credibly claim the risks are unable to be measured or negligible – and nor can regulators when deciding if a fossil fuel project will proceed. Food for thought for Environment Minister Murray Watt as he contemplates his recent approval of the extension of Woodside’s NorthWest Shelf gas bomb to 2070.

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THE PROFOUND GLOBAL IMPACT OF CHINA’S RISE AS AN ELECTROSTATE

In a Financial Times feature on China’s rise and rise as a green superpower, Tim says “the country’s long-term cleantech ambition is ‘profound’ and stands in stark contrast to Beijing’s rival superpower, the US, where President Trump has embraced fossil fuel industries and gutted his predecessor’s support for renewable energy. ‘I think China is using it in a very, very geopolitically savvy way, taking advantage of America’s stupidity and regression back into a petrostate. China just wins. America has abrogated the playing field.'"

Ember highlights a litany of statistics showcasing the country’s clean energy and electrification boom. Among them, China’s investments last year of US$625bn in clean energy, which amounts to nearly one-third of the global total. And the US$1.9tn contribution of clean energy to China’s economy last year is about one-tenth of GDP and equivalent to the entire Australian economy.”

There is a lot more to do, but this is all about energy independence, progressively cutting China's addiction to imported fossil fuels, and technology and manufacturing dominance of all the zero-emissions industries of the future that the world needs to tackle climate change. China's electrification and decarbonisation is inspiring, giving the world hope at a time it is most needed, as the US abdicates its global leadership role, has a dummy spit and walks off the playing field. Let’s hope for greater EU-China dialogue to crowd-in a ratcheting up in "global –1" efforts to solve the climate crisis.

Key to this is carbon pricing. It was great to see the powerful language in Beijing’s Progress Report on China’s National Carbon Markets this month: "After four years of operation, the National Carbon Market has become an essential policy tool in accelerating green transition in all aspects of economic and social development" as China aims to "accelerate the building of a more effective, dynamic and internationally influential carbon market."

There are opportunities here for international cooperation. It is critical that Australia continue to build and improve relations with our #1 trade partner, and embrace a path towards potential collaboration on an Asian Carbon Border Adjustment Mechanism to extend and leverage the EU ETS and CBAM, as CEF’s Matt Pollard set out in his recent report.

>>> COMING SOON: China’s green capital is reshaping the world. Our upcoming Global Outbound Direct Investment by Chinese firms in Cleantech 2025 report reveals where, why, and how — stay tuned for the full release.

>>> Read CEF China analyst Caroline Wang’s commentary in WSJ and in FT on China’s clean energy and battery dominance and Tim in WSJ on how China is dramatically outpacing the US in new power generation.

>>> See Tim’s presentation to the ANU School of Business and Economics on China's Green Industrial Policy and Its Financial Implications for Australia 

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This newsletter is not intended to provide, and should not be relied on for, tax, legal, investment or accounting advice, nor is it an offer or solicitation of an offer to buy or sell, a recommendation, endorsement, or sponsorship of any security, company, or fund. CEF is not responsible for any investment decision made by you. Unless attributed to others, any opinions expressed are our current opinions only. Certain information presented may have been provided by third parties. CEF believes that such third- party information is reliable, and has checked public records to verify it wherever possible, but does not guarantee its accuracy, timeliness or completeness; and it is subject to change without notice.