17 JULY 2025

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

PM’s LANDMARK TALKS IN CHINA ON GREEN STEEL BUT WE NEED ACTIONABLE AGREEMENT OR AUS RISKS $50bn pa IRON ORE SLUMP

Top of the agenda for PM Albanese’s visit to China this week has been the massive bilateral opportunity for Australia – the world’s #1 producer of iron ore, with a 56% share of global exports – to partner with China on developing green iron and steel produced using zero-emissions energy. Such an important opportunity to elevate the understanding on this $100bn investment opportunity for Australia, and the need to collaborate with our key trade partners real time to make it happen here, rather than in the Middle East and Brazil.

The PM’s Shanghai green steel roundtable with Chinese officials and Australian resources leaders including BHP, Rio Tinto, Fortescue and Hancock was a potential watershed in China-Australia trade collaboration with real potential to position Australia as a leader in green iron. After the meeting, the PM announced that a Policy Dialogue on Steel Decarbonisation had been established, which will “provide Australia with timely insights and input into the Chinese government’s planning on steel, including new opportunities for our domestic mining and steel industries.”

China leads globally in steel production, and the sector accounts for 15% of China’s emissions. 

Globally, steel production creates 7-9% of emissions. Outside of the electrification of transport and the decarbonisation of electricity, green iron and steel is the single largest opportunity to reduce global emissions. As number one in iron ore and steel respectively, Australia and China are uniquely placed to jointly play the pivotal role in this era-defining industrial transformation. 

As detailed in our report Green Metal Statecraft: Forging Australia’s Green Iron Industry, Australia could double the value of our iron exports to $250 billion pa by pivoting to green iron. Failure to do so risks halving export revenues, as China, which takes 86% of our iron ore, reduces overall steel production, boosts scrap recycling and concurrently looks to other nations with higher grade, lower impurity ore to decarbonise its supply chains. It has already moved to joint-venture in Guinea to unlock a vast new high-grade deposit. 

It was highly significant to hear the PM and Australian iron ore leaders commit to working in partnership with China to jointly drive steel sector decarbonisation. Equally heartening was the PM’s stated  intention to invest in joint R&D and make equity and other investments via vehicles such as the NRF to strategically accelerate our green iron industry – the state support and policy certainty that iron ore majors need to further invest their private capital into the transition. The $1bn Green Iron Investment Fund is a good first step, but we now need to double down, and then double down again, and bring Western Australia and South Australia into this key global race.

Next on the table should be a China-Australia bilateral agreement on green iron and steel, as Fortescue CEO Andrew Forrest proposed, to convert talk into action. A Clean Commodity Trading Initiative (CCTI) should likewise be a priority – as Prof. Elizabeth Thurbon and Oliver Yates have promoted.  This would be a game-changing step forward in bringing Australia’s top investment, employment and export opportunity to fruition.

>>> Tim on the green steel Shanghai roundtable on ABC NewsRadio. 

>>> Tim on Ausbiz  (with an interview forthcoming  on Sky NewsDay with Kieran Gilbert from Parliament House at 12.30 on Friday 18th).

>>> Our op ed on the China green steel collaboration opportunity in PV Magazine.

>>> Our China analyst Caroline Wang speaking ahead of the PM’s trip on the opportunities to partner with China, on ABC Online; and ABC AM: from 2:44 and quoted in CGTN 

>>> A NYT feature on China’s clean energy leadership highlighting CEF’s ongoing work tracking China’s enormous outbound foreign direct investment, with Chinese companies announcing now $170 billion in foreign investments in clean energy manufacturing, generation and transmission since 2023

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CATL and BHP partnership: A milestone in advancing electrification to decarbonise Australian mining 

China’s CATL, the world’s largest battery manufacturer, and BHP announced they have signed an MoU to explore opportunities in battery development for mining equipment with XCMG Group and locomotives including rapid charging infrastructure, along with BYD for energy storage systems and battery recycling options for BHP's mining applications, especially its copper operations. 

One almost gets the impression BHP has turned the corner and is no longer using lack of technology readiness as an excuse for delaying till next decade a world-leading investment opportunity for Australia to lead in ‘learning by doing’ in the domestic context, in doing so crowding-in onshore manufacturing, assembly and end-of-life recycling technologies in partnership with world technology leaders like CATL (think Renewable Metals in Perth). Beyond time to cap the diesel fuel rebate and turn it into a Transition Tax Incentive Treasurer Jim Chalmers!

>>> Coming soon: our updated report on Australia’s Fuel Tax Credit Scheme which acts as a massive disincentive for our mining majors to transition from diesel to electrification and decarbonisation of mining operations. We propose a phase-out of the FTCS for its largest beneficiaries with a Transition Tax Incentive scheme to accelerate electrification and decarbonisation.

The CATL-BHP announcement comes after CATL and partners recently announced that a ~US$6 billion vertically integrated battery manufacturing gigafactory and recycling facility had commenced construction in Indonesia, the largest initiative of its kind in Southeast Asia. Spanning over 2,000 hectares, the Indonesia Battery Integration Project encompasses nickel mining and processing to battery materials, manufacturing and recycling. CATL says the megaproject is expected to create 8,000 direct and 35,000 indirect jobs at full capacity. 

As Bloomberg reports, Indonesia, home to the world’s largest nickel reserves, is seeking to move up the global metals domestic value-add supply chain by building smelters and battery and EV factories onshore.

This is the power of Chinese foreign direct investment into partner economies – and as we have long argued, Australia should take note. China is keen to invest and partner with Australia’s world leading firms, but this capital will go elsewhere if we don't provide the policy support and encouragement here.

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MEANWHILE IN CHINA…

Jaw-dropping clean energy progress continues: while most everyone has been projecting a slowdown in China's wind and solar deployment, a State Grid Energy Research Institute report projects a staggering 380 GW solar and 140 GW wind will be added to the grid this year (suggesting a possible 40% y-o-y growth). These clean capacity additions equate to around 850 TWh/year of clean power generation added to the grid while demand is protected to grow at 400-640 TWh (4.0-6.5%). 

We need to think of why China is doing this. In the face of the heightened US trade war, energy independence is a national security imperative. Levering China’s domestic manufacturing capacities to stimulate domestic GDP growth is a second entirely bankable motivation. 

On the dirty side, coal power additions are also picking up sharply. The State Grid predicts 127 GW of thermal power is to be added, some of it gas but the majority, probably 90-100 GW, flexible new coal power to balance ever-higher variable renewable energy shares (see the source for SGRI projections).

It's been clear that clean (and dirty) power capacity addition numbers would be buoyed by the end of the five-year plan period, when a lot of projects race to complete. Electrification is a key Chinese strategy imperative, and for all that China is still adding new coal capacity, the average utilisation rate of the Chinese coal fleet is down to 46% in 1HCY2025; idle new capacity does not create carbon emissions. 

CREA continues to report that Chinese national emissions peaked in March 2024, and are down 1% in the rolling 12 months through to May 2025, and with steel production down 8% y-o-y in the month of June 2025, this plateauing of national emissions six years ahead of China’s NDC commitment to peak by 2030 is nicely intact. This is despite the latest massive drought hitting China, and heatwaves driving up airconditioning demand.

Additionally, the IEA’s 2025 Oil Market Review highlights that China’s oil use over 2024-2030 is set to plateau, peaking now, well ahead of previous forecasts that under-estimated the unstoppable momentum of electric vehicles in China. 1HCY2025 saw China’s EV sales +32% y-o-y, again leading the world’s phasing out of reliance on internal combustion engines, and with that, shifting from imported expensive oil to domestic electricity, thereby driving energy independence, electrification and decarbonisation whilst the US stagnates and fossilises.

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FEDERAL RESOURCES UPDATE FLAGS DECLINE IN IRON ORE, COAL EXPORTS – TIME TO PIVOT

Just before the PM’s “Green Steel” tour of China, a wake-up call for our leaders and policymakers: the latest data from the Office of the Chief Economist (OCE) forecasts that Australia’s resource and energy export revenues will decline by $33 billion in 2026-27 compared to 2024-25, as the temporary Australian export sugar-hit resulting from Putin’s invasion of Ukraine continues to dissipate. 

Despite all the evidence, Premier Roger Cook is still in 2025 spouting fossil gas and Japanese trading house talking points about LNG being a transition fuel, a delusion that is clearly going to come home to roost as the world’s supply of LNG increases 50% over 2025-2030 (according to the latest IEA report) and demand fails to keep up, with the obvious result that prices will continue to fall. As a key LNG importer, it is entirely in Japan’s national interest to flood the world with new supply and permanently lower prices, to Australia’s loss. Woodside Energy shares have massively underperformed the Australian equity market boom over the last decade, a massive ongoing wealth destruction under the “leadership” of Richard Goyder and Meg O’Neill.

The projected deflation of Australia’s export earnings is a lens to threats to our future economic resilience and security. It is a stark reminder of the need to increase our economic complexity, to diversify from fossil fuels, which face inevitable structural decline, and to prioritise value adding our resources. The projections underscore the strategic importance to pivot to green iron production onshore using renewables, rather than shipping rocks of ore. 

The decline projected by the OCE is driven primarily by a 17% drop in iron ore revenues from $116 billion to $97 billion and a 20% drop in LNG from $67 billion to $53 billion over this period. From 2022-23, when Australia’s energy exports spiked due to Russian sanctions, LNG revenues are forecast to fall 42% to 2026-27, whereas iron ore revenues are expected to drop 22%. Thermal coal, meanwhile, is forecast to drop by more than 60% from highs of $66 billion in 2022-23 to $26 billion in 2026-27. Metallurgical coal revenues are forecast to fall around 34% from highs in 2022-23 to $42 billion in 2026-27. 

The OCE forecasts are a critical reminder of the importance of the Future Made in Australia re-industrialisation package, the National Reconstruction Fund, the Safeguard Mechanism and the Capacity Investment Scheme to accelerate renewables deployment to enable commodities value-adding. 

Progress made in Labor’s first term is substantial, but to safeguard our future economic resilience and security, we must now see a step-change in ambition to structurally pivot away from our end-of-life fossil fuel facilities and industries and towards Australia’s role in the emerging net zero world economy.

>>> See our full op ed on this in Renew Economy

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Ai GROUP PRODUCTIVITY PAPER CALLS FOR CONSIDERATION OF A CARBON TARIFF

A new paper by CBAM KIng Tennant Reed and the Australian Industry Group (Ai Group) highlights the critical productivity changes we need to see to drive the energy transformation at a speed and scale commensurate with the opportunities Australia has in a decarbonised global economy.

Climate Energy Finance wholly endorses the key recommendations:

✅ Streamlining environmental approvals, including EPBC Act reforms so national standards are enforced by states and approvals are time-limited, coordinated and outcomes-focussed.

✅ Improve community engagement, including communication of affordability, reliability and climate benefits.

✅ Simplify project expectations, with a focus on delivering clean energy faster and cheaper.

✅ Embrace automation, p-skilling and amart electrification, including the promotion of robotics, assistive tech, labor up-skilling and workforce capacity, and smarter use of electrification.

✅ Need for clearer carbon signals, including carbon pricing in generation emissions and CBAMs to ensure strengthened climate policies are not undermined by carbon leakage.

CEF strongly supports the urgent need for carbon pricing signals – including a CBAM – to mobilise capital into the energy transformation. The expectation of future regulatory landscapes that price in carbon externalities is critical to accelerating the progress of new green commodity projects. These provide the enabling demand that underwrites large-scale energy investments.

>>> We argued for this urgent policy reform to drive industrial decarbonisation in our recent report calling for an Asian CBAM, and are delighted to see this call reflected in the Ai Group's recommendations.

Complementing this, the Ai Group's recommendations for approvals reform are also key. We need to see an Energy Transition Coordinator to work across governments, expedited EPBC Act assessment for large-scale projects, and a simplification and coordination of approvals for priority projects. 

It was great to see Ai Group highlight Victoria's positive momentum in defining renewables projects as 'significant economic development' to streamline processes and limit third party appeals, while, unfortunately, Queensland reverses its once-leading climate-industry policies, as we wrote in Renew Economy, throttling investments with increasing bureaucracy.

To achieve the step-change in ambition required to decarbonise the existing energy landscape, let alone to onshore and scale a value-added green metals industry, we must address the limitations that have seen large-scale connections drop from 3.8GW in 2022-23 to 2.5GW in the 9MFY25. 

>>> Listen to the Let me Sum Up podcast focussed on CEF’s CBAM report,  with the Ai Group's Tennant Reed, hosted by Luke Menzel of the Energy Efficiency Council and Frankie Muscovic from the IGCC

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…AS MOMENTUM IS BUILDING ON CARBON PRICING

In its submission to the Productivity Commission ahead of the Productivity Summit, Australia’s second largest resources company Rio Tinto has argued for an economy wide carbon tax, noting that “Market-based price on carbon is the most effective way to incentivise the private sector to make low-carbon investments and drive down emissions”. Its position is aligned with the ACTU, which also argues for a tax on carbon. Rio also called for ambitious government support for large scale renewables to achieve the federal 82% by 2030 renewables target.

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FROM OUR VALUED PARTNERS

The Climate Capital Forum, founded and led by Blair Palese, has released a comprehensive new 10 point policy roadmap to feed into Treasurer Chalmers’ critical productivity summit in August. Its recommendations including getting committed transition and green industrialisation funds out the door; early-stage cleantech funding; expanding Future Made in Australia production credits to green iron; superannuation reform aligning performance tests with climate risk; mandating Australia’s sustainable finance taxonomy; and phasing out the diesel fuel rebate, amongst other key steps. CEF fully endorses this excellent summation of many of the critical drivers to future-proofing Australia. Read CCF’s 10 Ideas to Grow Australia’s Productivity here. CCF will undertake a 2 day delegation visit to Federal Parliament 28-29 July 2025 to promote these 10 policy asks.

John Grimes, longstanding CEO of influential peak body the Smart Energy Council, gave an excellent address to the National Press Club powerfully arguing that renewables are key to our economic prosperity and national security, including via processing and value-adding our abundant minerals and metals onshore using clean energy. View John’s full address here. (Many thanks to John and SEC for the shoutout to CEF’s work (at 23:30) on costing the Coalition’s nuclear folly, which was binned by the electorate at the May federal election.)

The Clean Energy Investor Group, representing investors with a collective $38 billion in clean energy assets, this week released its 2025 Clean Energy Outlook member survey. The report maps key shifts in investor sentiment, including planning and transmission delays now topping the members’ list of development challenges and NSW overtaking Queensland as the most attractive jurisdiction for clean energy investment. Policy coordination remains a major pain point: Australia has the resources and investor appetite to lead the world in clean energy, however fragmented State and Federal policy and regulatory barriers are holding investment back, with investors rating Australia as only 'somewhat attractive' compared to global competitors. The report finds that Australia must step up the pace of its transition ambition, or it risks missing a global leadership opportunity ahead of its expected role as COP31 host.

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