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

21 NOVEMBER 2024

GREEN IRON: AUSTRALIA MUST GET IN THE RACE & WIN – OR LOSE OUT 

CEF’s new report, led by Matt Pollard, Green Metal Statecraft: Forging Australia’s Green Iron Industry, finds that failure to invest now in a 'Team Australia' pivot to green iron would mean we risk a halving of our $138bn pa iron ore export revenues, as global importers, including China, decarbonise and restructure their steel supply chains. 

Repositioning Australia as a leader in green iron has the potential to double the value of our current iron ore exports to more than $250bn annually, securing our future economic prosperity.

This requires Australia's world  #1 reserves of iron ore to be processed onshore pre-export using renewable energy and green hydrogen, with possible DRI as an interim step. 

Australia dominates global iron ore exports, with a 56% export market share. China accounts for 86% of the total. The commodity contributes 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 – strategic national-interest policy and investment incentives to kickstart a green iron export industry, the intergenerational policy architecture needed to create a value-added Future Made in Australia in which we dominate in green metals. 

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 could reduce global emissions by 1 billion tonnes pa (more than twice Australia’s annual domestic emissions).

To seize this once-in-a-century opportunity requires that we:

• Establish a National Green Iron and Steel Strategy with clear, measurable targets.

• Implement demand-side policies and incentives to support price discovery and demand pull signals from our key export partners for green products, absent a carbon price on Asian trade.

• Implement supply-side policies and incentives, such as production tax incentives for green metal refining, and a $20bn Future Fund mandate for green metals processing.

• Provide an additional $500m over 10 years to the CSIRO for research, development & demonstration (RD&D) of green iron technologies to overcome the technical barriers to decarbonising the bulk of Australia’s iron ore production.

• Collaborate internationally on working towards an Asian Carbon Border Adjustment Mechanism (CBAM).

• Reform approvals processes to accelerate firmed renewables deployment, lowering the cost of energy and ensuring Australia’s green iron is competitive with other emerging green iron regions.

As Marilyne Crestias, Head of Policy and Advocacy at the Clean Energy Investor Group, representing renewables investors with a portfolio value of ~$24bn, said on the report: “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.”

In the words of report foreword author, UNSW Professor Elizabeth Thurbon, in her op ed published in Pearls and Irritations: “By embracing an ambitious green metal statecraft agenda, Australia can create the new job-creating, high-value, export-oriented industries of the future … Australia’s political and policy leaders must start thinking about the development of a local clean metals industry as an unmissable opportunity to address our nation’s pressing economic, energy, and environmental security challenges, and to bolster our geostrategic positioning. And they need to embrace the idea of a more ambitious and strategic role for the government in bringing this new industry to life – just as other governments around the world are doing.”

>>View our full report, including a one-page report at a glance, Executive Summary and Key Recommendations

>>View our other extensive media on the report, including Tim’s interviews on SkyNews Newsday with Kieran Gilbert and Sky Weekends with Jaynie Seal, in China’s Xinhua News, an AAP story in Canberra Times and across 100+ mastheads, two features in news.com.au, Reuters, PV Magazine, a SparkClub Podcast with Grant McDowell and wide coverage across key industry publications including Australian Manufacturing, Australian Mining Monthly and mining.com

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FUTURE FUND FINALLY GEARED TO THE ACTUAL FUTURE WITH ENERGY TRANSITION INVESTMENT MANDATE

CEF applauds the announcement today by Treasurer Jim Chalmers and Finance Minister Katy Gallagher of a new investment mandate for Australia’s $230bn sovereign wealth fund, the Future Fund.

The mandate directs that while the fund’s primary objective will be to continue to maximise returns, it will be required to consider national priorities in its allocations, including supporting the energy transition as part of the net zero transformation of the Australian economy, as well investing in residential housing and critical infrastructure.

This is the first refresh of the mandate in over a decade and a half. CEF endorses this much needed modernisation of the fund as entirely appropriate and long overdue. It represents a critical strategic repositioning in a rapidly transforming investment landscape, responding to the defining economic and sovereign-wealth-building opportunity of our era – economy-wide Australian and global decarbonisation – as it sets up this critical federal investment architecture for long-term returns in the national interest. 

Future Fund Chair Greg Combet confirmed that the Fund will "assess opportunities to invest in businesses that will play a vital role in the energy transition.”

That our sovereign wealth fund is actively seeking investments linked to the green energy transformation is a welcome corrective to the regressive approach of the previous chair, Peter Costello. Australia urgently needs greater strategic public interest investment into decarbonisation to crowd-in private capital at speed and scale. This reorientation will complement the investment programs of key bodies such as the CEFC, NRF, NAIF and ARENA, amplifying these. 

It was brilliant to hear also that chair Combet will appoint a new executive director responsible for the energy transition in response to the mandate changes. 

Australia’s #1 future-facing investment opportunity is the development of a green iron export industry. Our green iron report (detailed above) recommended a new $20bn mandate in the Future Fund to undertake strategic, public interest, patient public and private equity plus infrastructure investments into value-adding Australia’s world-leading critical minerals and strategic green metals onshore, powered by renewable energy. The 22,000 people in Whyalla – a potential green iron and steel hub – are crying out for a strategically-minded, strongly capitalised owner after decades of ongoing financial distress.

We strongly recommend that the Future Fund consider this key once-in-a-century $100bn investment opportunity to secure Australia’s prosperity, as we necessarily pivot from strategically risky over-reliance on fossil fuels in a rapidly decarbonising world to our boundless potential as a zero-emissions export leader.

A mandated shadow price on carbon in the Fund aligned with the EU ETS would be an added bonus and help get the Fund ready for an Asian CBAM, to extend and leverage the EU ETS and CBAM.

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TRUMP ELECTION LEAVES CHINA TO WIN DECARBONISATION RACE AS GLOBAL TRANSITION ACCELERATES

The election of Donald Trump as US President – a charlatan, felon and climate denier captured and paid for by the fossil fuel cartel – is a bitter irony after devastating climate-driven floods smashed parts of the southeast US just ahead of the poll, costing some US$50bn, and in the face of escalating wildfires, hurricanes, floods and other natural disasters taking a huge toll in that country and elsewhere.

Trump’s "drill, baby, drill" climate and energy "policies" are a disaster for the nation, for intergenerational equity and equality, and will impact global efforts to mitigate climate change. It is likely that he will undermine the Paris Agreement, as in his previous presidency, reduce support for renewables, close down the NOAA which monitors emissions, roll back environmental protections and fossil fuel industry regulation, give free rein to big coal, oil and gas and potentially trash key parts of President Biden’s landmark 'green new deal' Inflation Reduction  Act, his unprecedented $1tn investment into decarbonisation, including cleantech industry development and incentives for consumer clean energy resources.

Trump’s massive promised tariffs on cleantech imports such as EVs and solar from China, and indirectly from ASEAN and Mexico, will do untold harm to US consumers slammed by cost of living pressures, to the economy broadly, and to the US’s global geopolitical standing.

Nevertheless, despite this crushing setback for US decarbonisation, the global energy transition is inevitable, inexorable and accelerating in many countries across the world. The US will be isolated and will now certainly lose the global cleantech race. China wins.

China, the world's #1 emitter, is rolling out its energy transition at unprecedented speed and scale as it leads in R&D, investment, manufacturing, deployments and exports across all cleantech fronts: solar, wind, batteries, EVs, hydro and grid. 

Our latest China Monthly Energy Update covering the 9 months to September shows more staggering progress in China's electrification and decarbonisation journey. It continues to install 22GW per month of renewable energy, installing each and every week what Australia takes a year to do.

It’s the biggest decarbonisation story on earth, and consistent with the Australian opportunity to help decarbonise the Chinese and global steel industry supply chain. And it has overwhelmingly positive implications for global emissions reduction momentum.

China met its 2030 renewables targets this year, 6 years early. It is increasingly likely its national emissions will peak early, in 2024, as firmed renewables deployments grow at an astonishing rate and construction wanes. Its reach extends globally as it invests billions into renewables and cleantech manufacturing and projects around the world from Thailand to Hungary to Morocco – some US$120bn since 2023 across every continent, including, importantly, in the Global South. 

This remarkable progress will continue unabated despite the outcome of the US election. In fact, China will simply increase its global lead and possibly leverage US isolationism to work more closely with the EU in a joint race to the top, leveraging their emissions trading schemes. 

>> Read the rest of our commentary on this topic in our full op eds on China vs Trump’s America and the race to decarbonise in the South China Morning Post and Renew Economy.

__WHAT DOES TRUMP'S ELECTION MEAN FOR AUSTRALIA?

It is critical that Trump’s trashing of climate goals not be used as a premise for reduction in ambition by other major economies, Australia included. We note Climate Minister Chris Bowen’s recommitment, at COP29 in Azerbaijan, to cutting emissions in line with the Paris 1.5 degree limit, and his pledge to “accelerate our transformation” as we help developing nations decarbonise and manage the impacts of warming.

With a US walk-back from the Paris Agreement now looming, the scope for Australia to be a major beneficiary of growing global investor interest in decarbonisation and its enabling energy infrastructure should not be lost on us.

That China’s TrinaSolar divested its brand new 5GW pa solar module manufacturing plant in the US the day after the election aligns with TrinaSolar’s MoU with Sundrive for solar module manufacturing in Australia – a clear signal of capital flight from the US, to other nations' potential gain.

Any retreat from investment under the IRA, or a turning away from energy transition in the US, could help shift private capital to jurisdictions that provide investors certainty and stability, and with the right market settings, policy environment and incentives, including strategic national-interest public investment commensurate with the scale and urgency of the global decarbonisation opportunity. This could and should include Australia as a key investment destination.

There may still be opportunities to work with the US in areas of mutual advantage under a reconfigured or constrained IRA – it is unlikely to be dismantled wholesale, because much of its capital has flowed to reindustrialisation and energy transition opportunities in Republican states.  

We also stand at the edge of enormous opportunities to build our sovereign capabilities. As Martijn Wilder, chair of the NRF, told the AFR in relation to the election of Trump, “We’re in a situation of global uncertainty, and Australia has some credible competitive advantages. There’s incredible innovation in Australia that just needs to be fostered and supported and funded, an amazing opportunity for Australia to expand its current economic and manufacturing base. It’s more important than ever, given what’s going on in the world, that we find those innovations in Australia and we back them.”

In this geopolitical environment we should be doubling down on a Future Made in Australia with a nation-building public investment program, crowding in the enabling private capital to leverage our once in a century opportunity to reposition as a clean energy-powered, value-added trade and investment leader – including innovating in the emerging global green iron industry.

As the critical mass of decarbonisation momentum shifts away from the US, this also requires us more than ever to build and leverage diverse international collaborations with likeminded key trade partners and global industry leaders in the Asian region. Key to this is China. 

Chinese President Xi Jinping’s remarks with PM Albanese in Brazil this week support this: “Our relations have realised a turnaround and continue to grow, bringing tangible benefits to our two peoples.” Australia needs to chart our own collaborative roadmap forward, different to the US’s.

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AUSTRALIA CHINA BUSINESS COUNCIL ECONOMIC COOPERATION FORUM

CEF director Tim Buckley reports:

It was great to have the opportunity to publicly launch CEF’s green iron report to the above Forum jointly hosted by ACBC and the China Chamber of Commerce in Australia, alongside Cochlear – one of Australia’s largest medical technology manufacturing firms operating in China – BYD and Beijing Energy International. The Forum was moderated by ACBC NSW CEO Patrick Mayoh. 

CEF had the pleasure of presenting our new report to China’s Ambassador to Australia, HE Xiao Qian, who strongly endorsed our key message calling on Australia to collaborate with our key North Asian trading partners on together derisking and bringing to commercial fruition this massive decarbonisation opportunity. 

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BIG COAL STILL COMMITTED TO DOING ABSOLUTELY NOTHING BUT RAKING IT IN AS WORLD BURNS

​​Glencore and other cashed-up coal majors BHP, Whitehaven, Yancoal and Stanmore have demonstrated their breathtaking lack of bona fides on investment in energy transition by relieving themselves of even their self-imposed, pathetic commitment to donate 10c/tonne to an industry-led  decarbonisation solutions fund, because it apparently has “surplus cash”. The FY25 levy will be precisely zero.

This exposes their total lack of climate and decarbonisation ambition and – even if only considering their own corporate and shareholder interests – a failure to appreciate the impact on balance sheets of the inevitable and massive acceleration of the global energy transition. It’s past time their damaging externalities were internalised in the form of a carbon price.

We also desperately need reformed taxation of fossil fuel industry multinational corporate profits, and an end to the unconscionable opportunity cost of subsidies: progressive coal royalties like under the previous QLD government, capping of the hugely expensive federal diesel rebate – which our report on this topic found will cost Australians $37bn to 2030 – and PRRT reform, to guarantee a fair return to the people for the private exploitation of our sovereign assets. 

It was great to have confirmation that major reform of the massive federal Fuel Tax Credit fossil fuel subsidy into a Transition Tax Credit will be key to the legislative agenda of crossbenchers Kate Chaney, David Pocock, and Allegra Spender et al next year. They propose a $50m pa cap on claims under the Fuel Tax Credit Scheme, leaving farmers unaffected, as we advocated in our report.

These revenue-generating and saving measures would enable governments to invest on our behalf in decarbonisation to the benefit of all. In QLD progressive coal royalties have underpinned a transformative multibillion dollar clean Energy and Jobs Plan – especially imperative with industry "leaders" like those above abdicating their responsibility to transition.

Meanwhile, Glencore’s CEO was in Australia last week, looking to entrench the coal giant's interests and bolster its already overflowing coffers, spruiking the "necessity" of coal as a transition fuel and urging expansion of coal in NSW.

The October International Energy Agency (IEA) World Energy Outlook begs to differ. It says demand for all fossil fuels will "peak this decade, before 2030"; and the surge in renewables is "more than enough' to cover growth in global electricity demand and "push coal-fired generation into decline". By the decade’s end, global economic growth can be sustained "without using additional amounts of oil, gas or coal". 

NSW (like the rest of Australia), needs to increase its already improved ambition on accelerating transition. In NSW, Energy Minister Penny Sharpe and Planning Minister Paul Scully are taking material steps to reduce the planning system headwinds undermining the deployment of utility and distributed firmed renewables.

This is the key to slashing emissions, permanently ending the energy bill hyperinflation smashing consumers and industry – driven by the climate-destroying, self-enriching fossil fuel cartel – and delivering low-cost, secure and reliable energy to all.

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AUSTRALIAN NATIONAL UNIVERSITY SOLAR ORATION

Tim Buckley was honoured to be invited by Professor Andrew Blakers to give the ANU's prestigious annual Solar Oration early this month, with a replay available here, and slide presentation here. He explored the global solar and wider cleantech shift, including China's astonishing leadership and Australia's innovative solar and wind generation strides, looking at how technology disruptions and international cooperation are reshaping the future of energy.

TEAM NEWS

Xuyang Dong has unfortunately moved on from her role as CEF’s China Energy Policy Analyst. We thank Xuyang for her contributions since the start of 2023, as CEF built its profile and leadership in this space, and wish her all the very best for her future endeavours.

We look forward to rolling out the next phase of our China program, with a redoubled commitment to this key strategic focus.

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OUR MEDIA |

View our recent media here, including Tim’s regular fortnightly commentary on the Spark Club podcast.

OUR WORK |

See more of our latest work, including presentations on global decarbonisation and capital shifts.

PREVIOUS NEWS UPDATES |

Our previous newsletters covering major energy news can be accessed here. 

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AJ for the CEF team.

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