Unlocking green metals opportunities for a Future Made in Australia: consultation paper

Australia has a significant comparative advantage for a green metals production future based on our abundant mineral resources, industrial capacity, and enormous renewable energy potential.

Establishing a green iron sector in Australia will be key to helping reduce emissions from our major trading partners, in particular Japan and South Korea, which are geographically limited in how much renewable energy they can deploy.
An estimated 10.5% of Japan’s emissions and 15.5% of South Korea’s emissions are from the iron and steel sectors.

Developing new strong trade relationships based on joint investment into green iron production in Australia will be crucial for reducing emissions in the economies of our trading partners and establishing new trading relationships built around investment, technology deployment and trade in green iron and steel.

Australia’s top economic and climate priority should be to become a primary supplier of green iron in particular to global supply chains.

Demand - Korea and Japan and China should be priority export markets based on existing trade relations and complementary industry structures. Australia can be a particularly complementary green metals trading partner with Korea and Japan due to our abundant mineral resources and renewable energy potential, in contrast to the energy constraints on both nations.

If Australia fails to urgently invest and develop competitive methods for producing green iron and steel using Australian ores, then there will be increasingly risk and competition from other iron ore producing regions such as Brazil and Simandou iron production region in the Republic of Guinea, that currently produce ores more suitable for current green iron production methods. Investment and support for green iron pathways using Australian ores must be a critical priority.

Scrap metal is predominately processed using Electric Arc Furnances (EAFs), Australia currently has 2 EAFS—with one additional EAF in development at Whyalla in South Australia. There are two reasons for the need for more EAFs in Australia. Firstly the significantly lower emissions compared with blast furnaces, EAFs produce 75% fewer CO2 emissions and less environmental impacts per tonne of output (https://steelnet.org/annualreports/2022/). Currently, the majority of Australia’s ore is converted into steel via blast furnace–basic oxygen furnace (BF-BOF) technology which generates average emissions of 2.33 t CO2/t compared to 1.37 t CO2/t for Direct Reduced Iron - Electric Arc Furnace (DRI-EAF) processes and 0.68 t CO2/t for scrap to EAF production.

Secondly, EAFs are capable of processing far higher volumes of scrap steel into new steel, 85% compared with 20% with BOF. (https://www.steel.org.au/what-we-do/focus-areas/sustainability/reduce,-reuse-and-recycle/)

Given Australia’a climate targets and the volume of scrap steel produced across Australia In particular there is need for an EAF in WA and Queensland to process volumes and reduce emissions from scrapping at the same time.

The decommissioning of Australia’s offshore oil and gas platforms in the coming years also offers a vast quantity of scrap steel for recycling for the production of low-emissions steel. Legislation requires this infrastructure to be fully removed but this must be enforced to ensure this resource is not wasted.

Steel recycling in Australia is reasonable high, with approximately 90% steel being recycled (https://www.steel.org.au/what-we-do/focus-areas/sustainability/reduce,-reuse-and-recycle/) . The last nation wide analysis was done in 2009 and the government should commission more up to date material analysis.

Currently all of Australia’s recyclers of aluminium export their scrap, with the bulk of Aluminum (more than 95% of Australia’s scrap aluminium) is exported for scrapping overseas (https://aluminium.org.au/sustainability-main/recycling/). There are that significant opportunities in manufacturing and recycling that can be achieved through increasing recycling capacity and cross-value chain coordination, (https://aluminium.org.au/sustainability-main/recycling/#ftn9)

Springmount recommends that the government advocate for a distinct global commodity pricing for green versus fossil-produced metals that is independently verifiable. Currently, there is no global verification of the emission intensity of steel or aluminium products.

The government should give serious consideration to the establishment of a Green Metals Exchange to facilitate the trade of green metals to facilitate trading in metals with strong ESG credentials and genuine green metal price discovery that is not currently viable through the London Metal Exchange ( https://www.gtlaw.com.au/knowledge/could-green-metal-exchange-provide-liquidity-commodity-markets-while-protecting). Establishing a dedicated Green Metal Exchange would particularly benefit Australian producers seeking to manufacture high quality, ethically produced and low emissions metals underpinned by a rigorous certification system. .

Having a distinct global commodity pricing for green commodities will help differentiate commodities and provide Australia with an advantage in its marketing of its green metals.

Springmount Advisory recommends to following as a minimum to establish a competitive green iron industry in Australia:

- A federal investment of at least $10bn to establish a competitive green metals industrial sector.
- Deploy investment via a complementary mix of mechanisms to underpin the development of a green metals industrial base in Australia, including:
- Contracts for Difference to bridge green premium of first movers (volume capped at $30 billion for first movers, for detail see Green Gold report, CPD https://cpd.org.au/wp-content/uploads/2023/10/20230925-Green-gold-Report__.pdf);
- Production Tax Credits for Green Metal Production for example the US has a 10% tax credit for aluminium production;
- Green metal procurement embedded within Government/s purchasing (including infrastructure, defence projects, and government-supported renewable and transmission projects)
- Establish an Australasian Green Iron Corporation joint venture between the Federal Government, local industry and key trading partners to fast-track development of the green iron sector in particular and enable the transfer of critical skills and technology.
- Increase R&D investment in green metals production specifically focused on Australian ore requirements

State government initiatives ensuring local communities directly benefit from new developments should be emulated at the Federal level. Initiatives include local content and worker guidelines developed by the NSW Renewable Energy Sector Board Plan (https://www.energy.nsw.gov.au/sites/default/files/2022-09/nsw-renewable-energy-sector-board-plan.pdf) ; Tasmania’s guidelines for community engagement (https://www.stategrowth.tas.gov.au/recfit/renewables/guideline_community_engagement), benefit sharing and local procurement; Victoria (https://www.energy.vic.gov.au/__data/assets/pdf_file/0013/700105/Compensation-and-landholder-payments-factsheet.pdf) and Queensland’s minimum compensation requirements (https://www.powerlink.com.au/news-media/new-supergrid-landholder-payment-framework-australian-first) for landholders hosting new transmission infrastructure.

Further recommendations have been provided by Community Power Agency in its Regional Benefit Sharing paper (https://cpagency.org.au/is_regional_benefit_sharing_the_new_frontier_for_australias_renewable_energy_shift/) , as well as RE-Alliance’s Building Stronger Communities report (https://assets.nationbuilder.com/vicwind/pages/3164/attachments/original/1705557869/Building_Stronger_Communities_%E2%80%93_Community_benefit_funds.pdf?1705557869) .

Incorporating minimum and bonus conditions for community benefit sharing will help building the broad social licence, especially in host communities, and ensure any green metals support progams are successful and deliver tangible benefits to the community.

Green metals mining and processing occur on First Nations land and as such a specific set of community benefit overlays should also be implemented. The benefit sharing Mining Agreement struck recently between the Dja Dja Wurrung Clans Aboriginal Corporation and Agnico Eagle regarding the development of the Fosterville Gold Mine is a good example that could be emulated more broadly (https://djadjawurrung.com.au/galka-our-organisation/bakaru-wayaparrangu/)

A priority needs to be investment in the capacity of Traditional Owners and host communities to engage in the conception, design, planning and implementation is crucial for achieving good results and building an inclusive economic future.

The First Nations Clean Energy Network has developed Principles and Guidelines for the development of renewable energy, to ensure that the country is protected and to make sure First Nations communities share the benefits of Australia’s clean energy boom. The principles and guidelines should also be followed by renewable energy industries and the governments that regulate projects. The 10 principles cover such things as ensuring projects provide economic and social benefits, mutual respect, clear communication, cultural and environmental considerations, landcare and employment opportunities.

Green metals policy should ensure that the Aboriginal and Torres Strait Islander Best Practice Principles for Clean Energy Projects(https://assets.nationbuilder.com/fncen/pages/183/attachments/original/1680570396/FNCEN_-_Best_Practice_Principles_for_Clean_Energy_Projects.pdf?1680570396) are required for funded projects.

The following four areas have been consistently identified by First Nations organisations, unions, climate and environmental organisations, and community groups as priority outcomes for conditionality in government-supported programs and projects:

- Improved labour and workplace conditions
- Community and regional participation and benefit-sharing
- First Nations ownership and benefit sharing
- Industrial and energy development is nature positive

Recipients of government finance/funding should be delivering high quality projects that are in a race to the top for better practice and generate strong social returns through good community engagement, nature protection and restoration, and good local content and workforce outcomes.

Ensuring good conditionality outcomes will support industries to grow while building a much stronger and supportive social context needed to establish Australia as a renewable energy powerhouse.

First Nations , unions, climate and environmental organisations, and community groups have identified the following conditional outcomes for inclusion in the Future Made in Australia Act and its enabling mechanisms such as green metals and including any direct investment and/or production tax credits.

Conditional outcomes can be embedded as either:
A ‘minimum’ requirement in order for projects to be eligible for support,
A ‘merit’ requirement to drive competition for better practice, or
A ‘stretch’ conditionality which is rewarded with bonus payments or other benefits to drive innovation.

In general, conditionality that is set as an ‘minimum’ requirement should be broadly achievable irrespective of industry or location, while ‘merit’ conditionality should be used to incentivise desirable social outcomes in a race to the top. ‘Stretch’ conditionality demonstrates to industry and the host community the expectation of where practice should be innovating towards. New practices which should become business as usual over time, could be initially rewarded through ‘stretch’ conditions but with a set timeframe for transitioning to ‘merit’ requirements over time.

This approach will help strike the right balance between hard coding in minimum requirements that are both socially beneficial and readily achievable by industry, without loading on too many minimum requirements initially which may deter investment while industry develops the capacity to deliver on conditional outcomes.

There are also historic precedence for linking improved social conditions to support for new industries in Australia. In 1909, the Manufacturers' Encouragement Act, was introduced to underpin the development of the local iron and steel industry. A condition on receiving support from the Act was that funding recipients had to pay workers "fair and reasonable wages" in order to be eligible.

Springmount Advisory also recommends that direct Australian government investment/shareholding in new green metals ventures to ensure the public directly benefits from the green metals industry as it matures.

The recent agreement between Agnico Eagle and the Dja Dja Wurrung traditional owner group at the Fosterville gold mine marks a significant stride in corporate-community relations and sustainable resource management. By allocating a portion of its annual profits to the Dja Dja Wurrung people, Agnico Eagle aims to address historical injustices and foster community development. This agreement, titled Bakaru Wayaparrangu, not only provides financial support for community programs but also facilitates environmental stewardship and biodiversity conservation efforts led by the Dja Dja Wurrung.

Key elements of the agreement include community support initiatives, environmental restoration projects, and opportunities for employment, training, and business development within the community. It also grants the Dja Dja Wurrung a voice in managing the environmental impacts of the mine and planning for its closure and remediation.

The success of this agreement hinges on its collaborative approach, emphasising mutual respect, transparency, and meaningful engagement throughout its development and implementation. While specific financial details remain undisclosed, the agreement sets a positive precedent for future partnerships between corporations and indigenous communities, showcasing the potential for equitable benefit sharing and sustainable practices in resource extraction. https://www.theguardian.com/australia-news/article/2024/may/13/fosterville-gold-mine-first-nations-aboriginal-profit-sharing-deal-dja-dja-wurrung-agnico-eagle

Currently, one of the key barriers for investors is demand certainty. There is a lack of green metal offtake agreements with local and international which creates demand/investment uncertainty. This presents a strong opportunity to strike agreements with heavy users of steel and aluminium such as East Asian car manufacturers and infrastructure builders.

Additionally, building onshore demand will also create investment opportunities. If Australian governments can use building, road and energy infrastructure procurement, particularly for major new developments such as offshore wind and onshore renewables that are supported by the CIS, or major defence acquisition projects

Currently, there is limited demand for low-carbon industrial outputs in the Australian market, and few policy mechanisms are in place to address this issue. The higher cost of current low-carbon goods compared to carbon-intensive alternatives dampens their demand, often referred to as a ‘green tech premium.’ However, the more significant challenge lies in the ‘grey discount’ enjoyed by fossil fuel-based incumbents, which undermines the competitiveness of new technologies (https://cpd.org.au/wp-content/uploads/2023/10/20230925-Green-gold-Report__.pdf).

Without regulatory support or government intervention to stimulate demand, large-scale production is unlikely to develop independently, despite increasing investor interest. This situation exacerbates the first-mover problem, where early adopters face high capital costs and uncertain demand, discouraging investment until market conditions are more favourable. This hesitation is further compounded by slow maturation of the demand side of the market in the absence of adequate supply, leaving the potential growth of green product markets uncertain over time.

There is no market barrier to investment in metal projects powered by fossil fuels, and further investment will be detrimental to global emissions reductions. No investment support should be provided for metal projects that are powered by fossil fuels.

A major obstacle to developing new clean supply chains for these green metals is the substantial upfront capital needed and the risk in scaling up, compounded by uncertain demand if they are notably pricier than emissions-intensive alternatives. Early support to bridge the 'green premium' is key.

Utlising a combination of contracts-for-difference to support the absolute first movers in green metals industries, followed by the of introduction production credits, offtake agreements as well as loans, research grants, and regulatory reforms for fast followers ( (https://cpd.org.au/wp-content/uploads/2023/10/20230925-Green-gold-Report__.pdf)) will help overcome the initial barriers while also mitigating the risk of unnecessary support and subsidisation being provided as the green metals industry matures.

The Green Steel Opportunity report produced by the the Minerals Research Institute of Western Australia, has detailed analaysis of the emissions reduction opportunities at each stage of the steel production (https://www.mriwa.wa.gov.au/minerals-research-advancing-western-australia/focus-areas/green-steel/).

The Federal Government should fund further research into the following areas to build on the research:
1. Undertake full national analysis to understand the opportunities in other iron producing regions like South Australia
2. Map the iron ore-to-steel value chain to confirm scenarios against which further assessments will be undertaken related to infrastructure needs and market dynamics.
3. Assess the existing and required regional attributes to identify the comparative advantages of Australia's mining regions and future investment needs to enable delivery of the various scenarios.
3. Assess the future iron ore mining, ironmaking and steel market dynamics to evaluate the potential opportunity and risk to Western Australia and the rest of Australia from action or inaction for each scenario.

At a high level the following actions need to occur at each stage of production:
Pathway steps:
1 Green Iron Ore Mining - electrification of mining processes using renewable energy
2 Green Pellets The production and export of green pellets using renewable hydrogen.
3.Iron-making – HBI from Green Pellets using Renewable Hydrogen -Producing HBI from Green Pellets, using renewable hydrogen to produce both the pellets and the HBI.
4. Green Steel Domestic production of Green Steel, with full renewable energy solutions.

Springmount Advisory recommends prioritising a substantial increase into research and deployment investments into green iron production technology that utilises Australian ores. MRIWA outlines these technologies in their green steel opportunity paper (https://www.mriwa.wa.gov.au/minerals-research-advancing-western-australia/focus-areas/green-steel/).

Regardless of the technology pathways that are ultimately deployed, a significant increase in renewable energy build-out is required to power mining, refining and manufacturing and is a no regrets option, especially if Australia is to onshore more of the value chain.

Alumina decarbonisation has been developed by Australian company Alpha HPA,

For Aluminium - it’s a matter of mass rollout of renewables plus storage. Rio Tinto’s has recently purchased renewable PPA’s for its Gladstone operations, Boyne aluminium smelter, Yarwun alumina refinery and Queensland Alumina refinery, at 2.2GW. With the right support, there are reasonable grounds for the Tomago Newcastle, NSW smelter, Alcoa Portland Vic, Rio Tinto’s Bell Bay Smelter as well as the alumina refineries in WA to sign renewable energy PPA’s decarbonising all smelting operations in Australia, reducing Australia’s annual emissions by 6%.

Currently, there are at least 5 green iron projects in development in Australia, however, investment is significantly lagging compared to other regions.

The lack of investment to date is reflective of the lack of a clear government program to establish and support the sector in Australia - underscoring the importance of the government embedding green metals support within the Future Made in Australia Act.

The ZESTY process developed by Calix can use green hydrogen to reduce iron ore within Calix’s renewable powered electric Calix Flash Calciner (e-CFC). The project proponent indicates that the Calix indirect heating method aims to deliver efficient electrification of iron ore processing, minimise the amount of hydrogen required in the production process compared to competing technologies and removes the need for ore pelletisation pre-processing.

The project proponent notes that the ZESTY process can produce green iron from multiple ore types for use in either conventional blast furnaces for lower carbon steel products or directly in electric arc furnaces. Further information on the ZESTY process can be found here - https://calix.global/news/zesty-study-economical-green-iron-solution/

This example of local innovation that should be supported into more rapidly deployment.

More broadly, electrification technology for many mining processes is well advanced and consideration should be given to enabling mining companies to 'trade' fuel tax credits for electrification subsidisation. This would accelerate electrification, reduce emissions, as well as reduce total fuel tax liabilities held by the Federal Government.

A “carbon solutions levy” introduced from 2030-31 at the same level as the European Union carbon price (about $90 a tonne of carbon dioxide) would raise more than $100 billion a year initially, enough to cover the cost of the proposed reforms and leave money over for budget repair and tax, according to the Superpower institute (https://www.afr.com/policy/energy-and-climate/resurrect-carbon-price-to-fund-superpower-garnaut-sims-20240212-p5f4cb#:~:text=Professor%20Garnaut%20will%20argue%20a,for%20budget%20repair%20and%20tax)

A proposed introduction of an Australian CBAM would seek to levelising the playing field for domestic green metal production. Especially those who export to countries with existing CBAM policies such as any EU country.

1. A federal investment of at least $10bn to establish a competitive green metals industrial sector.
2. Deploy investment via a complementary mix of mechanisms to underpin the development of a green metals industrial base in Australia, including:
a) Contracts for Difference to bridge green premium of first movers (volume capped at $30 billion for first movers, for detail see Green Gold report, https://cpd.org.au/wp-content/uploads/2023/10/20230925-Green-gold-Report__.pdf);
b) Production Tax Credits for Green Metal Production for example the US has a 10% tax credit for aluminium production;
c) Green metal procurement embedded within Government/s purchasing (including infrastructure, defence projects, and government-supported renewable and transmission projects)

The Renewable Energy Target is one of the most notable and successful approaches Australia has used to bridge the early 'green premium' gap for new technology. The program has enabled $1.4 billion in renewable generation and storage, and as of 31 July 2022, Australian households and businesses have installed over 3.2 million solar PV systems and over 1.44 million solar water heater and air source heat pump systems.

Secondly, contracts for difference for renewable energy off takes. This provides the generator with a guaranteed revenue stream should spot market revenues fall below a contracted price. Contracts for difference were adopted by the Australian Capital Territory and Victorian Governments in their recent wind auctions.

Production credits and offtake agreements or contracts for difference are some of the most effective mechanisms available that are proven to work at scale.

The average DRI-EAF plant size globally is ~2mtpa. At a minimum Australia should be helping underwrite plant development at that scale for green iron production - or higher. The average size of Hot Briquette Iron plants is ~2.1 mtpa. The largest currently is the 5.5 mtpa Arcelor Mittal Nippon Steel Limited, in Hazira, India. Australia should aim to have capacity at least at the average if not higher given that Australia is the largest exporter of iron ore.

At a minimum, Australia should aim for 10mt pa by 2030 of green iron. This is equivalent to twice Australia's current steel making capacity.

1. A federal investment of at least $10bn to establish a competitive green metals industrial sector.
2. Deploy investment via a complementary mix of mechanisms to underpin the development of a green metals industrial base in Australia, including:
a) Contracts for Difference to bridge green premium of first movers (volume capped, for detail see Green Gold report);
b) Production Tax Credits for green metal production for example the US has a 10% tax credit for aluminium production;
c) Green metal procurement embedded within Government/s purchasing (including infrastructure, defence projects, and government-supported renewable and transmission projects)
d) Establish an Australasian Green Iron Corporation joint venture between the Federal Government, local industry and key trading partners to fast-track development of the green iron sector in particular and enable the transfer of critical skills and technology.
e) Increase R&D investment in green metals production specifically focused on Australian ore requirements

3. Embed community benefit principles and First Nation capacity building and benefit sharing as conditions for investment recipients

4. No investment support for fossil fuel-powered projects (fossil methane, coal) for the production of green metals

5. Establishing an Australasian Green Iron Corporation joint venture with key trading partners and industry. This will enable government procurement of green iron through existing processes, working with trade partners to strike offtake agreements, facilitation of joint ventures for green iron production and technology and skills sharing, investment into R&D for production of green iron from Australian ore types

In terms of the market gap and biggest economic opportunity, direct support for green iron is the best investment for Australia. Australia is dominant in iron ore resources as well as renewable energy resources. There is currently a window to setup the technology and trade position as a one-stop-shop for the majority of the worlds zero-emissions iron. Although Australia is best placed for this, there is a limited window to act and capture the advantage that other countries such as Brazil will fill if Australia does not.

Additionally, support for the renewable energy requirements of the value chain is needed. Decarbonisation of energy particularly in iron ore regions such as the Pilbara and South Australia will also have additional benefits of contributing to the decarbonisation of other metals and critical mineral. The mass build-out of renewable energy and transmission infrastructure, and establishing a common user grid to support the metals industry in WA is a priority.

1. Deploy investment via a complementary mix of mechanisms to underpin the development of a green metals industrial base in Australia, including:

a) Contracts for Difference to bridge green premium of first movers (volume capped, for detail see Green Gold report);
Two methodologies are used by the Centre for Policy Development to estimate the projected cost differential over the next 20 years of operation for first and second movers in the green metals sector. The first approach utilizes reliable forecasts of expenses and demand, incorporating implicit global carbon pricing for the next two decades. According to this method, first movers in green steel and aluminium (excluding alumina) are expected to accrue cumulative costs that surpass market prices by $46 billion during the first 20 years of operation.

The second approach relies on current premium estimates, assuming these premiums remain relatively stable: a 30% higher cost for green steel, 50% for alumina, and 15% for aluminium. These cost differentials are anticipated to decrease significantly as projects are rolled out and technology advances, though the benefits of such learning curves will primarily favour new facilities. Initial facilities adopting these technologies are likely to face higher costs throughout their operational lifetimes. According to this method, bridging the production cost-market price gap would require an estimated $94 billion. Both methodologies assume that first and second movers will produce 15 Mt/year of steel and 4 Mt/year of aluminium, scaling production linearly over seven years from inception.

b) Green metal procurement embedded within Government/s purchasing (including infrastructure, defence projects, and government-supported renewable and transmission projects)

The public sector represents a significant purchaser of carbon-intensive goods, particularly in infrastructure and construction projects such as steel. The US Inflation Reduction Act allocated USD $2 billion for the integration of low-carbon materials in highway construction and USD $3 billion for the adoption of low-carbon materials and technologies in government buildings. Similarly, Australian governments can leverage fiscal and procurement policies, such as employing internal "shadow" carbon pricing to incentivise departments and projects toward low-carbon alternatives.

The Australian Government could establish a central funding pool to mitigate costs for line agencies transitioning to low-carbon procurement, collaborate with states to embed financial incentives for low-carbon materials into infrastructure contracts, and use the public sector's substantial economic influence to set minimum environmental standards in supplier eligibility criteria, revise building codes, and forge alliances with states and territories to promote greater reuse and recycling in infrastructure.

In Australia, upcoming public infrastructure projects are projected to require $26 billion worth of steel. By implementing robust procurement reforms, Australian governments can signal a strong demand for green products to industry. Initially, a significant portion of this demand may be met through imports due to the current limited availability of Australian suppliers. However, this shortage underscores the potential of procurement reforms to stimulate the growth of a domestic green industry. See Infrastructure Australia (2023), ‘Infrastructure market capacity 2022 report’.

A creditable and short-term plan to reach 100% renewable production by facilities. There is no market barrier to investment in metal projects powered by fossil fuels, or facilities using fossil gas as a feedstock and further investment will be detrimental to global emissions reductions. No investment support should be provided for metal projects that are powered by fossil fuels.

Community benefit principles should be required for eligibility, not optional. The following four areas have been consistently identified by First Nations organisations, unions, climate and environmental organisations, and community groups as priority outcomes for conditionality in government-supported programs and projects:

- Improved labour and workplace conditions
- Community and regional participation and benefit-sharing
- First Nations ownership and benefit sharing
- Industrial and energy development is nature positive

Recipients of government finance/funding should be delivering high quality projects that are in a race to the top for better practice and generate strong social returns through good community engagement, nature protection and restoration, and good local content and workforce outcomes.

Ensuring good conditionality outcomes will support industries to grow while building a much stronger and supportive social context needed to establish Australia as a renewable energy powerhouse.

Yes, more incentives should be provided based on higher benefits that provide greater sustainability outcomes and/or community benefit sharing.

Based on the following community benefit sharing principles, the following four areas have been consistently identified by First Nations organisations, unions, climate and environmental organisations, and community groups as priority outcomes for conditionality in government-supported programs and projects:

Improved labour and workplace conditions
Community and regional participation and benefit-sharing
First Nations ownership and benefit sharing
Industrial and energy development is nature positive

Recipients of government finance/funding should be delivering high quality projects that are in a race to the top for better practice and generate strong social returns through good community engagement, nature protection and restoration, and good local content and workforce outcomes.

Ensuring good conditionality outcomes will support industries to grow while building a much stronger and supportive social context needed to establish Australia as a renewable energy powerhouse.

Upfront capital costs are the initial issue and need to be addressed first so first movers, can move.
Firstly its suggested that the government support
($30 billion) in contracts-for-difference to support the absolute first movers in key industries (iron, alumina, aluminium,)

Two methodologies are used by the Centre for Policy Development to estimate the projected cost differential over the next 20 years of operation for first and second movers in the green metals sector. The first approach utilizes reliable forecasts of expenses and demand, incorporating implicit global carbon pricing for the next two decades. According to this method, first moers in green steel and aluminium (excluding alumina) are expected to accrue cumulative costs that surpass market prices by $46 billion during the first 20 years of operation.
The second approach relies on current premium estimates, assuming these premiums remain relatively stable: a 30% higher cost for green steel, 50% for alumina, and 15% for aluminium. These cost differentials are anticipated to decrease significantly as projects are rolled out and technology advances, though the benefits of such learning curves will primarily favour new facilities. Initial facilities adopting these technologies are likely to face higher costs throughout their operational lifetimes. According to this method, bridging the production cost-market price gap would require an estimated $94 billion. Both methodologies assume that first and second movers will produce 15 Mt/year of steel and 4 Mt/year of aluminium, scaling production linearly over seven years from inception.

Secondly, fast followers should be supported so that a build up a critical mass can be achieved.
$20 billion in production credits to encourage second- and third-movers to reach a critical mass in key export industries

Investment credits reduce initial costs for establishing new facilities by subsidising capital and construction expenses, incentivising early financial commitments. In the context of developing new green industries, these credits would stimulate early capital investment and could phase out after 2030 or earlier, transitioning to production credits.

Production credits offer subsidies per unit to firms producing renewable energy or critical commodities like green iron, hydrogen, or essential minerals. They help bridge the gap between market prices and production costs. However, one drawback is that production credits fix a set subsidy, potentially resulting in government overpayments if costs decrease more rapidly than anticipated.

For supporting the initial, costly facilities producing green exports, contracts for difference are more effective in addressing marginal production economics. Consumption credits operate similarly to production credits but are given to purchasers rather than producers, boosting demand for green products domestically. However, as the primary consumers of export-oriented goods are often foreign, consumption subsidies may not be the most efficient tool.

Minimum 10 year program is recommended given scale of investment required and the capital intensity of green metals projects. The Center for Policy Development recommended a 20 year plan.

The level of support required is at least in the billions if Australian green metals industries are to be successful. A federal investment of at least $10bn to establish a competitive green metals industrial sector.

Deploy investment via a complementary mix of mechanisms to underpin the development of a green metals industrial base in Australia, including:

Contracts for Difference to bridge green premium of first movers (volume capped at $30 billion for first movers, for detail see Green Gold report);

The ACTU has also developed comprehensive policies to ensure public benefit results from government spending. These include:

- Stable, secure and ongoing employment for workers
- Workplace participation for Aboriginal and Torres Strait Islander peoples
- Participation of women and the achievement of gender equity goals
- Local content and employment plans and targets;

The first major industrial package introduced in Australia to support the iron and steel industry, the 1909 Manufacturers’ Encouragement Act, also reflected this ethos with recipients of ‘bounties’ required to pay fair and reasonable wages to their employees. Establishing support for a 21st century green metals sector should continue this historical tradition of ensuring industrial programs deliver better outcomes for workers and local communities.

The government should consider the following 3 options:
- Government procurement
- Government direct investment
- Offtakes with key trading partners, especially with consumer-facing products such as the auto industry

Government procurement in the embedded within Government/s purchasing (including infrastructure, defence projects, and government-supported renewable and transmission projects)

The public sector represents a significant purchaser of carbon-intensive goods, particularly in infrastructure and construction projects such as steel. The US Inflation Reduction Act allocated USD $2 billion for the integration of low-carbon materials in highway construction and USD $3 billion for the adoption of low-carbon materials and technologies in government buildings. Similarly, Australian governments can leverage fiscal and procurement policies, such as employing internal "shadow" carbon pricing to incentivise departments and projects toward low-carbon alternatives.

The Australian Government could establish a central funding pool to mitigate costs for line agencies transitioning to low-carbon procurement, collaborate with states to embed financial incentives for low-carbon materials into infrastructure contracts, and use the public sector's substantial economic influence to set minimum environmental standards in supplier eligibility criteria, revise building codes, and forge alliances with states and territories to promote greater reuse and recycling in infrastructure.

In Australia, upcoming public infrastructure projects are projected to require $26 billion worth of steel. By implementing robust procurement reforms, Australian governments can signal a strong demand for green products to the industry. Initially, a significant portion of this demand may be met through imports due to the current limited availability of Australian suppliers. However, this shortage underscores the potential of procurement reforms to stimulate the growth of a domestic green industry.

Government direct investment through establishing an Australasian Green Iron Corporation joint venture between the Federal Government, local industry and key trading partners to fast-track development of the green iron sector in particular and enable the transfer of critical skills and technology.

Offtakes with key trading partners as the majority of steel use globally is in building infrastructure (52%) following by mechanical equipment (16%) and automotive (12%). Working with major trading partners to establish green iron and steel offtake agreements will be critical to standing up the industry.

Establish an Australasian Green Iron Corporation joint venture between the Federal Government, local industry and key trading partners to fast-track development of the green iron sector in particular and enable the transfer of critical skills and technology.

The scale and speed required to establish a large scale green iron industry will almost certainly require the establishment of an Australian government-led JV in partnership with local industry.

This has been successful in the past, as Australia’s major industrial facilities have largely involved direct government involvement.

The Bell Bay Aluminium Smelter was the first constructed in Australia (and the Southern Hemisphere) in 1955, it was established as a joint venture by the Commonwealth and Tasmanian Governments.

The steel industry was supported through extensive industry development coordination by government including through direct government contracts especially for railway construction.

The number one priority for the government should be to see a large scale green iron industry developed in Australia, followed by the decarbonisation of existing metal manufacturing plants, and finally by the growth of new non-iron green metals sector.

Green metals represent a significant omission in the Future Made in Australia Act (FMIA). Apart from the anticipated support for hydrogen, which is likely to serve as a feedstock for green metals, there was minimal backing for this sector in the recent federal budget or FMIA. Green metals arguably present one of Australia's largest export opportunities, leveraging our existing metal mining capabilities alongside abundant renewable energy resources. They also offer a viable alternative for export revenue and employment in the declining fossil fuel sectors.