A brand new pact between Australia and the United States highlights the pivotal position our nation’s mineral wealth will play within the clear power transition. But it additionally underscores the huge effort now required from Australia.
Prime Minister Anthony Albanese and US President Joe Biden inked the landmark deal in Japan over the weekend. It cements cooperation between the 2 nations on local weather motion, together with sharing assets and coordinating on clear power coverage and funding.
Australia and the US have been allies for the reason that finish of the Second World War. The new settlement provides local weather motion as a “third pillar” of the alliance between the 2 nations, together with defence and financial cooperation.
The enhanced partnership might speed up Australia’s transition from main fossil gasoline exporter to wash power powerhouse. But success is way from assured. Australia should act quick to grab the chance now earlier than us.
Allies in a warming world
The Australia-US alliance was not established with a warming planet in thoughts. However, the local weather disaster is now recognised as a nationwide safety menace in each Australia and the US.
In each international locations, defence businesses have been more and more concerned in catastrophe aid operations following unprecedented excessive climate occasions supercharged by local weather change. They embody the Black Summer bushfires in Australia and Hurricane Ian within the US.
Climate change continues to worsen – and Australia and the US should share some blame. The emissions targets and broader local weather insurance policies of each nations are usually not per reaching the Paris Agreement aim of limiting warming to 1.5℃.
Both Australia and the US have to speed up the shift from fossil fuels to wash power applied sciences. This contains ending coal-fired energy, shifting past gasoline and investing in renewables infrastructure. It additionally requires re-thinking private transport and decarbonising heavy industries resembling metal and cement.
The new local weather pact between the 2 international locations recognises the pressing job at hand. It might allow Australia and the US to develop a shared response that matches the dimensions of the local weather disaster.
The deal goals to drive formidable motion on local weather change and clear power this decade, each domestically and internationally. Australia and the US will now formally work collectively to broaden and diversify clear power, and develop the availability of essential minerals utilized in low-emissions applied sciences.
Biden was effusive when asserting the deal. Taking maintain of Albanese’s arm, he mentioned the settlement was testomony to the shut relationship between the 2 international locations. “And I imply that: shut”, he mentioned.
Importantly, Biden will ask the US Congress to designate Australia as a “home provider”, primarily linking the commercial bases of each nations. This would means Australian corporations could also be eligible for billions of {dollars} value of subsidies accessible below the US Inflation Reduction Act – the largest local weather spend in US historical past.
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The race for tomorrow’s economic system
The Inflation Reduction Act allocates $US369 billion (A$555 billion) in subsidies to drive funding in renewable power infrastructure and clear power applied sciences. The funding is the same as a couple of quarter of the Australian economic system.
Already the act has stimulated greater than $A220 billion in non-public funding in clear power initiatives within the US, driving a growth in new photo voltaic, battery, and electrical automobile manufacturing amenities. Ultimately, the coverage is anticipated to:
spur greater than 1,000 new clear tech corporations
catalyse greater than A$3 trillion in funding
create 9 million new jobs by 2030.
When the world’s largest economic system makes such a transfer, it modifications the sport for everybody. Already, different main economies – together with the European Union, Japan and South Korea – have responded with trade coverage and stimulus packages to help their very own clear power industries.
Effectively, the US has turbo-charged the worldwide clear power transition.
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Australia’s second
The pact signed between Albanese and Biden on the weekend was scant on element. However, given the billions the US is throwing at clear power, Australia can count on to profit from the pledge to formalise co-operation on coverage and funding.
The Inflation Reduction Act is a significant alternative to broaden Australia’s essential mineral exports. Consider lithium, a key part in batteries. Australia is already the world’s largest lithium provider. US battery producers eager to entry subsidies should use minerals sourced domestically, or from international locations with which the US has an present free commerce settlement, resembling Australia.
So the US coverage will stimulate demand for Australian lithium. As early as 2028, the worth of Australia’s lithium exports is ready to overhaul our thermal coal exports – an indication of the occasions.
However the Inflation Reduction Act additionally presents a problem for Australia. Its sheer scale threatens to attract funding and expertise away from Australia’s personal rising clear power industries to the US as an alternative in areas resembling inexperienced hydrogen and metal.
The federal authorities is taking steps to deal with this. The May price range, for example, contained A$2 billion to help the event of a renewable hydrogen trade in Australia. Climate Change and Energy Minister Chris Bowen described it as a “down fee” on a extra fulsome response to Biden’s Inflation Reduction Act.
This response should match the dimensions of this once-in-a-century alternative to develop into a clear power powerhouse. It ought to embody focused help to develop new inexperienced export industries and assist Australia transfer previous a “dig and ship” method to our assets. By processing minerals right here, utilizing Australia’s aggressive benefit in renewable power, we will create extra advantages at house.
Clean power commodities and demanding minerals might drive funding and jobs at a scale akin to the latest mining growth. But the race is on, and we have to act quick. If we don’t, different nations – together with our US allies – will eat our lunch.
Wesley Morgan is a senior researcher with the Climate Council
