From Newcastle to the Pilbara, and from Gladstone to Whyalla, Australia is a proud and successful industrial nation. For decades, mining, manufacturing, minerals processing, and construction have been a major pillar of our economy, but these sectors now stand at a critical crossroads.
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As the global effort to reduce emissions and avert dangerous climate change gains momentum, companies are transitioning away from polluting fossil fuels to embrace clean energy, and investors are also prioritising clean industries and divesting from emissions-intensive ones. A growing number of countries, including Australia's key trading partners, are also looking to impose carbon border measures on high-polluting import products.
For Australia, this presents a major threat, but an even bigger opportunity. If our heavy industries cannot move beyond our polluting past, we risk being left behind and we will fail to meet our emissions targets. But if we capitalise on our world-leading clean energy resources, abundant minerals, and highly skilled workforce, Australia could be a major winner in the race to a net-zero economy.
The region I am lucky enough to call home, the Illawarra, faces this very challenge. From the high spires of BlueScope's steelmaking facilities in Port Kembla to the metallurgical coal mines around, this community is built on steel, while also helping build Australia with steel.
Steel has historically been an emissions-intensive industry, and contributes about $11 billion to our national economy a year. Most of the steel made in Port Kembla, as well as in Whyalla in South Australia, uses an emissions-intensive technique. As high-emissions products risk becoming outdated and unwanted in a net-zero economy, our region will need to adapt to protect manufacturing businesses and workers.
Fortunately, as a new Climate Council report points out, green steel and green iron are one of Australia's biggest opportunities to futureproof our economy, and tackle climate change.
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Iron ore is a key ingredient in steelmaking, and a mineral resource that Australia has an abundance of. Just as most of Australia's gas gets sent abroad, we currently send 90 per cent of the iron ore we dig up overseas, primarily to China, Japan and South Korea, for refining and steel production. Not only is this a missed opportunity for high-value manufacturing in Australia, but, the emissions generated from sending iron ore overseas are massive: about 1.5 billion tonnes of carbon pollution a year, or three times Australia's annual domestic emissions.
We could flip this wasteful, polluting model around by keeping the iron ore onshore, refining it using cheap, renewable energy generated from our world-leading wind and solar resources, and helping our domestic steel producers pivot to making green steel here in Australia. This would not only cut the huge carbon emissions from exporting iron ore, it would also ensure a strong supply chain to meet our need for steel, create jobs and generate 10 times the profits that our iron ore industry does today.
Green steel may be the biggest economic opportunity for Australia, but it's by no means the only one. We could also become leaders in the production of zero-emissions aluminium: we have world-leading reserves of the raw material bauxite, which we can refine using cheap renewable energy. This shift is already underway, with Tomago Aluminium Company, New South Wales' biggest energy user, planning to operate solely on renewables by 2030.
Similar opportunities exist to help industries like cement transition to low-emissions models, and make green ammonia here using renewable hydrogen.
The benefits of decarbonising heavy industry are truly boundless, but it will take careful planning and targeted support to make the transition.
A crucial opportunity to get the policy right to encourage heavy industry to cut carbon emissions is the upcoming reform of the Safeguard Mechanism, a central part of the federal Labor government's plans to cut harmful greenhouse gas emissions this decade.
In a nutshell, the Safeguard Mechanism regulates carbon pollution from our 215 biggest industrial emitters, including many steel and aluminium manufacturers and mining companies.
It's essential the federal government gets the reform of this legislation right, as the right policy will help futureproof our industrial sectors, protect Australian jobs and manufacturing capabilities, and help reduce our greenhouse gas emissions.
This legislation needs to ensure that large emitters deliver genuine emissions reductions, rather than buy unlimited carbon offsets while continuing to pollute as usual.
It also needs to prioritise crucial domestic industries like steel, aluminium, cement and chemicals by funding them to undertake technology trials, buy new equipment and update their facilities, rather than subsidising fossil fuels, an industry that has no long-term future.
There's a lot at stake here. The job before us is no doubt complex and difficult, but we are a country that is good at overcoming tough challenges.
The economic and environmental benefits of getting this right are huge, so let's keep our eyes on the prize, make the right decisions, and help the world decarbonise and grow clean export industries at the same time. Let's not squander this opportunity to become the prosperous, climate champion industrial powerhouse we know Australia can be.
- Professor Tim Flannery is a former climate commissioner, chief councillor at the Climate Council and one of Australia's leading writers on climate change