Calls for government to strike while green iron is hot

Australia could eventually export $400 billion in green iron, but new research demonstrates there are significant market and policy failings standing in the way.

According to The Superpower Institute, green iron produced in Australia could compete with fossil fuel-based production if government policies were improved.

Currently, Australia exports about $85 billion in iron ore per year.

It said there are three key failings preventing the green iron industry from reaching its full potential. These are: lack of an international price on carbon emissions; inadequate incentives for innovation and early investment; and underinvestment in critical infrastructure.

"The failures we outline aren't simply theoretical - they are actively preventing investment decisions right now.  Projects worth billions of dollars and thousands of jobs are stalled because these market failures make the economics unworkable without policy intervention," The Superpower Institute chair Rod Sims said.

"The onus is now on the government: there is a substantial prize in play if the right policies, grounded in the National Interest Framework, are adopted.

"Green iron is the next great chapter in Australia's export story. As the world decarbonises, our fossil fuel exports will inevitably decline. But by using our unparalleled renewable energy resources to make green iron, we can replace those exports with high value, zero carbon products that the world will need."

According to the research, Australia's green iron producers are disadvantaged because the lack of an international carbon price "distorts the international market for iron products, and creates and inefficient advantage for fossil-fuel based products."

Drawing on modelling across key production regions - the Pilbara, Geraldton, Kwinana, Eyre Peninsula, and Gladstone - the institute found that if iron producers paid the expected EU carbon price in 2030 then the cost of fossil fuel-based production would soar and the green premium would shrink. The current EU carbon price is $155 a tonne.

The institute gave several recommendations of how to address the issues hampering green iron's potential. These include:

• Introducing a green iron production tax credit of at least $170 per tonne that would simulate a carbon price.
• Provide up to 30% of the capital needed to accelerate early-stage green iron projects.
• Have the government invest in key infrastructure, like hydrogen pipelines.
• Engage offshore to boost demand for green iron from the likes of Japan and China.

"Australia has long played a pivotal role in global energy trade. With the right policies, we can continue that role in the zero-carbon era - starting with exporting energy embedded in green iron. This is a nation building opportunity on the scale of post war reconstruction. We can lay the foundations now for full employment, rising incomes and a stronger, more resilient economy for decades to come," The Superpower Institute chief executive Baethan Mullen said.

"The global race to secure green iron production is already underway. Countries that move first to address these market failures will capture market share, technology leadership, and decades of economic benefits. We have a once-in-a-generation opportunity, but the window for action is closing."