If Australia seizes the opportunity offered by the world’s transition to zero net emissions it can repeat the experience of the China resources boom that peaked about 10 years ago. But this time the opportunity can be sustained for some decades – rather than boom and bust – and we can manage it better for productivity and broadly based development.
The logic is simple.
Australia is the world’s largest exporter of gas and coal taken together. Many focus on the costs of losing what has been our large comparative advantage. But two key points are often overlooked.
First, Australia has the world’s best combinations of wind and solar energy resources, and it has enormous sources of biomass for a zero emissions chemical industry.
Think about that.
The world is moving to a zero emissions economy – albeit at an uncertain speed – and we can have the lowest-cost zero emissions electricity available for large scale economic development in the world.
Second, we have among the largest resources of the minerals needed in the energy transition. Renewable energy is not easily exported so it makes sense for industry to relocate to the source. Put simply, more of Australia’s minerals should now be processed in Australia.
Australia’s advantages relative to the rest of the world are so significant that using them on a large scale would materially improve the prospects of achieving the world’s climate objectives.
A net zero Australian economy will reduce global emissions by just over 1%. But if Australia successfully seizes the economic advantage in exporting zero-emissions goods then this can reduce global emissions by around another 7%.
Australia covers about 5% of the Earth’s land surface; supplying about 8% of the world’s renewable energy is no stretch given our abundant solar, wind and land resources.
Given all this, I am disappointed when I too often see discussion of the economy separate from discussion of the energy superpower transition.
Dealing with the fundamental change that the transition requires should no longer be a side issue – or worse, an issue concerning the costs and difficulties involved in dealing with climate change.
Australia can have more employment and higher incomes in the relatively short term, and be much richer in the longer term, by moving early and decisively in building and expanding the zero emissions economy.
Australia can have more employment and higher incomes in the relatively short term, and be much richer in the longer term, by moving early and decisively in building and expanding the zero emissions economy.
Not only is the transition consistent with a rising standard of living for Australians, it is perhaps also necessary for this to be achieved.
Let’s consider some of the opportunities that could drive this.
First, the direct reduction of iron ore to iron metal using green hydrogen, even extending to green steel.
Second, the availability of globally competitive renewable electricity, hydrogen and biomass for the production of zero emissions carbon and hydrocarbons. This provides the opportunity for zero emissions transportation fuels. For example, methanol as a shipping fuel is now ready technologically.
Third, using green hydrogen to make ammonia, which can be used for the production of nitrogenous fertilisers and explosives for Australia’s agriculture and mining industries, as well as for export.
Fourth, the mining and green processing of other energy transition minerals, such as copper, graphite and rare earths.
Fifth, metallurgical recycling focused on green energy waste, including from depleted batteries, wind turbines and solar panels.
Sixth, planting naturally adapted tree species, such as the mallee, in marginal farming country. This can be a major source of both carbon sequestration and biomass for zero emissions industry.
My modest aim is to see that all future discussion of the economy has at its centre the energy superpower transition.
There is no reason not to start on the journey described here. Indeed, there is nothing to lose but the opportunity itself.
Rod Sims
Chair, The Superpower Institute
Rod Sims is Enterprise Professor at the Melbourne Institute of Applied Economic and Social Research, Faculty of Business and Economics, University of Melbourne, and Chair of The Superpower Institute. He previously chaired the ACCC (2011-2022), served as Deputy Secretary (Economic) in the Department of Prime Minister and Cabinet, and Principal Economic Adviser to PM Bob Hawke (1988-1990).
