There is a great deal of talk in Australia about building a green industrial future. In Europe, that talk has turned into action.
I have just returned from a two-week industrial decarbonisation trip to Germany, Austria and Sweden, where I visited six of the more advanced green iron and steel projects in the world. I went to understand how far Europe has progressed, what is driving it, and what it means for Australia. The contrast with the conversation we are still having at home was the strongest impression I brought back.
What I saw was investment that has been made and construction that is well underway. Thousands of workers are on site, direct-reduction plants are taking shape, and facilities are scheduled to begin producing as early as next year.
To put it simply, Europe is several years ahead of Australia. It would be comfortable to assume Europe is ahead because the task is easier there. It is not. If anything, Europe is doing this from a harder starting position than we would. Green iron and steel require enormous quantities of cheap, clean energy, and Europe simply does not have it. Its electricity and hydrogen are expensive and most of Europe has renewable resources that are average at best. Australia, by contrast, has some of the best renewable energy resources in the world, giving us the much stronger starting hand.
So why is Europe building while we are still talking?
The answer, given to me at almost every project and in almost every meeting, was policy. Europe has recognised what the transition requires and has put settings in place that make the investment logic work. A carbon price, in the form of an Emissions Trading Scheme, that steadily raises the cost of high-emissions production, and a border tariff that applies the same cost to imports, together create a future market in which clean steel becomes the cheaper option. That change is what turns these projects from good intentions into financeable decisions.
The companies were candid that, on today's prices, the commercial case is not yet there. They are investing regardless, because the policy framework gives them confidence that the market will exist by the time their plants are running. That confidence is bearing a very large load.
And this is not happening in a settled political climate. There is real pressure across Europe to slow the pace of climate action, and the durability of the carbon price is openly contested. Yet the projects are pressing ahead. That tells you how much confidence the policy has already created.
It is worth being clear about what that means. Europe is not succeeding because the economics are already easy. It is succeeding because policy has been designed to make hard economics work over time.
This is the lesson I take home: Australia has the natural advantage Europe lacks, and there is real interest in what we could supply. Almost every company I met expected Australian green iron to be sold into Europe eventually, driven by cost advantages. Europe already imports our coal and iron ore; green iron is a version of the same trade, and the logic of making the energy-intensive iron where the energy is cheapest is now widely accepted. Increasingly, iron-making and steel-making can be separated, and it is the iron-making step that can move to where the energy is.
Australia has the natural advantage Europe lacks, and there is real interest in what we could supply. Almost every company I met expected Australian green iron to be sold into Europe eventually, driven by cost advantages.
But we cannot pretend our natural advantage will be sufficient or decisive. Our ore is mostly lower grade, so we need to back the innovators who are able to use it. Much needs to be done to get the project-enabling infrastructure and energy capacity in place. And most fundamentally, our region does not have a carbon price doing the work that Europe's does, which means government has a role in getting the first projects built and in helping create demand.
The uncomfortable part of the comparison is this: Europe is succeeding despite weaker fundamentals, largely on the strength of its policy. We have the better fundamentals and, so far, less of the necessary policy. Closing that gap and matching our natural advantage with settings that make investment rational is the task in front of us.
Europe is proving that the issue is not technology, as some here in Australia will try to have you believe. They are pouring concrete and standing up hundred-metre steel towers so that green steel can be in the market from 2027. Australia can take the same pathway by putting the enabling policy settings in place.
Baethan Mullen
Chief Executive Officer
Baethan Mullen has over 20 years of experience in public policy, economics and advocacy. Prior to joining the Superpower Institute, Baethan was General Manager of Economics & International at the ACCC, and led the largest energy efficiency program in Australia as Executive Director at the Essential Services Commission.
