The multibillion-dollar aluminium smelting production credit shows the Australian Government is serious about decarbonisation of heavy industries but additional measures targeting other commodities is also required, according to the Chamber of Minerals of Energy of WA.
The government is investing $2 billion in the nation’s aluminium industry, as part of its Future Made in Australia initiative. Aluminium smelters switching to renewable energy by 2036 will receive federal funds for every clean and reliable aluminium made in Australia over a 10-year period.
The credit aims to give local aluminium smelters confidence to invest at a pivotal time for Australia’s aluminium sector, as major manufacturers and infrastructure developers globally increasingly seek supply of low-carbon material, driving growing demand for sustainably produced products.
Aluminium has been made in Australia for 70 years. The industry generated $18 billion in 2024 and employs thousands in regional communities, including in Western Australia through bauxite mining and alumina refining.
CME acting CEO Adrienne LaBombard says the credit is a positive step towards safeguarding Australia’s aluminium industry although the government should also consider Western Australia’s green iron industry.
“We hope this announcement is the first of more to come, specifically supporting the development of other green materials in WA, such as green iron and green alumina,” LaBombard says.
“Maintaining Australia’s existing upstream and downstream industry while seizing the new opportunities on offer through the energy transition will require ongoing and holistic policy support.”
A CME report released in December found large-scale production of green iron in Western Australia had the potential to slash global emissions by 1.2%, create almost 20,000 jobs, and generate $74 billion in economic value.
However, LaBombard says establishing a green iron industry of that scale requires the commercialisation of new technologies and processes, as well as significant public and private investment in low-emission energy and supporting infrastructure such as ports, roads and desalination plants.
The report found WA-made green iron, which is produced with hydrogen instead of coal, could offset nearly all of Australia’s 465 million tonnes of domestic CO2 emissions by 2050.
“Industry is already investing to unlock the immense potential on offer but will require government support,” LaBombard adds.
“That must include an expansion of R&D funding, further tax incentives and substantial additional investment in lowering the cost of low-emissions energy and the rollout of common-user infrastructure.”
Assuming supportive policy settings, it is estimated that Western Australia has the potential to produce at least 4.5Mt of green iron in 2030, ramping up to 218Mt in 2050 (14% of global supply). This could generate $4 billion and $170 billion of export revenue in 2030 and 2050 respectively.
CMEWA is continuing discussions with the federal government for a green iron production credit that is also “stackable with other proposed incentives” under the Future Made in Australia Plan, such as the $2 per kilogram hydrogen PTI.
The Australian Aluminium Council has been calling for production credits for the sector to attract private capital and ensure the industry remains globally competitive.
Council CEO Marghanita Johnson notes the new production credits should provide some of the transitional support needed as Australia’s energy infrastructure and systems develop, and energy pricing returns to competitive levels.
Meanwhile, Rio Tinto (ASX:RIO) also reckons the government’s move will significantly advance both regional communities and the nation’s manufacturing capabilities.
Rio Tinto Australia CEO Kellie Parker says as traditional energy sources for heavy industry become increasingly uncompetitive, Monday’s announcement is a critical piece in helping future-proof the industry.
“Such support is crucial for sustaining and growing regional economies,” Parker says.
“As global industrial customers and consumers increasingly focus on low-carbon products, this support signals Australia’s potential to be a major supplier of the aluminium needed for the global energy transition, creating a foundation for local businesses and manufacturing to thrive.”
Write to Adam Orlando at Mining.com.au
Images: Stock & Elysis
