Australia has an historic opportunity to create a multi-billion-dollar, export-focused manufacturing sector based on globally competitive renewable energy, according to a new Grattan Institute report.
Start with steel: A practical plan to support carbon workers and cut emissions shows that using Australia's plentiful wind and solar resources to make energy-intensive 'green' commodities could create tens of thousands of jobs.
And these jobs could be concentrated in regions that currently employ tens of thousands of coal miners and other 'carbon workers' whose jobs are threatened by global efforts to tackle climate change by cutting greenhouse gas emissions.
Capturing about 6.5 per cent of the global steel market would generate about $65 billion in annual export revenue and could create 25,000 manufacturing jobs in Queensland and NSW.
'Climate change is a wicked conundrum for Australia,' says Grattan Institute's Energy Program director and report lead author Tony Wood. 'It's a threat to our health and to our agriculture and tourism industries - but tens of thousands of Australians work in industries that rely on fossil fuels.
'Our practical plan could be a win-win-win: it would create a new export industry, support carbon workers, and cut emissions.'
The report assesses the potential of three sectors to help make Australia a green energy superpower: aviation fuel, ammonia, and steel. It concludes that green steel represents the best opportunity for exports and job creation in key regions.
Green steel uses hydrogen, produced from renewable energy, to replace metallurgical coal to reduce iron ore to iron metal. Australia's extensive wind and solar energy resources mean we can make hydrogen, and therefore green steel, more cheaply than countries such as Japan, Korea, and Indonesia.
To do this at a global scale will require big industrial workforces - such as those found in the coal-mining regions of central Queensland and the Hunter Valley in NSW.
It is cheaper to make green steel in those places, where labour is available and affordable, than in the Pilbara in Western Australia - despite the cost of shipping iron ore to the east coast.
Smaller but still valuable opportunities in green steel and aviation biofuel exist in other locations, including Port Kembla in NSW, Portland in Victoria, Whyalla in South Australia, and Collie in WA.
Investment to create a global-scale export industry would have to come from the private sector, but Australian governments should act now to ensure we can capture this opportunity.
To build local skills and capability in low-emissions steel-making in the next decade, the federal government should help fund a low-emissions steel 'flagship' project. This could use WA's low-cost gas to make steel with lower emissions than coal. Or it could help modernise the steel plants at Port Kembla or Whyalla, and sustain existing jobs.
Governments should fund and publish pre-commercial studies of geological potential in Australia for hydrogen storage. And federal, state, and local governments should all play a role in coordinating land-use planning and regional development, and helping workers to retrain.
Australia could also support a new, sustainable biofuels industry that uses non-food biomass sources. The federal government should consider mandating that a set share of domestic aviation fuel comes from such biofuels. This could create hundreds of jobs in centres such as Collie, Portland, and Victoria's Latrobe Valley.
'For too long, adding value to Australia's energy and minerals resources and creating sustainable jobs through manufacturing and exporting have been the stuff of dreams,' Mr Wood says.
'Not anymore. If we get this right, we will resolve the great climate conundrum that has stretched our political fabric for more than a decade.'
