The transition to net zero emissions presents risks but also opportunities for Australian exports in energy and emissions intensive supply chains. At present, the supply chains of the five critical sectors known as ‘hard-to-abate’ sectors - iron and steel, aluminium, other metals, chemicals and liquefied natural gas (LNG) - make a critical contribution to Australia’s economy. Collectively, these supply chains contribute 12.3 per cent to Australia’s GDP, generate exports worth over USD160 billion per annum for the Australian economy and employ 2.9 per cent of Australia’s workforce.
However, existing and emerging technology solutions can address almost all emissions in the supply chains for the hard-to-abate sectors. This report from the Phase 1 of the Australian Industry Energy Transitions Initiative (Australian Industry ETI), recommends that Australia must capitalise on emerging low-carbon technologies and energy exports, such as green hydrogen and steel, and rapid deployment of existing technology solutions to facilitate net zero transition. Certain Australian industries could access variable electricity costs of USD20 – 30/MWh by 2050. In particular, hydrogen electrolysis is well-suited to variable energy supply, enabling favourable regions to flexibly produce green hydrogen for below USD1.50/kg.
The report provides robust analysis of the transition to net zero in the five supply chains. It provides useful oversight to finance professionals around the state-of-play for key emitting sectors in Australia, and will help shape considerations as to how to approach the transition conversation with clients in these sectors, and across the value chain. The report makes it clear that Australian industry has a key role to play in the complex, simultaneous shifts needed in a transition to net zero, and the finance industry will continue to be an important accelerator and enabler of this transition. HSBC Australia, by becoming a partner to the Australian Industry ETI, is guiding the conversation around access to capital to facilitate the transition to net zero.
The report also makes the point that the Australian industry has much to gain from being leaders in the global net zero emissions transition, and can play an important role in decarbonising materials and the energy system at an international scale by supporting the net zero ambitions of its trading partners, including China, Japan, South Korea and the United States. Australia’s trading partners are the destination of AUD246 billion of Australia’s AUD382 billion exports of goods, and are particularly significant for the Australian Industry ETI supply chains. Australia can continue to be an energy and commodity export powerhouse, provided there is timely action that positions Australian industry for competitiveness in a decarbonised global economy.