Australia and the United States have agreed to cooperate on critical minerals and the clean energy transition through a compact announced on Sunday by President Joe Biden and Prime Minister Anthony Albanese on the sidelines of the Group of Seven meeting in Hiroshima, Japan.
Australian companies may gain access to subsidies worth billions of dollars for technologies that underpin the energy transition under the US Inflation Reduction Act as part of the Climate, Critical Minerals and Clean Energy Transformation Compact.
Hydrogen manufacturers, rare earths extractors and battery developers are the types of companies that will benefit under the compact, which will see the US and Australia coordinate policies, programs and investments in critical mineral supply chain in the Indo-Pacific region, according to a joint statement by the two leaders.
The two countries will work together to establish supply chains for wind, solar, battery storage, hydrogen and other clean energy technologies, including those used in manufacturing. They will share information to coordinate the supply of critical minerals such as lithium, cobalt, copper and nickel and investment in processing technologies.
The compact will also include work to invest in battery storage to ensure interoperability between various battery types and common international standards, as well as joint efforts on battery recycling. It will also cover the development of emerging markets for clean hydrogen, including R&D, market development and supply chains.
The compact will also see the two countries collaborate to produce emissions accounting methodologies for new green industries such as hydrogen and green metals, including steel and aluminium. The compact text mentions that the US and Australia will collaborate on projects and standards for clean energy supply chains in connection with the Inflation Reduction Act and the Powering Australia Plan.
The agreement also covers joint climate mitigation, adaptation and resilience in the Indo-Pacific region and bilateral efforts to restrain global temperature rises to within 1.5°C of pre-industrial averages. Australia is bidding to host the UN Climate Change Conference of the Parties in 2026 (COP 31) in partnership with the Pacific Islands. There is a brief mention in the compact of work to improve access to climate finance for Small Island Developing States together with Multilateral Development Banks and Export Credit Agencies.
Australia and the US will now work on an action plan to be completed by the end of 2023 that will identify “concrete actions” towards the compact’s objectives and a new ministerial-level dialogue will be established between Australia’s Minister for Climate Change and Energy Chris Bowen and the US Secretary of Energy Jennifer Granholm.
Tim Buckley, director of Climate Energy Finance, described the compact as a “landmark policy statement of strategic intent.”
“The Compact is a critically-important development in the context of the Inflation Reduction Act (IRA), which is turbocharging the energy transformation in the US with upwards of $800 billion of federal investment in clean energy initiatives and attracting a massive influx of global capital to the US,” he wrote in a note on Monday.
The compact will position Australia to benefit in the investment associated with the IRA, instead of having to compete with it. Australia will be treated as a domestic US supplier under the IRA, which will benefit Australian companies involved in critical minerals, energy transition materials such as green steel and renewable energy.
“This massively boosts our reindustrialisation potential as a global renewable energy superpower and zero-emissions trade and investment leader as the world rapidly decarbonises,” Buckley wrote.
He pointed to US chemicals group Albermarle’s recent announcement of plans to double the capacity of its lithium hydroxide refinery in Kemerton, Western Australia to 100,000 tonnes per annum, as an example of active US-Australian collaboration in the energy transition supply chain.