A global NGO has warned Australia’s iron ore is incompatible with green steel technology and could significantly affect the country’s export revenue if not addressed soon.
During a recent Senate inquiry hearing, representatives from the World Wide Fund for Nature (WWF) raised the concerns.
“The iron ore that we have is not particularly compatible with the green steel technologies that are available right now, and this needs to be addressed quite rapidly,” WWF Australia Industry Decarbonisation Manager Nicole Wyche said.
She explained that the iron ore and steel industry was under strong pressure to decarbonise due to the Carbon Border Adjustment Mechanism (CBAM) introduced by the EU in 2023.
“Since the introduction of the CBAM, we’ve really seen Asian steel manufacturers focus heavily on what they can do to reduce the emissions requirements,” Wyche said.
“Even though the CBAM is not being paid for right now, it is being reported now, so they [manufacturers] have become very aware of the consequences that will turn into financial consequences for them in the next few years.”
Under the policy, importers will need to buy CBAM certificates for the carbon emissions embedded in the products they import from other countries.
However, importers can reduce the number of certificates if they can prove that a carbon price has already been paid during the production of the imported goods.
According to PwC economists, CBAM substantially impacts the global supply chain as it incentivises EU importers to do business with manufacturers that focus on reducing carbon emissions and shift away from non-cooperative ones in meeting new requirements.
The mechanism will take effect in 2026, with the transition phase to take place between 2023 and 2025.
WA Lacks Focus on Carbon Emission Reduction
At the same time, Wyche said some states, such as Western Australia (WA), did not have any interim emission reduction targets nor renewable energy targets, which could lead to uncertainty among investors in the iron ore and steel sector.“This is making potential investors lose confidence and really consider that they might be better off somewhere else,” she said.
“We don’t have a lot of time to really send a message that the Australian economy is looking to move towards developing low emissions.
“The feedback that we get from organisations suggests something needs to be happening in a really concrete way within the next three years if we’re going to secure that type of investment.”
The WWF manager also stated that there would be significant cost implications if the WA government did not address the issue of carbon emission reduction targets.
“The WA government itself would estimate the costs of ignoring this issue at about $310 billion (US$208) of GDP reduction, around $170 billion of reduction in Commonwealth taxation income and a loss of over 34,000 jobs for the Pilbara [region],” she said.
“This is quite a serious impact. It needs to be very well planned, and it will take a few years. So, the sooner we get started, the better.”
