Decarbonising Australia’s Heavy Industries: A 30-year Project That Costs $625 Billion

A general view of the steelworks and coal loading facility in Wollongong, Australia, on Feb. 1, 2021. Brook Mitchell/Getty Images

An ambitious plan to decarbonise Australia’s heavy industries in the next 30 years will cost the country $625 billion (US$432 billion) in both government and private investments.

Climate Change and Energy Minister Chris Bowen on Feb. 20 launched a report (pdf) that outlines the roadmap to reduce Australia’s industry emissions by 92 percent as the country seeks to limit global warming to 1.5 degrees Celsius.

The report is a three-year project conducted under the Australian Industry Energy Transitions Initiative, with the engagement of some of the nation’s largest companies.

Details of the Plan

The report stated that the federal government and local businesses had to invest $20.8 billion per year on average to decarbonise the industry sector by 2050.

This cost is approximately $1,925 per year per Australian household.

Roughly two-thirds of this amount must be invested in Australia’s energy system, while the remaining need to go toward the electrification of the most heavily polluting operations.

Notably, for the plan to succeed, there must be a massive lift in Australia’s electricity generation capacity.

The report said around 600 terawatt-hours would be needed each year, which is equivalent to a two-fold increase in the country’s total current electricity generation.

And if Australia wants to establish new export markets for “green” iron and hydrogen, the demand for additional electricity would go up to 1,450 terawatt-hours per year.

In addition, the plan also requires 260 gigawatts of renewable capacity to be added to the current power grid by 2050, among which 80 gigawatts will come from wind, 90 gigawatts from large-scale solar PV and 80 gigawatts from rooftop PV.

Regarding implementation, the plan will focus on five industries–iron and steel, aluminium, other metals, chemicals, and liquefied natural gas–which account for 25 percent of Australia’s total emissions.

The report said over 1.3 million jobs could be generated between 2025 and 2050 through government and sector investments.

Response from the Government and Relevant Parties

While acknowledging the challenging nature of the plan, the energy minister said it still needed to be carried out.

“If it was easy, it would have been done by now,” Bowen said.

“We’re talking about hard-to-abate sectors, hard-to-abate technologies. But it’s absolutely vital, and it can be done, as this report indicates.”

Chris Bowen, Labor Party's energy and climate change minister, speaks to the media during a press conference at Parliament House in Canberra, Australia, on June 16, 2022. AAP Image/Lukas Coch

Bowen also said the project would require an “all-in effort” while highlighting the job opportunities it could bring to the community.

“This is not a whole-of-government effort. This, the fastest transition since the industrial revolution is and must be a whole-of-society effort,” he said.

“And I believe we can do it–and reports like this are important in helping us to.”

Monash University Chancellor Simon McKeon, who is also the chair of the Australian Industry Energy Transitions Initiative, also emphasised the necessity of the project.

“Action is needed now to lay the foundations, capitalise on the opportunities and avoid more costly emissions reduction measures in the future,” he said.

Meanwhile, Lord Adair Turner, who has been an advisor to the project, talked about the changes Australia would undergo by achieving net zero emissions.

“Australia’s economic future in a net-zero world is hugely positive and prosperous,” he said.

“Blessed with abundant natural wind and solar resources, it can both decarbonise its own economy rapidly and become a major exporter of green hydrogen to countries across the world.”

Concerns about Renewable Energy Production

The report’s launch comes as energy experts have raised concerns about energy production in Australia.

In the past few years, many energy companies have announced plans to shut down coal and gas-fired power stations under political or economic pressures to transition to renewable energy.

A general view of The Yallourn Power Station in Yallourn, Australia, on Aug. 16, 2022. Asanka Ratnayake/Getty Images

However, Mark Collette, the managing director of EnergyAustralia–a major electricity generator and energy retailer in the country– pointed out that the development of new renewable energy sources failed to catch up with the shutdown of traditional power plants across Australia.

He warned that the national power grid could be at risk and called for some form of agreement between governments and energy companies that dictated the timing of the closure of fossil fuel generators to prevent shortfalls in generation capacity.

Meanwhile, National MP and former minister David Gillespie said the country would be in a permanent state of adding more and more renewables to the grid if it continued to pursue its emissions targets.

He noted it would cost Australia $1.27 trillion to achieve its 2050 net-zero emissions plan.

This is a significant figure, given that Australia’s total GDP for 2021 was around US$1.55 trillion ($2.25 trillion).