This article is adapted from Ro Maxwell’s presentation at our Briefing Room event ‘How to decarbonise Australia: Industry, energy and technology’.

Decarbonising Australia will require huge amounts of renewable energy, particularly in regions that are home to industries that are currently high-emitting.

Over the past three years, Climateworks developed decarbonisation pathways for five heavy industry supply chains as part of the Australian Industry Energy Transitions Initiative (ETI).

Our final report for the ETI identified a possible, though challenging, pathway to decarbonise Australian industry

When tackling a decarbonisation challenge as large as this, it’s vital to dig in and understand what’s going on behind the top level results.

Three increasingly ambitious scenarios

The approach we used for the modelling included comparing the results of three different scenarios. 

The scenarios we looked at were, in order of increasing ambition: 

  • Incremental
  • Industry-led
  • Coordinated 

For the Coordinated action scenario, we also conducted sensitivity analyses – a way of comparing results when just one parameter is changed, allowing us to isolate the impacts of that particular measure.

This approach allows us to test the robustness of our work and build confidence in the results, as well as allowing stakeholders to interrogate and use the work going forwards. 

No-regrets actions

The analysis demonstrated that decarbonisation of electricity-related emissions in the industry sector was both rapid and cost-effective. 

Across all scenarios, there was a clear preference for early abatement in this sector, underscoring its importance as a no-regrets strategy for industrial decarbonisation. 

Chart showing sources of annual emissions under different scenarios at 2030 and 2050.

Increased uptake of renewable energy in the long term led to reduced electricity prices nationwide – which in turn supports the decarbonisation of other sectors.

The modelling also reveals that the most effective technologies for the industry sector involve electrification and renewable hydrogen. 

In the more ambitious scenarios, these technologies are adopted early and constitute a significant portion of abatement efforts. 

The early adoption of electrification and renewable hydrogen results in a rapid decline in direct energy emissions.

Chart showing cost breakdown of modelled scenarios.

Interestingly we found that even the least ambitious incremental scenario sees significant investment in the energy system, showing that roll out of renewable energy and decarbonisation of the grid is considered a no-regrets action across the board. 

This is the kind of insight we can get from scenarios that can help decision-makers looking for actionable information. 

Decarbonising the grid and focusing on industrial regions is a smart investment that has positive ripple effects throughout the economy. 

The model results also saw the incremental scenario invest significantly in industrial electrification, due to the reduced fuel costs and increased efficiency of these technologies – another no-regrets action. 

Comparing scenarios

The three scenarios also allow a comparison of how different actors affect the transition to net zero. 

Chart showing sector breakdown of annual emissions at 2030 and 2050 under different modelled scenarios.

Industry, the finance sector, and government take slow, less coordinated actions in the incremental scenario. 

As its name suggests, the Industry-led scenario represents industry taking actions that are generally not supported by government and other sectors of the economy. 

We modelled the industry-led scenario by using a 1.5°C aligned carbon budget for the industry sector and a 2° budget for the rest of the economy. 

In the coordinated action scenario, a 1.5 degree carbon budget was applied to the entire economy, with industry, government and the broader economy acting in concert to decarbonise quickly.

When comparing the abatement achieved across the three scenarios, we see a number of significant differences. 

When industry acts to decarbonise without corresponding action from the energy sector and government, we see higher energy costs, a slower pace of emission reductions, and a higher reliance on land-based sequestration to align with carbon budgets and reach net zero. 

Renewable hydrogen

When we play out the industry-led scenario – with weak incentives to decarbonise, and a lack of government leadership – we see slower overall grid decarbonisation and generally reduced support for industry efforts to cut electricity emissions.

Chart showing state-by-state breakdown of hydrogen production cost under different modelled scenarios.

We also see relatively higher costs for energy inputs and renewable hydrogen in industry-led, which creates further disincentives for industrial action without wider support. 

All of these factors combine to portray a much less desirable decarbonisation pathway, particularly for the industry sector, but also for the broader economy.

In the coordinated action scenario, however, there is no such hand brake on decarbonising the grid and industry action. 

Gas price affects technology uptake 

Another factor we paid close attention to in the modelling was the price of gas on Australia’s east coast. 

We compared the effects of a range of gas prices through a sensitivity analysis to understand their impact on the size and speed of possible decarbonisation.

We wanted to understand how the results might change as gas prices increase, and modelled prices ranging from $14/GJ to $32/GJ. 

At prices above $21/GJ we saw a significant increase in hydrogen production overall and a strong shift towards more renewable hydrogen.

This chart shows how gas prices influence hydrogen production in the coordinated action scenario.

Chart showing modelled proportion of different types of gas production at 2030 under different gas prices.

The chart shows three types of hydrogen: 

  • green hydrogen, produced from 100 per cent renewable energy
  • blue hydrogen produced using gas with carbon capture and storage (CCS)
  • grey hydrogen produced from gas without CCS. 

With gas prices low, we see 19 per cent green hydrogen in 2030, and gas-based production makes up over 80 per cent of the total.

In the same timeframe, with the same assumptions but with gas prices at the maximum level, we see green hydrogen’s share jump to from 19 to 90 per cent. Blue and grey hydrogen production is significantly reduced, along with the role of blue hydrogen as a potential ‘transitional’ energy source.

The sensitivity analysis also provided insights into the selection of decarbonisation technologies for certain industrial sectors, as well as the speed at which technologies are introduced.

In steel production, a number of technologies are initially gas based, shifting to hydrogen over time as supply becomes more widespread and cheaper. The shift to hydrogen steelmaking happens more quickly at higher gas prices, requiring significantly more hydrogen earlier on.

In alumina production we saw that the calcination process (responsible for about two thirds of the energy use) was rapidly electrified as gas prices increased. 

The sensitivity analyses shows higher gas prices incentivise the sector to move directly from gas to electricity, rather than waiting for the cost of green hydrogen to reduce. 

Understanding the effect of gas prices allows us to provide a better picture of the least-cost pathway for industry to take to reach net zero emissions. 

Communication is vital

Communicating insights gained through modelling and exploring how they can be used are vital steps to support decision makers when looking to the future. 

The more information about the impact of various factors the better, especially when needing to make such massive change, on a national scale, in a short timeframe.

Find out more about the final Australian Industry ETI report, Pathways to industrial decarbonisation: Positioning Australian industry to prosper in a net zero global economy.

Read more on climate solutions: