Australia’s industrial regions are significant in terms of their emissions, energy use and contribution to the economy.
With net zero emissions targets now set at state and national levels, targets for industrial regions can facilitate planning and action, and guide decision making for the long-term transition.
Across the heavy industry supply chains of iron and steel, aluminium, liquefied natural gas (LNG), other metals and chemicals, the five Australian regions of Pilbara, Kwinana, Hunter, Illawarra and Gladstone make a combined contribution of A$166 billion to Australia’s gross domestic product (GDP) and account for about one-eighth of Australia’s total emissions.
This report on regional decarbonisation opportunities finds these key industrial regions also hold substantial opportunities for emissions reductions if timely, effective action is taken.
The 70 megatonnes of carbon dioxide equivalent (MtCO₂e) of potential abatement identified in these regions is significant and represents an 88 percent reduction in current emissions.
These decarbonisation efforts can build climate resilience and contribute to reaching state and national net zero emissions targets by 2050, while driving job growth.
This study profiles the decarbonisation potential of four industrial regions.
The regions were selected on the basis of their proximity to Australian Industry ETI partner operations as well as for the materiality of current emissions profiles and the diversity of decarbonisation opportunities they represent.
The industrial regions considered in detail are the Pilbara, Kwinana, Hunter and Illawarra. This study also provides analysis of a fifth region, Gladstone, but the qualitative work was not undertaken with Australian Industry ETI partners.
While each region is unique with its own context, stakeholders, advantages and challenges, cross-cutting themes have emerged that are central to the effective decarbonisation of industrial regions.
Other industrial regions will also be critical to decarbonising heavy industry including, among others: Bell Bay in Tasmania, the Upper Spencer Gulf in South Australia, Portland and the LaTrobe Valley in Victoria, and Darwin in the Northern Territory.
A large-scale transformation of the energy system is needed to achieve regional decarbonisation
Realising the opportunities of decarbonisation requires an unprecedented transformation of the energy system, with a priority of delivering low cost, decarbonised, firmed electricity supply and establishing a market for green hydrogen at scale.
The scale of renewable energy required would be an additional 68 – 126 TWh of energy and A$53 billion to A$100 billion in investment.
This would be equivalent to 26 percent to 47 percent of Australia’s total electricity generation and 107 percent to 197 percent of total current generation from renewable sources.
Achieving emissions reductions at this scale is a significant task and one that will require an appropriate level of ambition and planning to facilitate investment across industry, investors and government.
The development of clustered industrial precincts presents an opportunity to leverage multi-user infrastructure and existing workforce skills.
The deployment of a range of efforts at a precinct level, such as demand side response, sector coupling and integrated hydrogen systems to balance energy loads from renewables, can allow for more effective use of transmission, distribution and storage infrastructure as part of decarbonisation transformation.
Strategic alignment of supporting mechanisms is also needed to provide long term investment signals to achieve the required scale of decarbonisation in line with net zero targets.
Strategic planning and alignment of incentives is needed to underpin the required scale of additional, competitively priced, firmed and well-planned energy supply.
System plans such as the National Electricity Market (NEM) Integrated System Plan (ISP) and the Whole of System Plan (WOSP) in Western Australia’s South West Interconnected System (SWIS) should plan for a rapid and accelerating transition towards firmed, zero-emissions electricity and hydrogen networks at the scale needed.
Planning should be consistent with 1.5℃ warming scenarios, including planning for energy and green metals export scenarios in key regions.
Renewable Energy Zones (or equivalent in WA) in proximity to industrial regions at the required scale for industrial decarbonisation are needed today to develop the energy systems of tomorrow.
Coordination is needed to facilitate system wide transition
The complex systems challenge of industrial transition will require coordination of stakeholders across industry, governments, finance, communities and the energy sector to manage the simultaneous shifts needed.
This includes changes to infrastructure and the energy system, regulation and policy, workforce and skills, corporate strategy, technology solutions, new demand and markets, and finance and investment.
Support is needed to align stakeholders in industrial regions on the vision, timing, and scale required for infrastructure, energy systems and technology solutions through co-developed decarbonisation roadmaps.
Policy, regulations and programs need alignment across different levels of government to create clear goals and investment confidence.
Coordination and market development are needed to build early supply, demand and the enabling infrastructure that allows new opportunities to scale.
This can mean incentives and the removal of market barriers. ‘Missions’ offer an approach that can focus government efforts on a common goal. e.g. the United Kingdom’s mission to establish the world’s first net-zero carbon industrial cluster.
Additionally, a central navigation support service for industry would support and enable their efficient engagement in government programs. e.g. Sweden’s Transition Boost program is making it easier for industry to engage relevant support.
Efforts to support decarbonisation should balance accelerating the scale-up of proven and commercially available technologies alongside support for emerging and not yet commercial technologies.
Coordinated support is needed for research, development, demonstration and deployment of technical solutions needed to decarbonise, and shared learning is needed across the suite of technologies.
This can be facilitated by robust, open and practical knowledge sharing, linked to government funding.
Enhanced collaboration between stakeholders in industrial regions
Industry increasingly recognises that the scale and complexity of the net zero emissions opportunity and challenge cannot only be addressed by individual organisations acting on their own.
Although collaboration is seen as necessary, the norms of competition need to be navigated and overcome.
Collaboration between industry organisations and with other stakeholders will be key to the effective development and demonstration of new solutions as well as scale-up of renewables, hydrogen, energy storage and related infrastructure.
Government program funding that requires multiple industry partners can facilitate this collaboration. In addition, further efforts are needed to bring insight into regional efforts on the models and frameworks for multi-stakeholder collaboration, with an opportunity to learn from other industry sectors as well as international experience.
It is also important for industry to work together to inform government on policy and regulations needed to support industrial decarbonisation.
Better outcomes can be achieved for government and industry if knowledge and challenges are shared in public consultations for policy and regulation development.
Industry organisations should explore opportunities to work through existing groups and come together in new constellations where coordination is not happening or is not sufficient.
Industry actively engaging together in regional leadership and coordination efforts and working with other stakeholders is important to enabling shared visions and developing regional roadmaps.
Knowledge exchange between leadership groups domestically and internationally can accelerate learning for the transition.
An urgent need for action now
Urgent action on decarbonisation is needed to ensure a manageable transition that limits emissions to those consistent with limiting warming to below 1.5℃.
Action now will lay the foundations needed to realise effective decarbonisation, capitalise on the opportunities of a decarbonising global economy and avoid more costly emissions reduction measures in the future.
Early action can strategically build the competencies and comparative advantages required to ensure Australian industry is well placed for competitiveness in a decarbonising global economy. E
arly action should prioritise near-term opportunities, such as developing multi-user infrastructure and investing in the creation of demand and supply for hydrogen, which can lay the groundwork for much larger scale deployment of decarbonisation opportunities.
An appropriate level of ambition that acknowledges the scale of the transition, as well as the coordination, collaboration and urgency of action required, will be key to the effective decarbonisation of Australia’s industrial regions.
Opportunities exist now to drive emissions reductions in these regions and effectively position Australia’s industrial regions for prosperity into the future.