The Department of the Treasury has conducted a consultation on its Critical Minerals Production Tax Incentive, which forms part of the Australian Government’s Future Made in Australia package.
Australia is well placed to take advantage of the need for other metals, with relatively large global shares of reserves and production of nickel, lithium, copper and zinc.
Solving the challenges of decarbonising this supply chain in Australia will be critical to ensuring a sustainable supply of these metals as the global energy transition gathers pace.
This is especially urgent as the window to limit global warming to 1.5 degrees is still open, but narrowing.
Australia’s heavy industry sector, including the extraction and processing of critical minerals such as nickel, lithium, cobalt, manganese and rare earth elements, are the source of 44 per cent of Australia’s total scope 1 and 2 emissions.
Mining and production processes consume 44 per cent of total energy and 40 per cent of electricity.
The decarbonisation of Australia’s critical mineral production facilities and the use of critical minerals in the climate transition is essential in the effort to limit global warming to 1.5°C.
The ‘Coordinated action scenario’ explored by Climateworks Centre in the Australian Industry Energy Transitions Initiative shows that decarbonising critical mineral supply chains in line with a 1.5°C carbon budget requires Australia to address significant challenges and uncertainties.
Meeting growing demand for these minerals with sustainable production will require further development of green mining technology and renewable energy and hydrogen infrastructure will need to be effectively integrated with new and existing mines.
Recommendations
- Consider how the Critical Minerals Production Tax Incentive can support the supply of net zero industrial precincts and thereby enhance economic efficiency and enable further industrial development.
- Include a review process for the Critical Mineral Production Tax Incentive to assess ongoing necessity of support and help avoid perverse outcomes.
- Require ‘credible transition plans’ from recipients so as to make support consistent with Australia’s emissions reduction targets and ambitions to be a renewable energy superpower.
- Expect critical mineral production facilities to adhere to appropriate decarbonisation standards and transition in line with national targets and the Paris Agreement.
Further details on these recommendations can be found in the submission.