Latest news with #Garnaut
Sydney Morning Herald
2 days ago
- Business
- Sydney Morning Herald
Australia's great leap forward: China opportunity makes Trump tariffs look like ‘a pimple on the bum of the iron ore trade'
'I am a bit naughty,' says Stiesdal, whose renewable energy company, named after him, does business internationally including in Australia. 'Because I sometimes say that Australia behaves like a developing country. It sells raw products and buys them back as finished goods. You now have a chance to become more like a developed country.' Albanese's meeting in Shanghai represents this chance. The eminent economist Ross Garnaut puts it into perspective: 'This trip is as important as Bob Hawke's trip to China in 1984 that set up the iron ore trade,' which went from a trickle to become Australia's single biggest export, worth $116 billion in the financial year just ended. 'It's the future of the Australian economy.' Garnaut was Hawke's economic adviser at the time. The high drama of Donald Trump's tariffs on Australian exports are 'as a pimple on the bum of the iron ore trade,' Garnaut says. Trump's tariffs are high-risk but for another reason beyond Australia's direct trade with the US – they threaten to destabilise the world economy. Bob Hawke's 1984 trip was important for China, too. The high-quality Australian grades of ore, replacing China's low grade domestic ore, were the feedstock that allowed China to become the world's dominant steel maker. Today, China stands at a similar threshold. Beijing has decided that it will achieve net zero by 2060. The other big customers for Australian ore – Japan, South Korea and Taiwan – have their own deadlines. 'They all know,' says Garnaut, 'that they have to get to green iron pretty quickly, or they won't get to net zero in time.' Loading So why not make their own green iron? Because they don't have enough renewable energy of their own to achieve decarbonisation, and the cheapest and most feasible way of decarbonising their metals is to have it done in Australia. In China's case, the unfolding prospect is to import green iron from Australia, and then process it into green steel in China. 'There's not a snowflake's chance in hell that China won't send its cities green and its skies blue,' Fortescue Metals' founder, Andrew 'Twiggy' Forrest, who's travelling with Albanese this week, said recently. 'They are determined. And that means that its fuel industry has to go green now,' Forrest told The Australian. 'And that's when I became really clearly determined – we've got to get a green metal industry off the ground in Australia. We've got to break through the cynicism.' Garnaut agrees: 'In a zero carbon world, we have to get beyond Hawke's 1984 breakthrough. Today shows that the necessary support is there from China.' Fortescue has pledged to produce green iron in Australia. BHP, Rio and Hancock will now have to decide whether they will do the same. Because it's not just a matter of the bright prospect of Australia selling value-added iron ore, in the form of green iron, to China. It's whether Australia can keep its existing iron ore business: 'We will lose the trade if we can't export the iron as metal,' warns Garnaut. Beyond the Australian economy, the stakes are high for planetary conditions, too, according to Garnaut, author of the Garnaut Climate Change Review: 'This will determine whether the world will deal with climate change and whether it can achieve net zero greenhouse emissions.' And Australia has so much cheap renewable energy that it could supply China with its green iron needs by devoting just half of 1 per cent of its surface area to solar panels, and another half a per cent to wind turbines, according to a paper by The Superpower Institute, which was co-founded by Garnaut. And, by replacing conventional iron smelting in China with renewables smelting in Australia, we'd cut total global carbon emissions by 4 per cent, according to the institute. This is why, 10 years ago, Garnaut seized on the vision of Australia's low-carbon 'superpower' opportunity. Today it's considerably closer than it was a week ago.
The Age
2 days ago
- Business
- The Age
Australia's great leap forward: China opportunity makes Trump tariffs look like ‘a pimple on the bum of the iron ore trade'
'I am a bit naughty,' says Stiesdal, whose renewable energy company, named after him, does business internationally including in Australia. 'Because I sometimes say that Australia behaves like a developing country. It sells raw products and buys them back as finished goods. You now have a chance to become more like a developed country.' Albanese's meeting in Shanghai represents this chance. The eminent economist Ross Garnaut puts it into perspective: 'This trip is as important as Bob Hawke's trip to China in 1984 that set up the iron ore trade,' which went from a trickle to become Australia's single biggest export, worth $116 billion in the financial year just ended. 'It's the future of the Australian economy.' Garnaut was Hawke's economic adviser at the time. The high drama of Donald Trump's tariffs on Australian exports are 'as a pimple on the bum of the iron ore trade,' Garnaut says. Trump's tariffs are high-risk but for another reason beyond Australia's direct trade with the US – they threaten to destabilise the world economy. Bob Hawke's 1984 trip was important for China, too. The high-quality Australian grades of ore, replacing China's low grade domestic ore, were the feedstock that allowed China to become the world's dominant steel maker. Today, China stands at a similar threshold. Beijing has decided that it will achieve net zero by 2060. The other big customers for Australian ore – Japan, South Korea and Taiwan – have their own deadlines. 'They all know,' says Garnaut, 'that they have to get to green iron pretty quickly, or they won't get to net zero in time.' Loading So why not make their own green iron? Because they don't have enough renewable energy of their own to achieve decarbonisation, and the cheapest and most feasible way of decarbonising their metals is to have it done in Australia. In China's case, the unfolding prospect is to import green iron from Australia, and then process it into green steel in China. 'There's not a snowflake's chance in hell that China won't send its cities green and its skies blue,' Fortescue Metals' founder, Andrew 'Twiggy' Forrest, who's travelling with Albanese this week, said recently. 'They are determined. And that means that its fuel industry has to go green now,' Forrest told The Australian. 'And that's when I became really clearly determined – we've got to get a green metal industry off the ground in Australia. We've got to break through the cynicism.' Garnaut agrees: 'In a zero carbon world, we have to get beyond Hawke's 1984 breakthrough. Today shows that the necessary support is there from China.' Fortescue has pledged to produce green iron in Australia. BHP, Rio and Hancock will now have to decide whether they will do the same. Because it's not just a matter of the bright prospect of Australia selling value-added iron ore, in the form of green iron, to China. It's whether Australia can keep its existing iron ore business: 'We will lose the trade if we can't export the iron as metal,' warns Garnaut. Beyond the Australian economy, the stakes are high for planetary conditions, too, according to Garnaut, author of the Garnaut Climate Change Review: 'This will determine whether the world will deal with climate change and whether it can achieve net zero greenhouse emissions.' And Australia has so much cheap renewable energy that it could supply China with its green iron needs by devoting just half of 1 per cent of its surface area to solar panels, and another half a per cent to wind turbines, according to a paper by The Superpower Institute, which was co-founded by Garnaut. And, by replacing conventional iron smelting in China with renewables smelting in Australia, we'd cut total global carbon emissions by 4 per cent, according to the institute. This is why, 10 years ago, Garnaut seized on the vision of Australia's low-carbon 'superpower' opportunity. Today it's considerably closer than it was a week ago.
The Age
2 days ago
- Business
- The Age
The PM talked up green steel. But is it even a thing?
Champions of a green steel industry, such as the economist Ross Garnaut, a director of The Superpower Institute and the clean power company ZEN Energy, along with Andrew Forrest of Fortescue Metals Group, argue that Australia is uniquely placed to lead this potential new industry: we have the world's largest iron ore reserves and the vast space for the wind and solar farms needed to power the industry. Is it happening yet? Not at large scale. A Swedish consortium, Hybrit, has made around 5000 tonnes of hydrogen-reduced iron, and advances are being made in Australia. ZEN Energy is working with European and Asian partners to develop a green iron project to supply a new electric arc furnace at Wyalla in South Australia, while Fortescue has a green metal project underway at Christmas Creek in the Pilbara. What's the hold up? Cost and complexity. The industrial supply chain to produce green steel is long, complicated and expensive. It demands that a hydrogen industry be built to sustain it, and cost-effective ways of storing that hydrogen, and massive amounts of green energy, which also must be stored. The cost of each those processes must also be driven down. While renewable energy costs are tumbling, hydrogen remains comparatively expensive. Back when hydrogen cost around $15 a kilo former Prime Minister Scott Morrison announced an energy policy designed to drive it down to $2 per kilo. Today it remains closer to $10. 'It means a lot of large organisations making big expensive bets, and getting enough of them right,' explains Tony Wood, senior fellow with the Grattan Institute's energy program. 'The question is, who is going to cover the risk?' Finally, the product they make will be more expensive than conventional steel, which means the industry will need customers willing to pay a premium for a clean product. If countries are to meet their Paris Agreement targets, it is expected that market will grow. Garnaut believes the industry needs the support of a carbon price. Are there advantages beyond greenhouse gas emissions? Absolutely. As Albanese said on Monday, Australia is already the world's largest exporter of iron ore. If we can scale green iron at a viable cost we can add value to the product. 'The value of the green iron would be two or three times the value of the iron ore,' says Garnaut, pointing to a Superpower Institute paper that found if green iron replaced iron ore as a primary export, it could generate up to $386 billion annually by 2060. By comparison, Australia's iron ore exports are typically around $120 billion per year. This would provide a strategic hedge against the expected decline in coal exports. With a large scale green iron or steel industry, Australia could not only help decarbonise its own economy, but that of its iron customers, who would be purchasing Australian green energy embodied in the iron products. This would be far more efficient than exporting Australian hydrogen and iron ore to be produced offshore into iron and steel, and it could reduce global emissions by four per cent, Garnaut argues.
Sydney Morning Herald
2 days ago
- Business
- Sydney Morning Herald
The PM talked up green steel. But is it even a thing?
Champions of a green steel industry, such as the economist Ross Garnaut, a director of The Superpower Institute and the clean power company ZEN Energy, along with Andrew Forrest of Fortescue Metals Group, argue that Australia is uniquely placed to lead this potential new industry: we have the world's largest iron ore reserves and the vast space for the wind and solar farms needed to power the industry. Is it happening yet? Not at large scale. A Swedish consortium, Hybrit, has made around 5000 tonnes of hydrogen-reduced iron, and advances are being made in Australia. ZEN Energy is working with European and Asian partners to develop a green iron project to supply a new electric arc furnace at Wyalla in South Australia, while Fortescue has a green metal project underway at Christmas Creek in the Pilbara. What's the hold up? Cost and complexity. The industrial supply chain to produce green steel is long, complicated and expensive. It demands that a hydrogen industry be built to sustain it, and cost-effective ways of storing that hydrogen, and massive amounts of green energy, which also must be stored. The cost of each those processes must also be driven down. While renewable energy costs are tumbling, hydrogen remains comparatively expensive. Back when hydrogen cost around $15 a kilo former Prime Minister Scott Morrison announced an energy policy designed to drive it down to $2 per kilo. Today it remains closer to $10. 'It means a lot of large organisations making big expensive bets, and getting enough of them right,' explains Tony Wood, senior fellow with the Grattan Institute's energy program. 'The question is, who is going to cover the risk?' Finally, the product they make will be more expensive than conventional steel, which means the industry will need customers willing to pay a premium for a clean product. If countries are to meet their Paris Agreement targets, it is expected that market will grow. Garnaut believes the industry needs the support of a carbon price. Are there advantages beyond greenhouse gas emissions? Absolutely. As Albanese said on Monday, Australia is already the world's largest exporter of iron ore. If we can scale green iron at a viable cost we can add value to the product. 'The value of the green iron would be two or three times the value of the iron ore,' says Garnaut, pointing to a Superpower Institute paper that found if green iron replaced iron ore as a primary export, it could generate up to $386 billion annually by 2060. By comparison, Australia's iron ore exports are typically around $120 billion per year. This would provide a strategic hedge against the expected decline in coal exports. With a large scale green iron or steel industry, Australia could not only help decarbonise its own economy, but that of its iron customers, who would be purchasing Australian green energy embodied in the iron products. This would be far more efficient than exporting Australian hydrogen and iron ore to be produced offshore into iron and steel, and it could reduce global emissions by four per cent, Garnaut argues.
Sydney Morning Herald
11-05-2025
- Business
- Sydney Morning Herald
Ross Garnaut: Prophet with a sunny vision of our glorious future
What we need is some sort of economist prophet who can help us overcome this existential threat, not an army of blinkered economists telling us all that matters is raising our material standard of living. Fortunately, among the profession's abundance of unproductive thinkers is a lone prophetic, and so productive, thinker, Professor Ross Garnaut, who sees not only how we can minimise the economic cost of the transition to clean energy, but also what we can do for an encore. What we can do to fill the vacuum left by the looming collapse of our fossil fuel export business (which, by chance, happens to be our highest-productivity industry). Because economists are such incurious people, Garnaut seems to have been the first among them to notice that, purely by chance, Australia's natural endowment also includes a relative abundance of sun and wind. Until now, we thought these were non-resources and of little or no commercial value. It took Garnaut to point out that, in a post-carbon world, they had the potential be our new-found comparative advantage. To provide us with a whole new way of making a bundle from exports, while generating many new jobs for the miners to move to. When you add the possibility of structural change to the rules of conventional economics, you get what's a scary thought for many economists: maybe our natural endowment isn't ordained by the economic gods to be unchangeable through all eternity. Maybe there are interventions fallible governments should be making to move our economic activity from one dimension of our natural endowment to another. Maybe such a switch is too high-risk and involves too many 'positive externalities' (monetary benefits than can't be captured by the business doing the investing) for us to wait for market forces to take us to this brave new world. Loading Maybe changing circumstances can change the nature of our comparative advantage in international trade, meaning the government has to nudge the private sector in a new direction. It was Garnaut who first had the vision of transforming Australia into a 'Superpower' in a world of ubiquitous renewable energy. And it was he who uncovered the facts that made this goal plausible. Exporting our fossil fuels is cheap, whereas exporting renewable energy would be much more expensive. So whereas it was more economic to send our coal and iron ore overseas to be turned into steel, in the post-carbon world it soon will be more economic to produce green iron and other green metals in Australia and then export them. In a speech last week, Garnaut acknowledged that, in its first term, the Albanese government began to lay the policy foundations for the Superpower project. The economic principles are set out clearly and well by Treasury's 'national interest framework' for A Future made in Australia, released after last year's budget, he says. The re-elected Albanese government has already restated its commitment to the project. Garnaut says there's much more for the government to do in creating the right incentives for our manufacturers to re-organise and expand. Loading Research sponsored by his Superpower Institute finds that Australian exports of goods embodying renewable energy could reduce global emissions by up to 10 per cent. So we can contribute disproportionately to global decarbonisation by supplying goods embodying renewable energy that the high-income economies of Northeast Asia and Europe cannot supply at reasonable cost from their own resources. This would 'generate export income for Australians vastly in excess of that provided by the gas and coal industries that will decline as the world moves to net zero emissions over the next few decades'. Garnaut concludes: 'The new industries are large enough to drive restoration of growth in Australian productivity and living standards after the dozen years of stagnation that began in 2013.' The present fashion of obsessing with productivity improvement for its own sake is counterproductive and probably won't achieve much. We should get our priorities right and focus on fixing our most fundamental problems – unfairness between the generations, action on climate change and fully exploiting the opportunities presented by our newfound strength in renewable energy – and let productivity look after itself.
