Australia’s iron and steel sector shows why climate policy, industrial strategy and national security now need to be governed together, not treated as separate problems.
Australia faces a nation-defining moment. Climate change, energy insecurity, technological transformation and geopolitical competition are reshaping the economic and strategic landscape. They can no longer be understood – or governed – in isolation. They demand a more strategic response: one that aligns public institutions and private investment to build the industries that will underpin future prosperity and national resilience.
Few industries better illustrate both the scale of the challenge – and the opportunity – than iron and steel. As a foundation industry, steel underpins Australia’s construction, energy, transport and defence capabilities. Its successful decarbonisation therefore offers far more than emissions reduction. It has the potential to unlock billions of dollars in investment, create new employment opportunities across regional Australia, stimulate new renewable energy development, and strengthen Australia’s sovereign industrial capability.
With the right policy architecture, Australia could see renewables-powered electric arc furnaces deployed in low-emissions steelmaking in Collie, Western Australia; Whyalla, South Australia; and greater Brisbane, Queensland, as soon as next year.
Realising that opportunity, however, demands more than isolated policy interventions. It requires strategic coordination between the public and private sectors. In short, it calls for a Green Energy Statecraft approach.
Green Energy Statecraftstarts from a simple proposition: the decarbonisation of strategic industries like iron and steel – and the creation of the green industries that will follow – is not simply a climate imperative. It is an opportunity to strengthen economic, energy, environmental, social and geostrategic security simultaneously. The countries that prosper will not necessarily be those with the greatest natural resources or the deepest fiscal pockets, but those with the governance capabilities to translate comparative advantages into enduring national strength.
Australia is exceptionally well placed to succeed. Abundant renewable resources, world-class mineral endowments, outstanding research capability and trusted relationships with key Indo-Pacific partners provide a formidable starting position. Yet these advantages will not translate automatically into industrial leadership or national resilience.
The objective is not to shelter industries that cannot compete. It is to use Australia’s structural advantages – particularly its exceptional potential for low-cost renewable energy and its mineral resources – to build industries that can become globally competitive in a decarbonising world. Government’s role is to help overcome the early barriers to commercialisation, not to provide permanent support.
Pricing carbon remains an essential part of the policy toolkit. It helps ensure markets better reflect the true costs of emissions and encourages cleaner production and consumption. But no country has ever taxed its way to techno-industrial transformation.
This is because the challenge of building entirely new industries is not simply one of price signals. It is one of investment coordination. Green iron and steel projects require billions of dollars in upfront capital while depending simultaneously on renewable energy generation, enabling infrastructure, processing facilities, skilled workforces, long-term customers and supporting supply chains. Each investment depends on the others proceeding, creating a classic coordination problem that private markets alone struggle to resolve. Even where the long-term commercial opportunity is compelling, few investors are willing to move first when so much depends on decisions beyond their control.
For these reasons, governments have a key role to play in making strategic projects bankable . In practice, this means coordinating investment, infrastructure, finance, procurement, regulation and skills around a shared long-term national ambition. The central question for policymakers is therefore not simply: Which policy instrument should we use? It is: Which strategic capability are we trying to create – and what combination of public and private action will bring it into being?
A new report from think tank Climate Energy Finance, Arc of Ambition, is a timely contribution to that challenge, connecting Australia’s resource and renewable-energy endowments with a practical pathway for industrial renewal in the iron and steel sector. It demonstrates how strategic investment in domestic low-emissions steel production can revitalise regional communities, crowd in private capital, stimulate renewable energy development and strengthen sovereign manufacturing capability.
More importantly, it shows how the right governance, financing and institutional arrangements can turn that opportunity into bankable projects. In doing so, it points towards precisely the kind of home-grown recipe that Australia needs if the Future Made in Australia agenda is to move beyond aspiration and deliver globally competitive industries.
Australia’s opportunity lies not simply in decarbonising existing industries, but in using the transition to build entirely new sources of national capability, resilience and prosperity. Energy transition is more than an environmental imperative, although this is key as the climate crisis escalates. If governed strategically, it can become one of Australia’s greatest national security multipliers – strengthening our prosperity, resilience and sovereign capability for decades to come.
Elizabeth Thurbon
Elizabeth Thurbon is Professor of International Political Economy, Deputy Head of School and Director of Research in the School of Social Sciences at UNSW Sydney. She is also Director of the Green Energy Statecraft Project, a collaborative initiative between UNSW Sydney, the University of Melbourne and the University of Sydney.