Australia has set its sights on becoming a clean energy superpower, but its aspirations may be threatened by US President Joe Biden’s Inflation Reduction Act (IRA). The legislation includes measures aimed at reducing the use of fossil fuels and accelerating the transition to renewable energy sources, potentially reducing demand for Australian exports.
Australia is already the world’s largest exporter of coal. Still, it is seeking to transition to cleaner forms of energy, such as hydrogen and renewable electricity, to reduce its greenhouse gas emissions. The Australian government has set a target of achieving net zero emissions by 2050, but the success of this ambition may be impacted by the IRA.
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Inflation Reduction Act (IRA): Infrastructure Investment and Jobs Act
Image: Demetrius Freeman/Washington Post – In the State Dining Room of the White House, Sen. Joe Manchin receives the pen that President Joe Biden used to sign the Inflation Reduction Act of 2022 into law.
One of the key components of the IRA is the proposed establishment of a Clean Energy Standard (CES) that requires utilities to increase the share of electricity generated from clean sources, such as wind and solar, to 80% by 2030. This would likely reduce demand for Australian coal, as power plants in the US would have to switch to cleaner energy sources to comply with the CES.
The Australian government has acknowledged the potential impact of the IRA on its clean energy ambitions. Still, Australia, according to Clean Energy Council Chief Executive Kane Thornton, stands to lose thousands of jobs and foreign investment to the US.
“Australia has a prime opportunity to become a clean energy superpower, but the brightest minds and the biggest wallets are now looking to the US for their best opportunity,” says Thornton.
“It is immediately clear the US package dwarfs the level of support Australian governments provide for the clean energy transition. The consequences of inaction have the potential to damage Australian competitiveness across all industries for decades to come.”
In addition, the IRA includes provisions to promote the production and use of electric vehicles, which could further reduce demand for Australian exports of oil and gas. This could have a significant impact on the Australian economy, which is heavily dependent on fossil fuel exports.
Check out our page to learn more about US law threatening Australia’s global hydrogen superpower ambitions.
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Leaders in Europe have come to the same realisation: set new guidelines for renewable hydrogen
To accelerate the transition to clean energy, the European Commission has introduced new rules for green hydrogen. The rules will help to create a market for green hydrogen, which is produced using renewable energy sources such as wind and solar and support the development of a new industry in Europe.
The Renewable Energy Directive calls for the approval of two delegated acts, which the Commission has proposed in detail to clarify what constitutes renewable hydrogen in the EU. These acts are a component of a larger EU regulatory framework for hydrogen that also contains legislative goals for renewable hydrogen for the transportation and industrial sectors, as well as laws governing state aid and investments in energy infrastructure. They will ensure that all RFNBOs, or renewable fuels of non-biological origin, are generated using renewable electricity.
Both Acts are necessary for the fuels to be included in the Member States’ renewable energy objective and are intertwined. As the EU strives to produce 10 million tonnes of domestic renewable hydrogen and 10 million tonnes of imported renewable hydrogen in accordance with the REPowerEU Plan, they will give investors legal stability.
By 2030, the EU is expected to produce 10 million tonnes of renewable hydrogen and import 10 million tonnes of it, according to the REPowerEU Plan.
Competing with renewables
In recent years, Australia has begun to take steps to transition to cleaner forms of energy. The country has significant renewable energy resources, including wind and solar, and is well-placed to become a leader in hydrogen production. However, Australia’s progress has been overshadowed by the more ambitious commitments of other countries.
The IRA is a wake-up call for Australia, which is now racing to catch up in the global race for renewables. The country’s leaders are under pressure to invest in clean energy technologies and set more ambitious targets for reducing greenhouse gas emissions. Leaders in Europe have come to the same realisation.
The IRA also includes funding for research and development in clean energy technologies, which could create opportunities for collaboration between Australian and US researchers and companies.
Overall, the proposed measures in the IRA could pose a threat to Australia’s aspirations of becoming a clean energy superpower. However, the country also has the potential to benefit from the transition to clean energy in the US, particularly through the supply of hydrogen. Collaboration between Australian and US researchers and companies could also create new opportunities for innovation and economic growth in both countries.
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