Joint Statement by US /Australian Governments re Critical Minerals, page-6

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Hiroshima/Canberra | Australian mining and energy companies could get expanded access to billions of dollars worth of subsidies from US President Joe Biden’s signature Inflation Reduction Act, under deals to grant special status to the country’s defence manufacturing and critical minerals industries.

The plans were announced after Prime Minister Anthony Albanese met Mr Biden on the sidelines of the Group of Seven summit in Japan, where the leaders of the world’s major industrialised economies were also united in strong condemnation of Chinese economic coercion and Russia’s invasion of Ukraine.

In a meeting with Mr Albanese, Mr Biden apologised for cancelling his planned trip to Sydney this week for the Quadrilateral Security Dialogue because of the US debt crisis. Mr Biden also announced he would ask Congress to define Australia as a domestic source for sectors deemed critical such as defence, critical minerals and clean energy.

While details were sketchy, the leaders said the move could make sectors like energy and rare earths a third-pillar of the alliance. It means Australian companies in areas such as hydrogen could get access to US subsidies and other benefits under the US Inflation Reduction Act (IRA) without having to leave Australia.

“Canada has this at the moment,” Mr Albanese said. “If you think about industries like hydrogen, without that support, there would be a massive incentive for hydrogen-based industries to be based in the United States.

“So the big risk with the Inflation Reduction Act … is that you would see capital leave Australia to go to the United States. This is about addressing that. This is about creating an enormous opportunity for Australia.”

The federal government expects Australian energy firms to benefit directly from the deal, including through new loans for the production of batteries and energy systems. The act extends provisions for US firms through mechanisms including the US-Australia Free Trade Agreement, allowing commodities such as lithium to qualify for grants.

The deal is expected to go some way towards winding back the investment distortion caused by the massive $US369 billion ($547 billion) bill – recognition that American companies cannot meet expected demand alone.

Energy Minister Chris Bowen said on Sunday that the agreement was a milestone for decarbonisation efforts and the energy transition.

“This is a significant step forward in Australia’s ambitions in relation to renewable energy exports,” he told The Australian Financial Review. “It sets up a framework for co-operation with the United States and builds on the work, for example of our Hydrogen Headstart [program], in the recent budget.”

That program aims to make Australia a global leader in green hydrogen, providing revenue support for large‑scale renewable projects through competitive hydrogen production contracts.

“It’s been a very significant whole-of-government effort across several portfolios, and has involved high-level representations with key interlocutors in the United States.”

The US has already supported Australian rare earths and critical minerals groups, including Syrah Resources, which in October was given a $US220 million ($325 million) grant to expand the capacity of its Louisiana graphite anode plant. Lynas Resources in June was awarded a $US120 million contract by the US Department of Defence.

The deal was one of a raft of US measures to bolster economic co-operation with Australia and other allies in areas deemed to be crucial to national security, as another way to ramp up pressure on China.