Australia and the United States have committed to enhancing their bilateral cooperation under a new climate, critical minerals, and clean energy transformation compact. This compact comes after the two countries reached an agreement to coordinate polices and investment to support the growth of the critical minerals industry.
US President Joe Biden and Australian Prime Minister Anthony Albanese signed the compact on the sidelines of the G-7 summit in Hiroshima, Japan last week with a ministerial-level joint taskforce established to increase collaboration on critical minerals and materials needed for clean energy and defense supply chains.
Establishing clean energy and climate change as a central pillar of their alliance, the two countries have designed this compact to advance ambitious action over the next decade, at home and abroad.
Australia currently supplies around half of the world’s lithium as well as other minerals like rare earths (used in batteries for electric cars and defense) amid a global push to diversify supply chains away from dominant producer China.
This is expected to unlock further investment in battery metals for Australia, smoothing the way for private investment from the US and potentially opening the door to taxpayer funding under the US Defense Production Act.
The countries intend to coordinate policies and investments to support the diversification of responsible clean energy and critical minerals supply chains, accelerate the development of technology markets, meet the growing energy needs of the Indo-Pacific, and enhance the region’s role according to the joint government statement made on 20 May.
Biden will ask congress to add Australia as a ‘domestic source’ within the meaning of Title III of the US Defense Production Act to allow the president to funnel US dollars to Australian miners of critical minerals and to “accelerate and strengthen” implementation of the 2021 AUKUS (Australia, UK, US) trilateral security partnership.
The compact will also help Biden and Albanese confront some of the criticism that their energy supply chain policies have faced back home.
The current dependence on China for key energy transition materials has been a focus of US Republican efforts to change project permitting laws, which they say the Biden administration is not doing enough to accelerate.
“We’re not looking to decouple from China, we’re looking to de-risk and diversify our relationship,” Biden said at a press conference on 21 May. “That means taking steps to diversify our supply chains and so we’re not dependent on any one country for necessary product.”
Albanese wants to add value to Australia’s critical mineral resources, but the industry is already struggling with inflationary cost pressures. Industries have objected for more government action to level the playing field in the face of the US Inflation Reduction Act’s incentives for clean energy metals and processing, which has reinvigorated global renewable supply chains since August.
Biden has already flagged opening US electric vehicle tax credits to automobiles incorporating European critical minerals to assuage these concerns among EU members, and this agreement could do the same for Australia, a longtime US ally.
Mines and petroleum minister of Western Australia (the world’s largest lithium-producing jurisdiction) Bill Johnston, expects further critical minerals investments to flow in, he said in an interview with S&P.
“I expect further investments to be made on the back of the compact and general acknowledgement of the state’s attractiveness as a stable, well-governed jurisdiction with world-best governance, regulatory, environmental, health, safety, and social standards,” Johnston said.
Australia is set to announce a national strategy for critical minerals processing shortly and ministers from the U.S. National Security Council and Australia’s Department of Industry will also take part in a task force to develop a plan by the year end to encourage stronger industrial collaboration and speed up development, the two leaders said in statements announcing the deal.
“This is about creating an enormous opportunity for Australia, and I can’t underline how significant this is,” Albanese told press after a Quad leaders’ summit in Hiroshima.
