House of Representative

Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024

Future Made in Australia (Production Tax Credits and Other Measures) Act 2025

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)

[1]
At the time this Bill was introduced, the Future Made in Australia (Guarantee of Origin) Bill 2024 was still before Parliament. To appropriately explain the operation of the provisions of this Bill, which will only commence if Future Made in Australia (Guarantee of Origin) Bill 2024 Bill is enacted by Parliament, this chapter of the Explanatory Memorandum refers to the provisions of that Bill as if they have become law as the Future Made in Australia ( Guarantee of Origin ) Act 2024 .

[2]
Department of Industry, Science and Resources (Cth), Australia's Critical Minerals List and Strategic Minerals List (last updated 20 February 2024)
Australia's Critical ... https://www.industry.gov.au/publications/australias-critical-minerals-list-and-strategic-materials-list .

[3]
Department of Industry, Science and Resources (Cth), Critical Minerals Strategy 2023 - 2030 (2023).

[4]
Department of Industry, Science and Resources (Cth) (2023), p 15.

[5]
Usually processing of this sort occurs as a preliminary step in a larger processing activity that involves the transformation of spodumene into lithium hydroxide or lithium carbonate. While the preliminary step would not itself satisfy the general definition, the larger processing activity would satisfy it.

[6]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, 2024) (' National Hydrogen Strategy 2024' ), 42.

[7]
Australian Government, Geoscience Australia, Australian Energy Hydrogen ,

[8]
Timur Gul and Noe van Hulst, IEA, Why Clearer Terminology for Hydrogen Could Unlock Investment and Scale Up Production (Commentary, 29 June 2023) https://www.iea.org/commentaries/why-clearer-terminology-for-hydrogen-could-unlock-investment-and-scale-up-production.

[9]
International Partnership for Hydrogen and Fuel Cells in the Economy, Methodology for Determining the Greenhouse Gas Emissions Associated with the Production of Hydrogen (Working Paper, July 2023).

[10]
Future Made in Australia ( Guarantee of Origin Charges ) Bill 2024 and Future Made in Australia ( Guarantee of Origin Consequential Amendments and Transitional Provisions ) Bill 2024 .

[11]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, 2024) (' National Hydrogen Strategy 2024' ), 42.

[12]
Srinivasan, V., Temminghoff, M., Charnock, S., Hartley, P. (2019). Hydrogen Research, Development and Demonstration: Priorities and Opportunities for Australia, CSIRO, 40.

[13]
Ibid, 47.

[14]
Australian Government, Budget 2024-25 Budget Paper Number 2 , 67.

[15]
Department of Climate Change, Energy, the Environment and Water, Safeguard Mechanism (Web Page) https://www.dcceew.gov.au/climate-change/emissions-reporting/national-greenhouse-energy-reporting-scheme/safeguard-mechanism.

[16]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024), 64.

[17]
Australian Government, Department of Climate Change, Energy the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024) 75.

[18]
Wenguo Liu et al, 'The Production and Application of Hydrogen in Steel Industry', International Journal of Hydrogen Energy , Volume 46, Issue 17 (2021) https://www.sciencedirect.com/science/article/abs/pii/S0360319920347376.

[19]
ARUP analysis and report, Activating Domestic Demand for Hydrogen , produced for Australian Government, Department of Climate Change, Energy the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024) 95.

[20]
Australian Government, Department of Climate Change, Energy, the Environment and Water, State of Hydrogen 2022 (Report, 2022), 10.

[21]
CSIRO and ClimateWorks Centre 2023, Pathways to Industrial Decarbonisation : Phase 3 Technical Report , Australian Industry Energy Transitions Initiative, 112.

[22]
World Steel Association, 'Fact Sheet: Steel and Raw Materials' (Factsheet, March 2018) https://www.steel.org.au/getattachment/458fa31b-2586-47bb-a645-9411140863dd/WSA_fact_raw_materials_2018.pdf, 1.

[23]
Jisoo Kim et al., 'Decarbonizing the iron and steel industry: A systematic review of sociotechnical systems, technological innovations, and policy options' Energy Research and Social Science , Volume 89 (July 2022), quoting data from the International Energy Agency.

[24]
Department of Industry, Science and Resources, Resources and Energy Quarterly : June 2024 (Quarterly Report, June 2024), 106.

[25]
Deloitte and the Australian Government, Australian Renewable Energy Agency, A Roadmap for Decarbonising Australian Alumina Refining : In Collaboration with Australian Renewable Energy Agency , and in Consultation with Participants Alcoa , Rio Tinto and South32 (Report, November 2022), 1.

[26]
AEMO, 2024 Integrated System Plan 2024 (Final Report, June 2024) https://aemo.com.au/en/energy-systems/major-publications/integrated-system-plan-isp/2024-integrated-system-plan-isp.

[27]
Levelised cost of hydrogen is a method that evaluates the total expenses involved in producing hydrogen throughout its lifecycle, including capital and operational costs (European Hydrogen Observatory, Levelised Cost of Hydrogen ( LCOH ) Calculator Manual (Report, June 2024), 7).

[28]
International Energy Agency (IEA) Global Hydrogen Review 2024 (Report, October 2024).

[29]
Internal DCCEEW analysis based on confidential project data provided by applicants for the Hydrogen Headstart program.

[30]
Australian Government, Department of Climate Change, Energy the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024) 45.

[31]
Bloomberg New Energy Finance, 2023 Hydrogen Levelized Cost Update, 2023.

[32]
IEA, Global Hydrogen Review 2024 (Report, October 2024), 11.

[33]
P Graham, J Hayward, J Foster and L Havas, 2023, GenCost 2022-23: Final report, CSIRO, Australia, www.csiro.au/en/research/technology-space/energy/GenCost.

[34]
P Graham, J Hayward, J Foster and L Havas, 2023, GenCost 2022-23: Final report, CSIRO, Australia, www.csiro.au/en/research/technology-space/energy/GenCost.

[35]
IEA, Global Hydrogen Review 2024 (Report, October 2024), 11.

[36]
Australian Government, Department of Climate Change, Energy the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024), 63.

[37]
Australian Government, Department of Climate Change, Energy the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024), 15.

[38]
EY Global, How to Capture the Sun : the Economics of Solar Investment (Article, 14 February 2020) https://www.ey.com/en_pt/financial-services/how-to-capture-the-sun-the-economics-of-solar-investment.

[39]
Targets from Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, 2024), 91.

[40]
Tansu Galimova, Mahdi Fasihi, Dmitrii Bogdanov and Christian Breyer, 'Impact of international transportation chains on cost of green e-hydrogen: Global cost of hydrogen and consequences for Germany and Finland'Applied Energy , Volume 347, 2023.

[41]
Deloitte Australia's Hydrogen Tipping Point (Article, 27 February 2023) https://www.deloitte.com/au/en/Industries/power-utilities-renewables/perspectives/australia-hydrogen-tipping-point.html.

[42]
IEA, Net Zero by 2050 : A Roadmap for the Global energy Sector , 2020, https://www.iea.org/reports/net-zero-by-2050 Error ! Hyperlink reference not valid . 13-14.

[43]
Australian Government, Australia's Nationally Determined Contribution (Communication, 2022), 3.

[44]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024).

[45]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024), 42.

[46]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024), 42.

[47]
Australian Government, The Treasury, Future Made in Australia : National Interest Framework Supporting Paper (Supporting Paper, May 2024) 17.

[48]
Australian Government, Australian Trade and Investment Commission, 'Hydrogen, Australia's Next Big Export Industry' (Web Page) https://international.austrade.gov.au/en/do-business-with-australia/sectors/energy-and-resources/hydrogen#:~:text=Green%20hydrogen%20production,renewable%20electricity%20and%20water%20supplies.

[49]
For example, the United States has committed to a 10-year clean hydrogen production tax credit worth up to US$3 per kilogram of eligible hydrogen produced through its Inflation Reduction Act and Canada has committed to tax rebates between 15 to 40 percent of costs associated with the purchase and installation of eligible equipment for clean hydrogen projects.

[50]
Australian Government, The Treasury, Future Made in Australia : National Interest Framework Supporting Paper (Supporting Paper, May 2024).

[51]
Australian Government, The Treasury, Future Made in Australia : National Interest Framework Supporting Paper (Supporting Paper, May 2024).

[52]
Grattan Institute, Green Metals Consultation Paper 2024 (Consultation Paper, 2024).

[53]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024), 10.

[54]
Accenture, Sunshot : Australia's Opportunity to Create 395 , 000 Clean Jobs (Report commissioned by ACF, WWF, Business Council of Australia and Australian Council of Trade Unions, October 2021) https://d3n8a8pro7vhmx.cloudfront.net/bca/pages/6621/attachments/original/1634169147/Sunshot_-_Clean_Exports_Research_Report_-_Embargoed_-_131021.pdf?1634169147 14.

[55]
Australian Government, The Treasury, Future Made in Australia National Interest Framework Supporting Paper (Supporting Paper, May 2024), 5.

[56]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024), 9.

[57]
Thomas Longden, Frank Jotzo, Mousami Prasad, Richard Andrews, Zero-Carbon Energy for the Asia-Pacific Grand Challenge (ZCEAP), Crawford School of Public Policy, Australian National University, Green hydrogen production costs in Australia : implications of renewable energy and electrolyser costs , 2020 09 01 - ZCEAP - CCEP Working Paper - Green hydrogen production costs.pdf (anu.edu.au).

[58]
CSIRO, National Hydrogen Roadmap (Report, 2018) xvi.

[59]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024), 75.

[60]
ARENA, Six shortlisted for $ 2 billion Hydrogen Headstart funding (Web Page, 21 December 2023) Six shortlisted for ...~https://arena.gov.au/news/six-shortlisted-for-2-billion-hydrogen-headstart-funding.

[61]
Australian Government, Budget 2024-25, Budget Paper 1 , Statement 3 : Fiscal Strategy and Outlook , 107.

[62]
Ibid.

[63]
Replacing all grey hydrogen produced in Australia for use in ammonia would require roughly 0.41 Mt. To produce enough green steel (using the hydrogen direct reduced iron process) to replace current crude steel production using iron ore would require roughly 0.25Mt.

[64]
Displacing grey hydrogen production for ammonia gives 4.1Mt CO2e emissions impact. Displacing vertically integrated steel production process gives 7.6 Mt CO2e emissions impact.

[65]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024) 75.

[66]
Accenture, Sunshot : Australia's Opportunity to Create 395 , 000 Clean Jobs (Report commissioned by ACF, WWF, Business Council of Australia and Australian Council of Trade Unions, October 2021) https://d3n8a8pro7vhmx.cloudfront.net/bca/pages/6621/attachments/original/1634169147/Sunshot_-_Clean_Exports_Research_Report_-_Embargoed_-_131021.pdf?1634169147.

[67]
As discussed in Section 3.2, the costs associated with transporting and converting hydrogen carriers make importing renewable hydrogen a costly alternative to producing it in Australia for domestic use.

[68]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, 2024), 91.

[69]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, 2024), 64.

[70]
A production deadline of 2033 was considered with the intention that production supported would be similar to that under Option 2A. However, modelling was undertaken on an aggregated production forecast basis rather than project-by-project basis due to the extremely limited nature of data available on the nascent renewable hydrogen industry in Australia. The differences in estimated production under Options 2A and 2B are unquantifiable as a result, as project-specific circumstances would play a significant role.

[71]
Targets from Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, 2024), 91.

[72]
Australian Government, Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, 2024), 64.

[73]
McKinsey and Company, Renewable - Energy Development in a Net - Zero World : Disrupted Supply Chains (Article, 17 February 2023) https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/renewable-energy-development-in-a-net-zero-world-disrupted-supply-chains.

[74]
PwC, Key Bankability Issues for Renewable Energy Projects (Report, March 2023) https://www.pwc.com.au/energy-transition/papers/11-bankability-issues-renewable-energy-projects.pdf.

[75]
Australian National University, Are We Overestimating Green Hydrogen Production (Policy Brief, August 2024) https://policybrief.anu.edu.au/are-we-overestimating-green-hydrogen-production.

[76]
www.aph.gov.au/Parliamentary_Library/Budget/reviews/2024-25/NewIndustryPolicy

[77]
https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/second-reading-speech-future-made-australia-bill-2024

[78]
https://www.pm.gov.au/media/investing-future-made-australia

[79]
Australia's Critical...~https://www.industry.gov.au/publications/australias-critical-minerals-list-and-strategic-materials-list

[80]
https://www.ucl.ac.uk/bartlett/sustainable/sites/bartlett_sustainable/files/critical_minerals-potential_next_steps.pdf

[81]
https://www.arultd.com/projects/nolans/project-update/

[82]
https://www.arultd.com/projects/nolans/project-update/

[83]
International Energy Agency, 'Critical Minerals Demand Dataset', International Energy Agency (2022), www.iea.org/data-and-statistics/data-product/critical-minerals-demand-dataset .

[84]
Department of the Treasury, 'Future Made in Australia: National Interest Framework', 2024, Page 24, Future Made in Australia - National Interest Framework

[85]
Department of Industry, Science and Resources (DISR) (Commonwealth of Australia), 'Resources and Energy Quarterly March 2023', DISR (2023), 158, https://www.industry.gov.au/publications/resources-and-energy-quarterly-march-2023.

[86]
Critical Minerals Strategy 2023-2030 (industry.gov.au)

[87]
The economic potential of Australia's critical minerals and energy transition minerals (industry.gov.au)

[88]
PU-141-Energy-Report-WEB.pdf (fbicrc.com.au)

[89]
page 10, https://www.piie.com/sites/default/files/documents/wp22-12.pdf

[90]
CHINA'S MONOPOLY OVE...~https://orcasia.org/article/602/chinas-monopoly-over-lithiums-upstream-and-downstream-supply-chain

[91]
Trends in batteries ...~https://www.iea.org/reports/global-ev-outlook-2023/trends-in-batteries

[92]
EU forecast to fall ...~https://source.benchmarkminerals.com/article/eu-forecast-to-fall-short-of-2030-crma-targets-without-ambitious-action

[93]
https://lens.monash.edu/2024/02/19/whats-behind-the-collapse-in-the-price-of-nickel-and-how-can-the-industry-survive

[94]
www.reuters.com/markets/commodities/race-regain-rare-earth-glory-europe-falls-short-mineral-goals-2024-06-27/

[95]
https://www.sciencedirect.com/science/article/pii/S030142072300733X

[96]
www.sciencedirect.com/science/article/pii/S030142072300733X

[97]
A glimpse into Indon...~https://www.lowyinstitute.org/the-interpreter/glimpse-indonesia-s-nickel-policy

[98]
Lithium-Ion-Battery-Value-Chain-report.pdf (greengravity.com)

[99]
Congressional Budget Office (2022) Estimated Budgetary Effects of H.R. 5376, the Inflation Reduction Act of 2022; Rhodium Group (2023) Clean Investment Monitor; McKinsey (2022) The Inflation Reduction Act: Here's what's in it; Mandala analysis

[100]
Critical Minerals Pr...~https://amec.org.au/ptc-resources/

[101]
https://thoriumenergyalliance.com/wp-content/uploads/2020/10/Rare-Earth-Cost-Economic-Value-By-Distribution-V12-10-15-2020.pdf

[102]
https://www.dailymetalprice.com/neodymium.html

[103]
Page 3, Future Made in Australia - National Interest Framework

[104]
Critical Minerals Strategy 2023-2030 (industry.gov.au)

[105]
Future Made in Australia - National Interest Framework

[106]
The economic potential of Australia's critical minerals and energy transition minerals (industry.gov.au)

[107]
Page 27, Future Made in Australia - National Interest Framework (treasury.gov.au)

[108]
Page 27, Future Made in Australia - National Interest Framework (treasury.gov.au)

[109]
Page 24, Future Made in Australia - National Interest Framework (treasury.gov.au)

[110]
https://www.whitehouse.gov/briefing-room/statements-releases/2023/08/16/fact-sheet-one-year-in

[111]
Critical Minerals Strategy 2023-2030 (industry.gov.au)

[112]
Australia's Critical...~https://www.industry.gov.au/publications/australias-critical-minerals-list-and-strategic-materials-list

[113]
Page 12, The economic potential of Australia's critical minerals and energy transition minerals

[114]
Page 3, Future Made in Australia - National Interest Framework

[115]
Future Made in Austr...~https://www.aph.gov.au/Parliamentary_Business/Bills_LEGislation/Bills_Search_Results/Result?bId=r7219

[116]
The economic potential of Australia's critical minerals and energy transition minerals (industry.gov.au)

[117]
Page 68, Budget Paper No.2

[118]
Page 3, Future Made in Australia - National Interest Framework

[119]
Future Made in Austr...~https://www.aph.gov.au/Parliamentary_Business/Bills_LEGislation/Bills_Search_Results/Result?bId=r7219

[120]
The economic potential of Australia's critical minerals and energy transition minerals (industry.gov.au)

[121]
The economic potential of Australia's critical minerals and energy transition minerals (industry.gov.au)

[122]
Page 68, Budget Paper No.2

[123]
https://www.pm.gov.au/media/future-made-australia-bill-will-build-stronger-cleaner-economy

[124]
https://supplynation.org.au/about-us/supply-nation-members/

[125]
National Agreement on Closing the GAP (2020) Closing the Gap in Partnership.

[126]
The platinum group elements include ruthenium, rhodium, palladium, osmium, iridium, and platinum. Several partner lists separately identify the platinum group elements and/or only identify certain platinum group elements as critical minerals.

[127]
The rare earth elements include yttrium, lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium. Several partner lists separately identify the rare earth elements and/or only identify certain rare earth elements as critical minerals.

[128]
www.exportfinance.gov.au/how-we-can-help/our-solutions/critical-minerals/

[129]
https://www.industry.gov.au/news/national-reconstruction-fund-diversifying-and-transforming-australias-industry-and-economy

[130]
https://naif.gov.au/our-investments/sectors-we-support/resources/

[131]
https://www.industry.gov.au/news/our-commitment-developing-australias-critical-minerals-sector

[132]
www.industry.gov.au/news/our-commitment-developing-australias-critical-minerals-sector

[133]
https://business.gov.au/grants-and-programs/research-and-development-tax-incentive/overview-of-rd-tax-incentive

[134]
Budget Paper No.2

[135]
https://www.vu.edu.au/centre-of-policy-studies-cops/contract-research-cge-model-sales/cge-model-sales/victoria-university-regional-model-vurm

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