In a momentous stride towards clean energy and emission reduction, the United States and Australia have announced a bilateral Clean Energy Transformation Compact. The landmark agreement was signed during the recent G7 leaders’ summit in Hiroshima, Japan.
Designated as the Climate, Critical Minerals, and Clean Energy Transformation Compact, the agreement places climate action and clean energy development at the forefront of the Australia-United States Alliance.
According to the White House, U.S. President Joe Biden is set to support congressional action to recognize Australian suppliers and activities as domestic activity within the United States, particularly for the Defense Production Act. This includes granting tax incentives under the Inflation Reduction Act (IRA) to Australian companies.
Australian Prime Minister Anthony Albanese praised the IRA as “the largest ever action by any country to deal with the challenge of climate change and to attract investment into the clean energy transformation.” He further elaborated on the critical role this pact will play in bolstering the United States’ commitment to treating Australian suppliers and activities as domestic.
The White House stated that the agreement “intends to coordinate policies and investments to support the expansion and diversification of responsible clean energy and critical minerals supply chains.” Furthermore, it aims to hasten the development of markets for established and emerging technologies, meet the rising energy and adaptation needs of the Indo-Pacific region, and augment the region’s role in sustainable global prosperity.
The IRA boasts nearly $370 billion in climate and clean energy provisions. These include investment and production credits for solar, wind, storage, critical minerals, funding for energy research, and credits for clean energy technology manufacturing, including wind turbines and solar panels.
In a parallel move towards renewable energy, the Australian government has recently allocated $1.33 billion (AUS$2 billion) in the 2023-24 budget to expedite large-scale renewable hydrogen projects. The nation’s objective is to ascend to global leadership in green hydrogen production. Notably, Australia is already a major producer of lithium, a vital mineral in the leading battery technology worldwide.
This bilateral pact marks a significant step in global climate change response, reflecting the evolving emphasis on renewable energy sources and environmentally friendly policies. It signals a promising future for clean energy cooperation between the United States and Australia, two of the world’s most influential nations in terms of energy policy.
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