Australia exposed as China rewrites green economy
The closure of a lithium refinery in Western Australia after just four years should serve as a wake-up call as China pumps more than A$160 billion into critical mineral and metal investments abroad.
US company Albemarle closed shop at its South West lithium refinery in February, citing its struggle to compete with China’s low-cost production.
Climate Energy Chief Financial Officer Tim Buckley said the plant’s closure was a result of China’s strategic diversification to increase critical minerals and clean technology capacity.
“This is a serious problem,” he told AAP.
“Unless we can get other countries to truly value the geopolitical stability we offer, we will remain a country of digging and shipping.”
Mr. Buckley co-authored a report on China’s evolving strategy to consolidate its dominance of lithium, copper, nickel, rare earths and other elements of the low-carbon supply chain.
The Asian powerhouse has launched a comprehensive foreign investment strategy targeting the Global South, as well as investing heavily in local mining and manufacturing capacity.
Moving beyond past mega-mining projects, China is investing in smaller, high-tech production facilities overseas to secure long-term access to materials.
The massive investment totaling $160 billion tracked by the think tank represents China’s strategic move to reduce its over-reliance on several key export markets, including Australia.
Additionally, there has been an 85 percent collapse in foreign direct investment since 2018, identified by KPMG consultancy, while a very small portion of China’s overseas spending goes to Australia.
Mr Buckley said Australia needed to adapt quickly to China’s reshaping of the green economic geography.
“It is imperative that we act now to change these dynamics in Australia’s favor to become a renewable energy-powered mining and value-added superpower or risk being sidelined as the world’s quarry in the new global economy,” he said.
In the absence of a strong international carbon pricing signal to support greener production, Mr Buckley said Australia needed to double down on “green energy statecraft”.
This includes trade arrangements and strategic investments that help key trading partners meet their Paris climate commitments, while ensuring a higher green premium for Australia’s manufactured goods.
The agreement between Australia’s Lynas Rare Earths and Japan for long-term supply of rare earths at a guaranteed floor price has been cited as an “excellent example” of green energy statecraft.
Australia must also carefully and selectively engage China, still its largest trading partner, in green partnerships before diversification becomes more apparent.
The $81 billion federal capital boost under ‘The future is made in Australia’ was described as “directionally correct” but inadequate without a carbon pricing signal to encourage private money.
The think tank recommends Australia work on an open, whole-economy carbon price and use Energy Minister Chris Bowen’s COP31 presidency to push for a regional Asian carbon border adjustment mechanism.
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