The federal government announced that its Future Made in Australia (Production Tax Credit and Other Measures) Bill 2024 has cleared the upper house, paving the way for $13.7 billion (USD 8.59 billion) worth of tax breaks to flow for green hydrogen production and critical minerals processing.
The Bill will now return to the lower house to be rubber-stamped before becoming law.
The legislation establishes a hydrogen production tax incentive worth $2 per kilogram of renewable hydrogen produced between 2027-2028 and 2039-2040 for up to 10 years per project.
It also includes a 10% production tax credit for processing and refining critical minerals like lithium and nickel, again for up to 10 years per project. Critical minerals and rare earths are vital inputs to technologies needed for the energy transition such as batteries and solar panels.
The two incentives combined are worth an estimated $13.7 billion over 10 years and form part of the government’s Future Made in Australia policy.
A key feature of the Bill is that the tax credits will only be granted to businesses that invest in and produce green hydrogen, or process or refine critical minerals, in Australia.
The government says the tax breaks will help kickstart emerging green industries and reduce reliance on China’s critical minerals supply chain.
In a joint statement, federal Energy Minister Chris Bowen described the tax incentives as critical to “seizing the vast economic and industrial opportunities” of the net-zero transition.
“We recognise that the best opportunities for Australia and its people lie at the intersection of industry, energy, resources, skills and our ability to attract and deploy investment,” the statement says.
“These tax incentives will leverage traditional strengths and encourage and enable new industries which help maximise our opportunities in the global net-zero transformation.”
The passage of the Bill has been widely welcomed by industry with Joanna Kay, executive general manager of industry body Zero Carbon Hydrogen Australia, describing it as a critical step in cementing the nation’s position as a global leader in hydrogen and critical minerals.
“Policy tools like production tax credits are game changers,” she said in a Linkedin post. “They drive investment, lower costs, and accelerate industry growth.”
Rebecca Tomkinson, chief executive officer of Western Australia’s Chamber of Minerals and Energy, said the newly legislated production tax incentives would help Australia leverage its traditional strength in upstream mining to advance further down the value chain.
“Offering production tax incentives for hydrogen production and critical mineral processing sends a clear message to investors that Australia is serious about seizing the opportunities presented by the global energy transition,” she said.
The Australian Workers’ Union has strongly endorsed the passing of the Bill, describing it as “a historic step that positions Australia to become a global leader in new energy and advanced manufacturing.”
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