Australia’s parliament has passed new legislation aimed at boosting its energy transition plans and reducing dependence on China by offering production tax breaks for critical minerals and renewable hydrogen. The laws, passed on Tuesday, are designed to support Australia’s goal of achieving net-zero emissions by 2050 while increasing domestic production of key minerals used in renewable energy and defence sectors.
The new law will provide tax incentives worth 10% of processing and refining costs for 31 critical minerals, ranging from lithium to rare earths, for projects from the fiscal year ending June 2028 through to 2040. The incentives will be available for up to 10 years per project, encouraging more local processing of these vital resources.
For renewable hydrogen production, the government is offering a tax incentive of A$2 ($1.26) per kilogram of renewable hydrogen produced. This is part of Australia’s broader plan to reduce its reliance on imported energy sources and diversify its global supply chains.
The legislation is a response to the growing global demand for critical minerals, which are essential for solar panels, batteries, and the construction of submarines and aircraft. With China being the world’s largest producer of rare earths, many major economies are competing to invest billions of dollars into critical mineral projects to secure supply chains and reduce reliance on Chinese exports.
The move has faced opposition from the Liberal-National coalition, who voted against the legislation. They argued that the tax credits come with excessive environmental and Indigenous consultation requirements, which they believe would complicate the process for companies.
The Labour government, led by Prime Minister Anthony Albanese, is focusing the incentives in resource-rich states like Western Australia and Queensland as the country approaches a national election expected by May. In its May budget, the government had pledged A$7 billion in tax incentives for the processing and refining of critical minerals and A$6.7 billion for renewable hydrogen production from 2028 to 2040.
