Studies in Statecraft
The Case for an Australian Clean Commodities Trading Initiative
Elizabeth Thurbon and Oliver Yates
Published: June 2025
This independently reviewed paper is part of a Studies in Statecraft series which showcases work that aligns with AP4D’s mission of encouraging better statecraft to maximise Australia’s influence in a difficult, dangerous and complex world.
Executive Summary
This report examines the case for the Clean Commodities Trading Initiative (CCTI) from multiple perspectives— economic, environmental, social, and geostrategic. What emerges is a clear picture of the CCTI as not merely a desirable policy option but a strategic imperative for Australia in the current geostrategic moment.
The global energy transition is accelerating, driven by the convergence of economic, technological, and political forces. Countries that move decisively to position themselves in clean energy value chains will secure lasting advantages in terms of economic prosperity, strategic influence, and environmental leadership. Those that hesitate risk being left behind as markets transform and new industrial ecosystems emerge.
Australia stands at a pivotal moment in its economic history. We can continue to rely on a commodity export model increasingly vulnerable to global decarbonisation trends, or we can embrace a more sophisticated approach that leverages our natural advantages to move up the value chain and secure our place in the clean energy future.
The CCTI represents exactly the kind of strategic, forward-looking policy that Australia needs in this historic moment. By addressing the fundamental market formation challenges currently preventing investment in clean commodity production, the CCTI can unlock Australia’s potential as a clean commodity superpower while advancing our comprehensive national security interests.
In an uncertain world characterised by geopolitical competition, technological disruption, and environmental change, the CCTI offers a path forward that enhances Australia’s resilience, prosperity, and security. It exemplifies sophisticated green energy statecraft—a governance approach that recognises the profound interconnections between energy, economics, environment, and security in the 21st century.
The time for incremental approaches has passed. If Australia wants to lead in the clean industrial era, we must act decisively. The Clean Commodities Trading Initiative provides the strategic framework for that action.
An Unprecedented Opportunity Demands a Strategic National Response
Australia stands at a pivotal moment in its economic history. As the global economy rapidly decarbonises, an unprecedented opportunity has emerged for Australia to transform from a conventional, low value-added commodity exporter into a global leader in value-added clean commodities.
This is not just an environmental imperative—it represents Australia’s most significant economic and geostrategic opportunity in generations.
The potential value of this transformation is staggering. Consider iron ore, Australia’s largest export earner. As our traditional markets in Asia decarbonise their industrial processes, we face a choice: we can watch our export revenues decline as demand for conventional commodities wanes, or we can seize the initiative to not just maintain but substantially increase the value of our exports by processing iron ore locally and exporting green iron instead.
Analysis suggests this value-adding approach could triple the existing value of our iron ore exports. It could also trigger the establishment of significant new manufacturing capabilities and ecosystems as the production of the clean energy to produce green iron will create long term demand for equipment like electrolysers, batteries, wind turbines, towers, solar panels and transmission assets.
This opportunity extends far beyond iron ore. Across multiple sectors—green hydrogen, green ammonia, sustainable aviation fuel (SAF), lithium hydroxide, green aluminium, and green steel—global demand is surging for low-emission alternatives. Reports by The Superpower Institute, Climate Energy Finance, Kaya Partners, and other leading research organisations have documented the scale of this opportunity in detail. Their findings are unequivocal: Australia possesses the elements necessary to become a clean commodity superpower, from the technical capabilities to the natural endowments, comparative advantages in renewable resources, geographic positioning, and global standing as a trusted, stable trade partner.
Yet despite improving policy ambition and significant private sector interest, commercial execution is so far failing. The fundamental challenge is not a lack of technology, resources, or investor willingness. Rather, it is a failure of demand-side market formation.
Clean commodity projects are massive in scale and have the potential to unlock and entrench Australia’s competitive advantage for centuries to come. They are technically viable and scalable, meaning that they will be highly competitive in a carbon-constrained environment. But today, these projects are unable to secure the long-term offtake agreements at bankable prices necessary to commence construction.
This leaves Australia’s key clean production potential stranded and puts Australia’s opportunity to create very significant future national wealth at risk.
The urgency of addressing this market failure cannot be overstated. The global race to establish leadership in clean commodity production is accelerating. Countries around the world — especially in the Middle East and China — are implementing ambitious industrial policies to capture this lucrative market we all know must come if we are to collectively address the global emission challenge.
If Australia hesitates, these opportunities will be seized by international competitors, many of whom lack Australia’s incredible natural advantages but who compensate with more decisive policy frameworks.
The 2025 election delivered the Commonwealth government a strong mandate—and with it, high but fair expectations. Its policy agenda is now packed with multiple pressing priorities: lift productivity; catalyse private investment; spur research and development; mitigate looming export risks; unlock new export opportunities; create jobs; fight climate change; strengthen alliances; control inflation; deliver value for taxpayer money – all while balancing the budget.
With a crowded policy agenda and limited fiscal headroom, the government must act with precision and purpose. That means targeting the biggest opportunities with the most efficient and effective policy tools — especially those that deliver outsized returns by solving multiple problems simultaneously.
The Clean Commodities Trading Initiative (CCTI) is the tool for our times. It’s a fiscally conservative, marketfriendly solution that can bridge the gap between the climate risk-exposed commodity markets of today and the cleaner commodity markets of tomorrow.
By creating bankable demand for clean commodities, the CCTI will give firms the confidence they need to invest now, so they can start building the clean production facilities and pioneering the clean commodity markets we know will exist in the next 5-7 years.
By creating and accumulating Clean Commodity Credits, and doing so early, the CCTI has the potential to generate revenue for the government, giving Australian taxpayers a stake in future upside to recoup early support. This creates the rare possibility of a policy that could eventually pay for itself—a compelling feature in the current fiscal environment.
By acting as an investment and innovation multiplier, the CCTI will boost productivity and create jobs without breaking the budget. Indeed, the Clean Commodity Credits that the CCTI would create, accumulate, and sell are perhaps best described as Innovation Credits. Unlike Carbon Credits, Clean Commodity Credits don’t just put a price on pollution; they mandate cleaner production, and let firms decide whether to innovate or purchase credits from others who have. In doing so, they create a market for innovation itself, rewarding first movers and pushing laggards to catch up — or pay up.
By broadening and deepening collaboration with countries like Japan and South Korea, the CCTI will help solidify relationships with Australia’s key strategic partners.
The Clean Commodities Trading Initiative is thus the superior policy instrument for our uncertain economic and geostrategic moment, and a stellar example of sophisticated, market-friendly green energy statecraft.
As the government weighs where to direct scarce capital, it must back policies with outsized returns— economic, environmental, and geostrategic. The CCTI is one of those policies: shovel-ready, fiscally sound, and in lockstep with our trading partners.
It represents a precise intervention at exactly the right moment—not a speculative bet, but a targeted approach to unlock Australia’s investment in first-of-a-kind clean commodity production projects today so they will be ready and in operation for the market we expect to develop.
If Australia wants to lead the clean industrial era, we must act decisively—and back our future exports with the full force of a well-designed offtake mechanism that delivers across multiple national priorities.
That mechanism is a CCTI.
Limitations of Existing Policy Approaches
Australia’s approach to developing clean commodity industries has thus far relied heavily on supply-side policy interventions. While these measures have laid important groundwork, they have proven insufficient to catalyse the scale and pace of investment needed to secure Australia’s position in global clean commodity markets. Understanding these limitations is essential for developing more effective policy frameworks.
Current supply-side approaches primarily focus on reducing production costs through grants, subsidies, and tax incentives. These include research and development funding, direct infrastructure investment, and various forms of capital expenditure support. While these tools have merit in addressing specific barriers, they fail to tackle the fundamental obstacle to project development: the absence of bankable demand over time.
The critical weakness in Australia’s existing policy toolkit is its inability to provide the revenue certainty that project developers and their financiers require.
Clean commodity projects typically involve high capital expenditure and long project timelines, with payback periods extending over many years. These projects also face large and uncertain green premiums compared to fossil-based alternatives, given the lack of carbon pricing in international trade. In this context, without credible, long-term offtake contracts at prices that reflect these realities, even the most promising projects struggle to reach financial close.
This limitation is particularly evident in the government’s approach to critical minerals development. The recently announced $1.2 billion Critical Minerals Strategic Reserve represents a welcome step toward demand-side thinking, but its focus on accumulating physical stockpiles rather than stimulating new longer term demand offtake highlights the incomplete nature of current policy approaches.
Similarly, proposals to mimic carbon pricing through grants and subsidies, such as flat-rate production subsidies for green iron ($200/tonne), lack the precision and adaptability needed to efficiently support diverse projects with varying cost structures and market dynamics.
These blunt instruments often result in either insufficient support for truly transformative projects or excessive subsidies for those that could proceed with less assistance, incentivising rent-seeking.
Another significant limitation of existing approaches is their vulnerability to political cycles. The United States’ cancelling of contracted grants is a recent example of this, as was the Coalition’s 2025 campaign promise to cut Australia’s production tax credits (PTCs). Because legislative measures like PTCs are subject to the political climate, they carry higher risk, increasing the equity and debt costs for projects. This political uncertainty undermines the very stability that clean commodity investments require.
Furthermore, current policies often operate in isolation rather than as part of a coherent industrial strategy. The lack of coordination across portfolios—energy, minerals, and manufacturing—creates inefficiencies and missed opportunities for synergistic development. This siloed approach fails to leverage the potential multiplier effects that could be achieved through more integrated policy design.
Perhaps most critically, existing supply-side measures assume that reducing producer costs will naturally build a market for clean commodities. This assumption overlooks the complex reality of market formation in green emerging industries where a significant portion of the product’s price is a function of a regulated scheme that is yet to be put in place.
Without policy mechanisms to generate that demand ahead of the regulated scheme, green products will not be produced and the creation of a functioning market for green attributes cannot be built. For this reason, supplyside support alone cannot bridge the gap between the potential future and current commercial realities.
The limitations of current approaches are further compounded by their fiscal implications. Grants and subsidies represent one-way financial flows from government to industry, with limited opportunity for taxpayers to share in future upsides or recover costs as markets mature.
This creates both fiscal pressure and potential political vulnerability as support for clean industries is framed as an ongoing cost rather than a strategic investment.
International experience demonstrates that successful industrial transformation requires a more balanced approach. Countries leading in clean commodity development have implemented sophisticated demandside mechanisms alongside supply-side support. These hybrid approaches create the market certainty needed for investment while maintaining the flexibility to adapt as technologies mature and markets evolve.
For Australia to capitalise on its unprecedented clean commodity opportunity, policy innovation must move beyond the limitations of existing approaches.
We need mechanisms that directly address demand and price uncertainty, provide revenue certainty for early movers, and create pathways for market development that align with both commercial realities and strategic national interests.
The CCTI represents such an innovation—a demand-side policy tool designed to overcome the limitations of existing approaches while complementing their strengths. By focusing on the critical gap in current policy—bankable demand—the CCTI offers a more efficient and effective path to achieving Australia’s clean commodity ambitions.
Demand Side Intervention: A Tried, Tested and Market-friendly Policy Approach
Demand side intervention is not a novel concept—it is a tried and tested approach that has successfully catalysed private sector investment, spurred innovation, and developed strategic assets across numerous sectors of the economy. In fact, most of a nation’s key infrastructure assets are constructed with demand-side policies, where the government contracts for a product or service, providing the certainty needed for private capital to flow.
The Australian government has considerable experience with demand-side tools already, having issued contracts for the procurement of physical assets, electricity, and fossil fuels. However, it has not yet applied this proven approach to clean commodities—a gap that represents both a missed opportunity and a logical next step in policy evolution.
The fundamental principle behind demand-side intervention is straightforward: provide certainty on the revenue side of a project’s business case, and the private sector will mobilise to deliver. This approach recognises that while private enterprise excels at managing production risks, technology implementation, and operational efficiency, it cannot reasonably be expected to bear regulatory and policy risks that are entirely within the government’s responsibilities and control.
Consider the success of the Renewable Energy Target, the Capacity Investment Scheme, and state-based reverse auction schemes in transforming Australia’s electricity sector. These mechanisms created guaranteed demand for renewable energy, allowing project developers to secure financing based on predictable revenue streams. The result has been a remarkable acceleration in renewable energy deployment, with Australia now leading the world in per capita renewable energy installation.
Governments often contract for the provision of assets and services using a variety of Public-Private partnership (PPP) and project delivery models
Similarly, the Long-Term Energy Service Agreements used under the NSW Electricity Infrastructure Roadmap have proven highly effective at bringing forward investment in new generation and storage. These contracts, which include sophisticated floor-and-cap pricing mechanisms, have de-risked projects for developers while protecting taxpayers from excessive costs and allowing for upside benefit sharing when market conditions are favourable.
International examples further demonstrate the effectiveness of demand-side approaches. The U.S. Defense Production Act has been used to secure strategic supply chains through long-term procurement contracts. The European Union’s Carbon Contracts for Difference provide revenue certainty for low-carbon industrial projects. Japan’s Green Innovation Fund includes significant demand-side elements to support its hydrogen and ammonia strategy. More broadly, Advance Market Commitments have been used widely since the early 2000s to encourage the rapid development of vaccines to address global health problems, from Pneumococcal to Covid-19.
What makes demand-side interventions particularly powerful is their ability to leverage private capital efficiently. Rather than requiring governments to fund the full cost of strategic assets, these mechanisms use targeted public commitments to unlock much larger private investments. The multiplier effect can be substantial—each dollar of government commitment can mobilise many times that amount in private capital.
Demand-side tools also offer greater precision than broad-based subsidies. They can be tailored to specific project requirements, market conditions, and policy objectives. This targeting ensures that public resources are deployed where they will have the greatest impact, rather than being spread thinly across all market participants regardless of need or strategic importance.
Another advantage of demand-side approaches is their compatibility with market principles.
Rather than distorting markets through ongoing subsidies, well-designed demand-side interventions create the conditions for new markets to emerge and mature. They provide the initial certainty needed for early investments while establishing pathways for transition to fully commercial operations as scale increases and costs decline.
The private sector responds predictably to demand-side signals because they align with fundamental business logic. As one industry executive succinctly put it: “The private sector is not a charity—it will not make clean commodities unless it can see how doing so would generate a profit.”
Given a contract for a product, commodity, or service that businesses believe they can produce at less than the sale price, they will act. This principle applies equally whether the contract is for hospital beds, social housing, green energy, or clean commodities.
In the context of clean commodities, the regulatory risk that the private sector cannot manage is the additional value they receive for producing a low-carbon commodity above the price they would receive for producing the commodity in a traditional way. While producers can manage production risks and conventional market risks, they cannot reasonably bear the long-term risk on the price or demand for a low-carbon product that is more expensive than a traditional product—a risk that is entirely dependent on regulations created and written by government.
By applying the proven principles of demandside intervention to clean commodities, Australia can unlock the investment needed to establish leadership in these strategic growth markets.
How the Clean Commodities Trading Initiative Would Work
The CCTI represents a targeted, efficient, and effective solution to the critical market formation challenges currently preventing investment in clean commodity production. Unlike blunt supply-side measures, the CCTI directly addresses the fundamental barrier to project development: the absence of bankable demand.
At its core, the CCTI would be a government-backed initiative that supports early-stage market formation by contracting for supply, then selling, holding, or redistributing clean commodities and their associated environmental attributes as markets evolve.
This approach recognises that while global demand for clean commodities is expected to scale rapidly with the implementation of regulatory mandates, current markets are immature, opaque, and fragmented. Voluntary demand is insufficient, and regulatory markets (such as SAF mandates or green steel requirements) are still emerging.
At the same time, we know that regulatory markets shift – and can do so rapidly. With clean commodity project lead times so long – between 5-7 years – our producers must prepare now so that they are scaled and ready to compete in regulated markets of the future. Indeed, Europe’s Carbon Border Adjustment Mechanism is already in place, and by 2030 is predicted to put a EUR150/tonne price on carbon. The race has started, and Australia must act now to ensure our producers are primed and positioned for future success.
The private sector’s needs in this context are straightforward. As one industry executive noted: “The private sector is a quite simple beast. Given them a contract for a product, commodity or service they believe they can produce at less than the sale price and they will do it.”
One contract is all it takes to kick the private sector into action—but that contract must address the specific risks that producers cannot manage themselves.
Ideally, the CCTI would be established in partnership with key trading partners like Japan and South Korea (see section below) to share risks and rewards and maximise geostrategic payoffs. But with time constraints so pressing, Australia could first move independently, establishing the CCTI as an initiative under an existing government-owned entity such as EFIC, the CEFC, or the NRF, while waiting for our trading partners to come on board.
As an independent legal entity (to easily enable the future participation of international partners) yet under the umbrella of an established government body, the CCTI would be tasked with writing highly tailored contracts with selected early producers of clean commodities. These producers would take the risk that they can produce the clean commodity at below the contracted price.
But the risk that the future market price is lower than the contracted price (most likely because the “credit” value created by the regulatory system is lower than expected) would remain with the government. This allocation of risk is appropriate because the government controls the regulatory framework that determines the value of clean attributes.
In most cases, CCTI contracts would separate the commodity from its “clean attributes” or “credits.” The producer would manage the sale of the commodity itself into the market as a traditional product, while the CCTI would hold the credits, creating a secondary market for these attributes with producers around the world that might need them to reduce the average carbon intensity of their own production or to reach certain regulatory mandates (see section below).
As the government sets the regulatory scheme that will determine the future market price of these credits, governments can in effect determine the value of those credits. In other words, the value of the credits is within the government’s control. Naturally, each contract should provide as low a level of contracted offtake as possible to be fiscally efficient while also ensuring that facility construction and production of the clean commodity rapidly proceeds.
This approach effectively creates a mandate market for a commodity in early anticipation of the regulatory frameworks that will inevitably emerge as governments worldwide are forced to drive down the carbon intensity of various industrial products.
By getting ahead of these regulatory developments, Australia can position itself as a leader in both clean commodity production and the associated credit markets.
To this end, the CCTI offers several key advantages over alternative policy approaches:
First, it provides the demand certainty that project developers and their financiers require. By offering long-term offtake contracts for clean commodities and their attributes, the CCTI makes projects financeable and de-risks final investment decisions. This addresses the primary market failure—demand uncertainty—that is currently preventing investment.
Second, it maximises capital efficiency through project-specific engagement. Unlike flat-rate subsidies that apply the same support level to all projects regardless of their specific needs, the CCTI would require an openbook negotiation process with producers. This would allow for true price discovery, ensuring that support is calibrated to bridge the actual green premium for each project, minimising taxpayer burden.
Third, it focuses on market formation rather than just cost reduction. The CCTI would provide standardised demand, build credit markets, and allow for government banking of green attributes that can be integrated into future regulatory and compliance schemes. This approach not only catalyses initial investments but creates pathways for cost recovery as markets mature.
Fourth, it offers greater policy durability and adaptability than legislative measures. Offtake contracts are legally binding on current and future governments, providing the certainty that investors require. They can also be tailored to specific projects and designed to recover early support as markets mature, potentially becoming cost-neutral over time.
Fifth, it complements rather than replaces existing supply-side support. The CCTI would work alongside innovation funding, infrastructure investment, and other supply-side measures, addressing the critical demand risk that these tools cannot reach.
The CCTI is not designed to crowd out private buyers but to anchor demand during the critical early years of market development. As regulatory frameworks evolve and private demand grows, the CCTI’s role would naturally diminish. This transition pathway is built into the design, ensuring that government support is temporary and targeted rather than permanent and broad-based.
Large clean commodity projects take years to plan and build. We cannot afford to wait for regulatory changes to introduce supporting schemes like national carbon prices or mandates at levels that would, by themselves, trigger production of clean commodities. The CCTI offers an effective solution that allows projects to get underway now, with the government accepting the regulatory risk that appropriate schemes will be implemented in the future.
The cost of this support is actually a function of the future regulatory schemes governments implement, so the cost is fully within the control of future governments. As the price of clean commodity credits is determined by governmentset mandates or carbon intensity rules, governments have the tools to ensure that early investments through the CCTI are ultimately validated by market developments.
The CCTI represents a precise intervention at exactly the right moment—not a speculative bet, but a targeted approach to unlock Australia’s clean commodity potential when it is most needed.
How the Clean Commodity Credits Would Work
The Clean Commodities Trading Initiative (CCTI) would provide support by accepting the price risk of clean commodity credits in a future regulatory scheme. By doing this it provides both the certainty needed for investment and the flexibility required for efficient market development. Understanding the mechanics of these credits is essential for appreciating the full potential of the CCTI approach.
At the most fundamental level, while the CCTI would sign a single offtake contract, the CCTI would separate a clean commodity into two components: the physical commodity itself and its “clean attributes” or “credits.” This separation allows each component to be valued and traded independently, creating greater market efficiency and flexibility.
For example, in the case of green iron production, it is likely that the CCTI would instruct the producer to sell the physical iron into existing markets on behalf of the CCTI through conventional channels. At the same time, the CCTI would bank the clean attributes (essentially the carbon emissions avoided by using renewable energy and low-emission processes instead of conventional methods), until there is demand for those credits in a regulated scheme. This approach leverages existing commodity markets while creating a parallel market for environmental (and, relatedly, innovation) attributes.
The CCTI would write highly tailored contracts with selected early producers of clean commodities.
These contracts could be structured in many ways, for example:
- They could provide price certainty through floor-and cap mechanisms similar to those used successfully in the NSW Electricity Infrastructure Roadmap’s Long-Term Energy Service Agreements and the Commonwealth Government’s Capacity Investment Scheme. The floor price would represent a price for both the clean attributes and the physical commodity that would ensure that producers receive sufficient revenue to justify investment in the clean commodity production facility. A cap would be set such that the Government participates in profits should the price of the physical commodity, without its environmental attributes, exceed a target.
- They could include performance incentives that drive continuous improvement in production efficiency and environmental outcomes. By linking contract terms to specific performance metrics, the CCTI would encourage innovation and cost reduction throughout the contract period. For example, should the costs of producing hydrogen decline significantly over the life of the contract, the contract price floor could drop ensuring that the production facility innovates and stays ahead of the expected declining costs curve.
- They would be designed with appropriate risk allocation. Producers would bear the risks they can manage—production costs, technology implementation, operational efficiency—while the CCTI would absorb the regulatory and policy risks that are beyond producers’ control, i.e., the future value of clean attributes in evolving regulatory markets.
The contracting process would involve open-book negotiations with producers, allowing for true price discovery and ensuring that support is calibrated to bridge the actual green premium for each project. As noted earlier, this approach is far more efficient than flat-rate subsidies as it minimises taxpayer burden while providing the specific support needed for each project to proceed.
Once contracted, the CCTI would have several options for managing the clean commodity credits. It could:
- Bank the credits for future use or sale as regulatory markets mature;
- Sell credits into existing voluntary markets to recover costs;
- Transfer the credits to other government programs or initiatives;
- Create bundled products that combine physical commodities with clean attributes for specific buyers.
This flexibility allows the CCTI to adapt its strategy as markets evolve, maximising value for taxpayers while supporting market development.
The development of a clear and functioning market for these credits is vital as it will reduce the need for lessefficient future government support. Once operational, such a market would allow the private sector to put a value on the green attributes of the products they are making. It would also make it much easier for policy makers around the world to set mandates or emission intensity targets for these commodities, as they could see how producers could manage that risk and how much it would cost.
As regulatory frameworks evolve—through carbon border adjustment mechanisms that build upon and strengthen domestic carbon prices, clean procurement requirements, sectoral emissions intensity standards or even clean innovation requirements—the value of clean commodity credits will become increasingly clear and market-driven.
The CCTI’s early contracting would position Australia at the forefront of these emerging markets, capturing first-mover advantages in both production and trading.
Importantly, the cost of this support is a function of the future regulatory schemes which governments implement, so the cost is fully within the control of future governments.
This alignment of incentives ensures that early investments through the CCTI are ultimately validated by market developments in a regulated scheme controlled by the government. The government could even design future regulatory frameworks to specifically recognise and value the clean commodity credits acquired through early CCTI contracts. For example, regulations could specify that clean commodity credits from early projects are worth multiple credits in future compliance schemes, providing a mechanism to ensure cost recovery even if market prices evolve differently than initially anticipated.
The CCTI approach to clean commodity credits represents a sophisticated application of market principles to the challenge of industrial decarbonisation. By creating a parallel market for clean attributes alongside conventional commodity markets, it provides the certainty needed for investment while establishing pathways for transition to fully commercial operations as scale increases and costs decline.
This model has been proven effective in other contexts, particularly in renewable energy markets where renewable energy certificates have successfully driven investment and cost reduction. The CCTI would apply these lessons to the more complex challenge of industrial commodities, creating a framework that can adapt to diverse sectors from green metals to sustainable aviation fuels.
Clean Commodity Credits are "Innovation Credits", not just Carbon Credits
The Clean Commodity Credit system we are proposing differs conceptually from the carbon credit system that currently exists.
Indeed, Clean Commodity Credits are perhaps best described as ‘innovation credits’, not carbon credits, although the potential exists to integrate ‘innovation credits’ into existing carbon markets.
The idea of an innovation credit is simple but powerful: if producers are required by government mandate to meet a set threshold of low-emissions commodity production — and can meet this target either through direct innovation or by purchasing credits from those who do — the policy creates an enduring incentive to innovate.
It also does something that many conventional climate policies do not: it forces firms to act now to future-proof their operations, rather than waiting for carbon prices or penalties to bite.
In effect, Clean Commodity Credits create bankable demand for green innovation. They establish a clear price signal not just for carbon, but for innovation itself — for the kinds of technologies, processes and business models that will define the clean economy. And crucially, they provide a strategic mechanism for governments to stimulate private investment and build competitive advantage in future-facing sectors.
From Emissions Reduction to Market Creation
Traditional climate policy has relied heavily on carbon pricing and voluntary action. While these have their place, they too often assume that once a price signal exists, innovation and investment will follow. But in reality, markets for clean technologies don’t emerge spontaneously. They must be actively shaped.
Many countries — including South Korea, Germany and the United States — have used strategic policy to catalyse green innovation. These states didn’t just subsidise cleaner production; they set clear national missions, deployed public purchasing power, and created long-term policy certainty to drive innovation in both public and private sectors.
Australia, by contrast, has often relied on fragmented, underpowered policies that assume the market will deliver. But markets alone won’t get us to net zero — at least not in time. We need a carefully targeted policy that creates the conditions for innovation at scale.
Why Innovation Credits, Not Just Carbon Credits and Markets?
This is where Clean Commodity Credits offer something different — and potentially more effective — than conventional carbon credits and markets.
Carbon markets (such as emissions trading schemes or carbon taxes) work by putting a price on pollution. Firms must either pay to emit or trade limited permits under a cap. The logic is that, over time, rising carbon prices will discourage emissions and encourage cleaner alternatives.
But this approach has major limitations. It assumes that clean alternatives are already approaching economic viability, and that firms will naturally switch when it becomes economically rational. If clean alternatives at a reasonable cost are not available, these firms will keep offsetting their emissions, delaying innovation.
In practice, carbon prices have often been too low to make companies act, or too volatile to allow long term investment and drive significant change. How can you build a new steel plant that depends on a carbon price of $130 per tonne if the market might flood with carbon credits for, say, early coal closures or reduced fugitive emissions? Carbon market prices are shaped around future emissions – something that a steel plant investor can’t even imagine. They can, however, better predict technological change in their industry. They can price and take a risk on innovation.
Mandate markets, by contrast, focus on creating demand for clean production. They require that a certain share of production — say, steel or aluminium — must be low-emissions, and allow trading of credits to meet the requirement flexibly. This model was used successfully in Australia’s Renewable Energy Target and could now be extended to heavy industry.
Clean Commodity Credits are a mandate market tool. They don’t merely put a price on pollution; they mandate cleaner production, and let firms decide whether to innovate or purchase credits from others who have. In doing so, they create a market for innovation itself, rewarding first movers and pushing laggards to catch up — or pay up.
How Clean Commodity Credits Would Be Managed
To function effectively, a Clean Commodity Credit scheme requires an institutional home — one capable of setting targets, verifying outcomes, and managing credit flows transparently.
In the Australian context, this role could be played by the Clean Energy Regulator. Alternatively, a standalone CCTI could play this important role.
Specifically, alongside its role as offtaker (described in earlier sections of this report), the CCTI could serve as the national entity responsible for administering the Innovation Credit system. It would set commodity-specific clean production targets, certify eligible production methods, issue tradable credits, and oversee compliance. Its role would be both regulatory and catalytic — shaping the rules of the system while actively guiding its evolution in line with technological progress and global trends.
Importantly, the CCTI would not be a passive administrator. It would operate as a strategic market maker, using data, foresight, and stakeholder engagement to ensure the scheme remains ambitious, adaptable and investment-grade. It would liaise closely with industry, coordinate across jurisdictions, and adjust thresholds to reflect both economic realities and technological breakthroughs.
By ensuring transparency, credibility and policy stability, the CCTI would help de-risk clean innovation and attract the private capital needed to scale it. In this way, it would become a cornerstone institution of Australia’s green industrial strategy.
The Strategic Role of Clean Commodity Credits
Take a concrete example. Imagine Australia sets a requirement that, by 2030, all exported steel must contain at least 40% green steel content — produced using hydrogen, clean electricity or other low-emissions inputs. This type of target could even be set bi- or trilaterally with key trading partners such as Japan or South Korea. Companies can meet this threshold by transforming their operations or by purchasing Innovation Credits from producers who exceed the target.
This approach does several things at once:
- Stimulates demand for clean production methods
- Rewards first movers, creating early adopter advantages
- Encourages sector-wide innovation, as firms seek cost-effective ways to meet targets
- Mobilises private capital, by creating confidence in long-term market viability
It also reflects a broader shift in thinking — from simply correcting market failures to actively creating markets. This means using all the tools at our disposal — not just research and development subsidies or carbon taxes, but procurement mandates, credit systems, and conditional industry support — to forge demand for climate-compatible goods and services.
Aligning with Global Trends
Australia is not alone in facing this challenge. The European Union’s Carbon Border Adjustment Mechanism, the United States’ Buy Clean provisions, and Japan’s green procurement standards all point to a world in which clean production is no longer optional — it’s the price of participation in global trade.
A Clean Commodity Credit system, managed by a dedicated and empowered CCTI, would position Australia ahead of this curve, helping domestic firms prepare for emerging standards and seize new export opportunities. It would also align with the national ambition to become a “renewable energy superpower” — not just exporting clean electrons, but embedding clean energy into the value chains of critical minerals, metals and fuels.
Importantly, Clean Commodity Credits would also help solve one of the most pressing policy problems of the moment: how to mobilise private investment in innovation in a fiscally constrained environment. By creating predictable, policy-backed demand for clean innovation, the system would unlock the capital sitting on the sidelines, waiting for certainty.
Could These Credits Be Traded in Conventional Carbon Credit Markets? The answer to this question really depends on how the Clean Commodity Credit system is designed.
Carbon credit markets (like the European Union’s Emissions Trading System or voluntary carbon markets) typically trade tonnes of CO₂ equivalent avoided or removed. These are highly standardised, emission-focused instruments.
Clean Commodity Credits are different. They’re not just about avoiding emissions — they’re about mandating and incentivising clean production methods (e.g. using hydrogen to make steel) and rewarding innovation within your industry – that you understand – rather than just reductions in emissions.
So while both instruments aim to lower emissions, they are based on different units and logics:
- Carbon credits = “How much CO₂ you didn’t emit”
- Clean Commodity credits = “How clean your production is, and whether you exceeded the mandated clean share”
Integration is possible, but not automatic.
If Clean Commodity Credits were converted into verified emission reductions, then in principle they could be fungible with carbon credits — especially in voluntary carbon markets or future hybrid schemes.
This would require:
- Rigorous monitoring, reporting and verification standards
- Agreement on conversion metrics (e.g. how many tonnes CO₂ avoided per unit of clean commodity)
- Alignment with existing registries and trading platforms
The risk is that this dilutes the unique function of Innovation Credits: they are about creating demand for clean production, not just reducing emissions wherever it’s cheapest. Keeping Innovation Credits distinct from carbon markets allows governments to:
- Focus on domestic industrial transformation
- Create sovereign levers for green competitiveness
- Avoid volatility and credibility issues often seen in carbon markets
A National Strategic Imperative
Clean Commodity Credits are not a silver bullet. But they represent the kind of purposeful, catalytic policy that Australia needs. They combine market logic with state direction, short-term incentive with long-term vision — all anchored by strong institutional support through a CCTI.
Alignment with Government’s Multiplying Policy Priorities
The Clean Commodities Trading Initiative (CCTI) stands out as a policy instrument with remarkable versatility, capable of advancing multiple government priorities simultaneously. In an era of fiscal constraint and competing demands, this multiplier effect makes the CCTI an exceptionally efficient use of government resources and political capital.
First and foremost, the CCTI would serve as a powerful catalyst for industrial renewal and job creation.
By providing the demand certainty needed for clean commodity projects to reach financial close, it would unlock billions in private investment across the clean manufacturing value chain. These investments would support thousands of jobs—from construction and operations to advanced manufacturing and technical services. Importantly, many of these jobs would be created in regional communities where traditional industries face uncertain futures, providing a just transition pathway for workers and communities.
The employment benefits extend beyond direct project jobs. By establishing Australia as an early mover in clean commodity production, the CCTI would create opportunities for the development of specialised equipment manufacturing, engineering services, and other high-value activities in the clean commodity supply chain. These knowledge-intensive industries offer precisely the kind of high-productivity, highwage jobs that are central to Australia’s economic future.
The CCTI’s approach to performance incentives further enhances its economic impact. By building incentives for continuous improvement into offtake pricing, the CCTI would drive producers to innovate, making these industries long-term research and development powerhouses. This focus on innovation aligns perfectly with the government’s ambition to boost productivity and stimulate private sector research and development.
A second major alignment is the CCTI’s ability to crowd-in private capital efficiently. As any large-scale developer will attest, a government-backed offtake is the critical piece of the puzzle they need to secure financing. It gives banks and equity investors the confidence to proceed with projects that might otherwise be considered too risky.
This leverage effect means that each dollar of government commitment through the CCTI can mobilise many times that amount in private investment—a far more efficient use of public resources than direct grants or subsidies.
The CCTI also addresses the urgent need to future-proof Australia’s export economy. Global markets are rapidly decarbonising, with carbon border adjustment mechanisms in the EU and growing demand from Asian buyers for clean inputs creating both risks and opportunities for Australian exporters. Without a strategic response, Australia faces the prospect of declining export revenues as traditional markets evolve. The CCTI ensures our export profile evolves with the market, positioning Australia to capture premium prices for clean commodities rather than being left behind as a high-carbon supplier in a low-carbon world.
Perhaps most distinctive among the CCTI’s alignments with government priorities is its potential for future revenue generation, not just expenditure. Unlike blunt subsidies that represent one-way financial flows, the CCTI gives government a stake in future upside. By securing clean commodity credits early, the government can sell those credits into maturing markets and recover its outlays as regulatory frameworks evolve.
This creates the rare possibility of a policy that could eventually pay for itself—a compelling feature in the current fiscal environment.
The CCTI also offers significant advantages in terms of policy durability and adaptability. While legislative measures like production tax credits are vulnerable to political cycles and can be difficult to adjust as circumstances change, the CCTI’s contract-based approach provides both certainty for investors and flexibility for government. Contracts can be tailored to specific project needs and market conditions, allowing for precision targeting of support rather than one-size-fits-all approaches.
From a budgetary perspective, the CCTI represents a more controlled and predictable approach than open-ended subsidy schemes. By contracting with specific projects based on their individual economics, the government can manage its exposure and ensure that support is calibrated to actual need rather than providing windfall gains to projects that could proceed with less assistance.
The CCTI also aligns with the government’s commitment to evidence-based policy development. By creating a mechanism for price discovery in clean commodity markets, it generates valuable data on the true costs of decarbonisation across different sectors. This information can inform future policy design, ensuring that limited resources are directed where they will have the greatest impact.
Finally, the CCTI complements rather than competes with existing policy initiatives. It can be implemented within existing frameworks, such as the National Reconstruction Fund, the Clean Energy Finance Corporation, Export Finance Australia, the Clean Energy Regulator, or the Future Made in Australia program. It works alongside supply-side support measures, addressing the critical demand risk that these tools cannot reach.
With Commonwealth priorities multiplying and resources constrained, the government must focus on policies that deliver outsized returns across multiple dimensions. The CCTI represents exactly this kind of high-leverage intervention—a precision tool that advances economic, environmental, and strategic objectives simultaneously.
"The global environment is changing rapidly. Supply chains are under pressure, with increasing fragmentation and intensifying global competition. New opportunities in clean energy industries are also emerging that will shape the future of the global economy over the next decade and beyond. Given our critical and abundant natural endowments and skilled workforce, Australia is well positioned to strengthen priority supply chains and become an indispensable part of the net zero global economy."
Geostrategic Benefits of the CCTI
The CCTI offers Australia significant geostrategic advantages that extend well beyond its economic benefits.
In an era of increasing geopolitical competition and supply chain vulnerability, the CCTI represents a sophisticated form of green energy statecraft that can strengthen Australia’s position in the Indo-Pacific region and deepen our relationships with key allies.
Structured in close cooperation with partners like Japan and South Korea, the CCTI would align Australia’s industrial strategy with their decarbonisation and industrial competitiveness needs. This alignment creates a powerful basis for enhanced cooperation, as it addresses core economic and security interests for all parties involved. By positioning Australia as a reliable supplier of clean industrial inputs, the CCTI would strengthen our strategic relevance to these critical partners at a time when regional security dynamics are increasingly complex.
Japan and South Korea face particular challenges in their energy transitions. Both countries have limited domestic renewable energy resources, constrained land availability, and industrial bases that are heavily dependent on imported energy and raw materials. Their net-zero commitments require them to fundamentally transform their industrial processes, but they lack the domestic capacity to produce the clean commodities needed for this transformation at scale.
Australia, with its abundant renewable resources, established trading relationships, and reputation for reliability, is the natural partner to help address these challenges. The CCTI would formalise this complementarity, creating institutional frameworks for long-term cooperation on clean commodity development and trade. This would deepen our integration into regional value chains and enhance our strategic importance to these key allies.
The geostrategic benefits of the CCTI extend to supply chain security as well. As the world transitions to clean energy systems and low-carbon industrial processes, new critical supply chains are emerging. Control of these supply chains is becoming an increasingly important dimension of geopolitical competition.
By establishing early leadership in clean commodity production and trading, Australia can help shape these emerging supply chains in ways that benefit both our national interests and those of our allies and partners.
This supply chain dimension is particularly important in the context of growing concerns about economic coercion and resource nationalism. The CCTI would diversify Australia’s export markets and reduce our vulnerability to economic pressure from any single trading partner. It would also position Australia as a trusted alternative supplier of critical inputs for clean energy and industrial systems, enhancing our strategic value to partners seeking to reduce their own vulnerabilities.
The CCTI also offers a framework for more sophisticated engagement with developing economies in our region. As countries across Southeast Asia and the Pacific develop their own decarbonisation strategies, the CCTI could be expanded to include capacity building, technology transfer, and market development initiatives that support their transitions while creating opportunities for Australian businesses.
This developmental dimension would enhance Australia’s soft power and regional leadership at a time when competing influences are increasingly active.
From a broader perspective, the CCTI represents an opportunity for Australia to demonstrate leadership in addressing the shared challenge of climate change through practical, market-based mechanisms. This leadership would strengthen our diplomatic position in international climate negotiations and enhance our credibility as a constructive partner in multilateral efforts to address global challenges.
The timing for such an initiative is particularly favourable. The upcoming COP31 climate conference presents an opportunity to launch the CCTI as a multilateral initiative that brings together like-minded countries to share risks and accelerate clean commodity development.
Countries joining the CCTI would position themselves as leaders in the green commodity transition, with their economies becoming hubs for the trading of clean commodity credits.
Together, these countries would ensure that the risks accepted by the CCTI today are mitigated by the regulatory arrangements they control and implement in the future. This alignment of interests creates a powerful basis for sustained cooperation and mutual benefit.
The geostrategic benefits of the CCTI are further enhanced by its potential to catalyse innovation ecosystems around clean commodity production. As projects develop and scale, they will create opportunities for research collaboration, technology exchange, and joint ventures between Australian entities and their equivalents in partner countries. These knowledge networks represent a form of deep integration that strengthens relationships beyond transactional trade.
In an era of strategic competition and rapid technological change, the CCTI offers Australia a mechanism to leverage our natural advantages for strategic gain.
By aligning our economic development with the needs of key allies and positioning Australia as a leader in the clean commodity transition, the CCTI would enhance our security, prosperity, and influence in the Indo-Pacific region and beyond.
Why Would Japan and South Korea Collaborate with Australia?
Both Japan and South Korea face similar structural constraints in their energy transitions. As resource-poor, densely populated industrial powerhouses, they confront severe limitations in deploying domestic renewable energy at the scale needed to meet their ambitious net-zero commitments. Japan’s renewable energy potential is constrained by its mountainous topography and limited available land, while South Korea faces similar geographic limitations. Yet both countries have made binding international commitments to dramatically reduce their carbon emissions—Japan aims for carbon neutrality by 2050, and South Korea has pledged to reduce emissions by 40% by 2030.
These constraints create an urgent need for clean commodity imports. Their industrial bases—including steel, chemicals, shipping, and automotive manufacturing— require massive quantities of low-carbon inputs to decarbonise. Domestic production of green hydrogen, green ammonia, and other clean commodities cannot meet projected demand, making imports essential to their energy security and industrial competitiveness.
Australia represents an ideal partner in addressing these challenges. Our vast renewable resources, established trading relationships, geographic proximity, and reputation for reliability make us a natural supplier of the clean commodities that Japan and South Korea will increasingly require. The CCTI would formalise and accelerate this complementarity, creating institutional frameworks for long-term cooperation that benefit all parties.
From Japan’s perspective, collaboration on the CCTI aligns perfectly with its Green Transformation strategy. Japan has already committed significant resources to developing hydrogen and ammonia supply chains, with a focus on securing imports from trusted partners. The Japan Bank for International Cooperation and Japan Oil, Gas and Metals National Corporation have explicit mandates to support overseas projects that enhance Japan’s energy security, including clean energy initiatives. These institutions could become natural partners in the CCTI, potentially co-investing or providing complementary financing to accelerate project development.
Similarly, South Korea’s Green New Deal and Carbon Neutral Strategy emphasise the importance of securing clean energy imports and developing low-carbon industrial processes. Korean firms are global leaders in sectors like steel, shipbuilding, and chemicals—all industries that will require clean commodities to decarbonise. The Korea Development Bank and Export-Import Bank of Korea have been tasked with supporting this transition and could find natural alignment with the CCTI’s objectives.
Beyond these practical considerations, both Japan and South Korea have strategic interests in diversifying their supply chains and reducing dependence on any single source for critical inputs. Recent experiences with economic coercion and supply chain disruptions have heightened awareness of vulnerability and increased the premium placed on reliable partners. Australia’s democratic values, rule of law, and strategic alignment make us an attractive partner in building more resilient supply chains for the clean energy transition.
The CCTI also offers Japan and South Korea opportunities to leverage their technological and financial strengths. Japanese and South Korean firms are global leaders in many clean energy technologies, from fuel cells and electrolysers to advanced materials and manufacturing processes.
Collaboration through the CCTI could create pathways for technology transfer, joint ventures, and research partnerships that accelerate innovation and reduce costs for all parties.
From a financial perspective, both countries have sophisticated financial institutions with experience in project finance, green bonds, and climate-aligned investing. These institutions could play important roles in financing CCTI-supported projects, potentially reducing the fiscal burden on the Australian government while enhancing project viability.
The multilateral nature of the CCTI is particularly attractive in the current geopolitical context. By bringing together like-minded countries to share risks and accelerate clean commodity development, the CCTI creates a framework for deeper economic integration and strategic alignment.
This multilateral approach resonates with both Japan and Korea’s diplomatic strategies, which emphasise rules-based international cooperation and economic partnership as counterweights to more assertive regional actors.
The timing for such collaboration is especially favourable. Both Japan and Korea are actively seeking to position themselves as leaders in the global energy transition while ensuring their industrial competitiveness. The upcoming COP31 climate conference presents an opportunity to launch the CCTI as a flagship initiative that demonstrates practical cooperation on climate solutions while advancing shared economic and strategic interests.
By joining the CCTI, Japan and South Korea would be aligning themselves with a forward-looking approach to clean commodity development—one that recognises the critical role of market mechanisms and strategic partnerships in accelerating the energy transition. Together with Australia, they would be creating a model for international cooperation that could be expanded to include other like-minded partners over time, enhancing the initiative’s impact and influence.
The Right Geostrategic Moment
Australia stands at a critical juncture in its economic and geostrategic history. The convergence of several global megatrends present both unprecedented challenges to our traditional economic model and extraordinary opportunities for national renewal. The Clean Commodities Trading Initiative (CCTI) represents not merely a sensible policy innovation but a strategic imperative for Australia in this unique geostrategic moment.
The Defining Geostrategic Development of the 21st Century
The most significant geostrategic development shaping our current moment is China’s remarkable rise and its embrace of an entirely new approach to promoting national development and security. Over a decade ago, while Western governments debated carbon pricing and modest green subsidies, China began building and scaling the world’s largest renewable energy system— one that now dwarfs all others by a massive margin.
China’s motivation was not primarily climate action but a sophisticated understanding that accelerating the energy transition serves as a powerful national security multiplier. By speeding up the renewables shift, China’s policy leaders recognised they could simultaneously:
- Boost energy security by reducing reliance on fossil fuel imports—a major expense and strategic vulnerability;
- Enhance economic security by creating new hightech, export-oriented manufacturing industries;
- Improve environmental security by reducing pollution and mitigating climate change;
- Strengthen social security by creating thousands of higher-skilled, better-paid jobs in manufacturing and service industries;
- Advance geostrategic and military security by demonstrating environmental leadership, enhancing international status, and attracting new allies, particularly among developing nations.
In essence, China embraced the green energy transition as an unprecedented opportunity to advance a comprehensive national security agenda. This opportunity was not exclusive to China—it remains available to any country with the strategic vision to grasp it, including Australia. However, China’s first-mover advantage and the scale of its investments have had profound implications for Australia’s traditional economic model.
Three Megatrends Reshaping Australia’s Strategic Environment
China’s actions have catalysed three interconnected megatrends that now fundamentally challenge Australia’s traditional “dig and ship” economic model while simultaneously creating new opportunities:
1. The Rapidly Declining Cost of Renewables
Thanks largely to China’s massive investments, renewables are now the world’s cheapest form of energy. This has transformed global investment logics, with renewable energy now attracting two-thirds of global energy investment. This shift has made fossil fuels—the backbone of Australia’s export economy—an increasingly risky bet for long-term prosperity.
2. The Global Embrace of Green Industrial Strategy
Since the COVID crisis, governments worldwide have adopted ambitious green industry development plans and net-zero commitments to stimulate investment and address climate challenges. While this trend is global, it remains strongest in Northeast Asia, where countries like South Korea and Japan also understand the security-enhancing potential of the energy transition and are investing heavily in future industries.
The scale of China’s investments has helped it emerge as the world’s new economic and technological superpower to rival the United States, fundamentally altering the global balance of power and creating new geostrategic imperatives for countries like Australia.
3. Growing Strategic Rivalry Between China and the United States
The intensifying competition between Australia’s most important economic partner (China) and principal security ally (the United States) creates both risks and opportunities. The United States, having awakened late to China’s technological advancement, is now seeking to recapture leadership in strategically important, technology-intensive advanced manufacturing industries.
Under the Biden administration, renewables became a frontline in this techno-economic competition, with the trillion-dollar Inflation Reduction Act (IRA) serving as America’s signature policy. While targeted at China, the IRA had global implications, notably legitimising a stronger and more strategic role for government in the green energy transition—something Australian policy has historically resisted despite clear imperatives.
Australia’s Unique Risks and Opportunities
These megatrends present existential challenges to Australia’s traditional economic model centred on carbon-intensive commodity exports. Consider iron ore, Australia’s top export industry generating around $120 billion in annual revenue. Modelling shows these revenues could halve as China, Japan, and Korea restructure their carbon-intensive supply chains to advance their green ambitions.
Yet Australia has been presented with extraordinary opportunities alongside these challenges. We possess not only some of the world’s best mineral deposits but also unparalleled renewable energy resources. This combination positions Australia to move up the commodity value chain, processing our iron ore to create green iron and other clean commodities.
Analysis indicates that replacing our unprocessed iron ore exports to Asia with green iron could triple the value of our existing iron ore exports to approximately $380 billion annually—a transformative boost to export income, government revenue, and job creation.
The opportunity extends beyond economics into geostrategic advantage. A bold shift toward green iron and clean commodities would allow Australia to deepen vital economic and strategic partnerships with Northeast Asian neighbours, particularly Japan and South Korea. Australia could help these nations decarbonise their economies and maintain the viability of their most important export industries—especially steel and related sectors like automobiles and shipbuilding.
With steelmaking accounting for 6.7 per cent of global carbon emissions, and Asian steelmakers facing the impact of Europe’s Carbon Border Adjustment Mechanism, Australia has a unique opportunity to forge valuable new strategic partnerships centred on collaborative decarbonisation, economic competitiveness, and shared prosperity and stability.
Why the Clean Commodities Trading Initiative is the Right Policy for This Moment
To capitalise on these opportunities, Australia must move with speed and purpose to position itself as the clean commodity supplier of choice for our East Asian partners. This requires mobilising vast amounts of capital to spur investment and innovation in clean commodities before other countries secure a first-mover advantage.
Australia’s context differs significantly from China or the United States—we cannot afford trillion-dollar subsidies, especially in our current budget-constrained environment. With growing defence spending requirements to meet escalating geostrategic challenges, the policies we deploy must be highly targeted, efficient, and effective, delivering multiplier effects across various policy arenas while providing clear value for taxpayers.
The CCTI meets these requirements more effectively than any other policy instrument. It represents a precision tool that addresses the fundamental market formation challenge while maximising efficiency in the use of public resources.
By issuing purchase contracts, the CCTI would give project proponents exactly what they need to mitigate investment risk and unlock private finance.
By establishing guaranteed purchase prices for clean commodities, the CCTI would transform companies executing these projects—and their suppliers—into innovation powerhouses, incentivising them to reduce costs and improve processes to maximise returns. This aligns perfectly with the government’s focus on addressing Australia’s productivity challenges by stimulating private sector investment and innovation in budget-friendly ways.
The CCTI also offers a platform for strengthening strategic partnerships with key regional allies. If structured with trilateral ownership involving Japan and South Korea, it would provide a crucial vehicle for cooperation to advance shared decarbonisation and economic adaptation goals. This would send a clear signal that Australia is committed to working collaboratively to advance regional prosperity and stability.
The Impact of Recent Global Developments
Recent global developments, including policy shifts in the United States, have only amplified the strategic case for the CCTI. These developments have not changed China’s commitment to its development model that sees renewables as a source of comprehensive national security, nor have they reversed the three megatrends reshaping the global economy. For Australia’s existing economic model, the imperative remains clear: adapt or decline.
At the same time, these disruptions have created new opportunities for Australia if we implement the right policy framework. Capital and expertise are seeking new homes, creating potential resources for Australia to harness. Domestically, there is now greater policy certainty and a clear mandate for the Future Made in Australia agenda, giving investors more confidence to commit to Australian projects.
The CCTI provides the perfect platform to advance both domestic and international policy goals simultaneously. It represents a sophisticated form of green energy statecraft that can address complex security challenges while maximising economic benefits and national security rewards.
In this unique geostrategic moment, the CCTI is not merely a “nice to have”—it is a strategic imperative for securing Australia’s prosperity and security in a rapidly changing world.
Case Studies
Repurposing Legacy Assets and Industries – Whyalla
The transformation of Whyalla, South Australia, represents a compelling case study for how the CCTI could catalyse the repurposing of legacy industrial assets while securing significant economic and strategic benefits for Australia.
Whyalla, a city built around steelmaking, has faced persistent uncertainty as its traditional steel industry struggles with global competition and the imperative to decarbonise. The Whyalla steelworks is a critical national industrial asset, producing 75% of Australian structural steel and being the only domestic producer of long steel products appropriate for large infrastructure projects. It is also a cornerstone of the local economy, supporting thousands of direct and indirect jobs. Yet despite multiple attempts at revitalisation under the private ownership of the corporate group GFG Alliance, the operation continues to face challenges that threaten its long-term viability.
The fundamental issue is not a lack of vision or technical potential. Only recently, GFG Alliance (with its South Australian subsidiaries now in administration) had announced ambitious plans to transform Whyalla into a green steel hub, leveraging South Australia’s world-class renewable resources to produce low-carbon steel products. The region has all the necessary ingredients: abundant renewable energy potential, existing industrial infrastructure, a skilled workforce, magnetite iron ore resources and port facilities. What has been missing is the market certainty needed to unlock investment in this transformation.
This is precisely where the CCTI could make a decisive difference. By providing long-term offtake contracts for green iron and steel products, the CCTI would create the revenue certainty needed for Whyalla’s new owners and their financial partners to commit to major capital investments in green steelmaking technologies. These contracts would bridge the current green premium— the cost difference between conventional and lowcarbon production—making the transition economically viable while markets for green steel develop.
The potential benefits of this intervention extend far beyond preserving existing jobs. Transforming Whyalla into a green steel hub would position the region at the forefront of a global growth industry. As major economies implement carbon border adjustment mechanisms and corporate buyers increasingly demand low-carbon materials, green steel will command premium prices in global markets. By moving early, Whyalla could establish itself as a leading supplier, capturing market share and building expertise that would be difficult for competitors to replicate.
The multiplier effects would be substantial. Beyond the direct jobs in steel production, the transformation would create opportunities across the supply chain— from renewable energy development to advanced manufacturing, logistics, and professional services. These would be high-quality, future-proof jobs aligned with global decarbonisation trends rather than vulnerable to them.
From a national strategic perspective, securing domestic green steel production capacity has significant implications for supply chain resilience and sovereign industrial capability. Steel is a foundational material for critical infrastructure, defence applications, and the clean energy transition itself. As geopolitical tensions rise and supply chains face increasing disruption, the value of domestic production capacity extends beyond purely economic considerations to encompass national security.
The Whyalla case also highlights the CCTI’s potential for efficient use of public resources. Rather than providing ongoing subsidies to maintain legacy operations in their current form, the CCTI would catalyse transformation toward a sustainable business model. The support provided through green iron offtake contracts would be temporary and targeted, designed to bridge the gap until markets mature and green steel can compete without assistance.
Moreover, the CCTI approach would leverage significant private capital. Whyalla’s new owners and potential investors would provide the bulk of the funding needed for the transformation, with the CCTI’s offtake contracts serving as the catalyst that makes these investments bankable. This multiplier effect—where limited public commitments unlock much larger private investments—represents a far more efficient use of government resources than direct grants or subsidies.
The timing for such an intervention is particularly favourable. South Australia has established itself as a renewable energy powerhouse, with wind and solar resources that can provide the clean electricity needed for green hydrogen production—a key input for green steelmaking. The state government has demonstrated strong support for industrial transformation, creating a supportive regulatory environment for innovative projects.
Whyalla demonstrates the multiplier potential of a CCTI intervention. The issuance of just one green steel contract would trigger multiple downstream contracts; to make green steel Whyalla will need hydrogen, and that will trigger significant demand for electrolysers and renewable energy. Based on our discussions, the firm producing the renewable energy for the hydrogen production facility will also need steel for the production of wind towers. Early analysis shows that this demand alone would soak up 20% of the current Whyalla steel production for five years. In addition, they would want to lock up significant supply of electrolysers from Australian firms, and will also need a new steel rolling facility for tower and a turbine blade manufacturing facility – and this is just the start of the broader multiplier effect.
The Whyalla case also illustrates how the CCTI could complement other policy initiatives. It would work alongside existing programs like the Modern Manufacturing Initiative and the National Reconstruction Fund, addressing the critical demand risk that these supply-side measures cannot reach. This complementarity ensures that the full range of barriers to industrial transformation are addressed in a coordinated way.
Perhaps most importantly, the Whyalla example demonstrates how the CCTI can provide a just transition pathway for communities and workers currently dependent on carbonintensive industries. Rather than facing a binary choice between maintaining unsustainable operations or accepting industrial decline, these communities would have a third option: transformation toward sustainable industries that build on existing skills, infrastructure, and community identity.
The revitalisation of Whyalla through green iron and steel production represents exactly the kind of opportunity the CCTI is designed to unlock—a transformation that aligns economic, environmental, and strategic objectives while providing a template for industrial renewal across Australia.
Catalysing New Industries: Sustainable Aviation Fuels
The development of a domestic Sustainable Aviation Fuel (SAF) industry represents one of Australia’s most promising clean commodity opportunities and serves as an ideal case study for how the Clean Commodities Trading Initiative (CCTI) could catalyse entirely new industries aligned with global decarbonisation trends.
Aviation presents one of the most challenging sectors to decarbonise, with limited technological alternatives to liquid fuels for long-haul flights in the foreseeable future. SAF — which can reduce lifecycle carbon emissions by up to 80% compared to conventional jet fuel—have emerged as the primary near-term solution for reducing aviation emissions. Global demand for SAF is projected to grow exponentially as airlines face increasing regulatory requirements and voluntary commitments to reduce their carbon footprint.
Australia possesses exceptional natural advantages for SAF production. Our vast agricultural lands can support feedstock cultivation, while our abundant renewable energy resources can power the production processes. We also have established expertise in related industries, from agriculture and forestry to refining and chemical manufacturing. These advantages position Australia to become not just self-sufficient in SAF but a major exporter to the Indo-Pacific region and beyond.
Despite these advantages and growing global demand, Australia’s SAF industry remains largely conceptual, with only pilot projects and feasibility studies underway. The fundamental barrier is not technological readiness or resource availability, but the same market formation challenge that affects other clean commodities: the absence of bankable demand at prices that reflect the current green premium of SAF over conventional jet fuel.
This is precisely where the CCTI could make a transformative impact. By providing long-term offtake contracts for SAF at prices that reflect current production costs, the CCTI would create the revenue certainty needed for project developers and their financial backers to commit to commercial-scale production facilities. These contracts would bridge the current green premium—estimated at 2-3 times the cost of conventional jet fuel—making projects bankable while the industry scales and costs decline.
The CCTI approach is particularly well-suited to SAF for several reasons:
- First, SAF is a drop-in replacement for conventional jet fuel, requiring no modifications to existing aircraft or infrastructure. This technical compatibility means that once production is established, market integration is straightforward.
- Second, the aviation industry is already moving toward SAF mandates in major markets, creating a clear pathway for regulatory-driven demand growth. The European Union has established a SAF mandate starting at 2% in 2025 and rising to 70% by 2050, while the United States has set a goal of 3 billion gallons of SAF production by 2030.
By acting now through the CCTI, Australia can position itself ahead of these regulatory trends, establishing early leadership in SAF production and capturing market share before international competition intensifies. The CCTI’s approach of separating the physical commodity from its clean attributes is particularly relevant for SAF, as it allows for the creation of a secondary market in SAF credits that can be traded independently of the physical fuel.
The economic benefits of catalysing a domestic SAF industry would be substantial. A recent analysis suggested that a fully developed Australian SAF industry could create over 5,000 direct jobs and contribute billions to GDP annually. These would be high-quality jobs distributed across regional Australia, from feedstock production to advanced biorefining and distribution.
The multiplier effects would extend throughout the economy. SAF production facilities would create demand for agricultural and forestry products, potentially creating new revenue streams for farmers and landowners. They would also drive innovation in bioprocessing technologies with applications beyond aviation fuel, from biochemicals to pharmaceuticals.
The development of SAF production would create opportunities for Australian engineering firms, equipment manufacturers, and service providers to develop expertise that could be exported globally as other countries develop their own SAF industries.
From a geostrategic perspective, developing domestic SAF production capacity would enhance Australia’s energy security and reduce our vulnerability to disruptions in international fuel markets. It would also position Australia as a key supplier to the Asia-Pacific aviation market, strengthening our economic ties with regional partners and enhancing our strategic importance.
The CCTI approach to SAF development would be highly complementary to existing policy initiatives. It would work alongside supply-side measures like the Jet Zero Council and research funding through the Commonwealth Scientific and Industrial Research Organisation (CSIRO), addressing the critical demand risk that these initiatives cannot reach. By providing a clear pathway to market for SAF technologies, and production methods being developed through these programs, the CCTI would enhance their effectiveness and accelerate commercialisation.
The timing for such an intervention is particularly favourable. Major airlines are actively seeking longterm SAF supply agreements as part of their net-zero commitments, creating potential for the CCTI to partner with private offtakers to share risk and enhance project bankability. International investors are increasingly focused on sustainable fuels, with significant capital available for projects with credible offtake arrangements.
The SAF case also illustrates how the CCTI can be designed to maximise environmental and social co-benefits. By incorporating sustainability criteria into offtake contracts, the CCTI could ensure that SAF production delivers genuine emissions reductions while avoiding negative impacts on food security, biodiversity, or water resources. This approach would align with emerging international standards for sustainable fuels, ensuring that Australian SAF can access premium markets with stringent sustainability requirements.
The development of a domestic SAF industry through the CCTI would demonstrate Australia’s commitment to practical climate solutions while creating economic opportunities aligned with global decarbonisation trends. It represents exactly the kind of strategic, forward-looking initiative that can position Australia for success in the clean energy economy of the future.
The CCTI as Sophisticated Green Energy Statecraft in Action
The CCTI represents a sophisticated example of green energy statecraft—a governance approach that strategically leverages the green energy transition to advance comprehensive national security objectives. As we have explored throughout this report, the CCTI is not merely a policy mechanism for market formation but a precision instrument that can simultaneously address the energy, economic, environmental, social, and geostrategic security challenges facing Australia.
Embodying the Green Energy Mindset
At its core, green energy statecraft involves a strategic way of thinking about the energy transition and its potential to advance multiple national security objectives simultaneously. The CCTI exemplifies this mindset by recognising that clean commodity development is not simply an environmental imperative but a vehicle for enhancing Australia’s comprehensive security in an era of rapid global change.
The CCTI’s approach to market formation acknowledges that by rapidly building and scaling clean commodity industries, Australia can reduce dependence on volatile fossil fuel markets, create high-value jobs and export industries, reduce carbon emissions, and strengthen strategic partnerships with key partners. This multidimensional understanding of the comprehensive national security benefits of clean commodity development reflects the sophisticated governance mindset that characterises effective green energy statecraft.
Domestically-Oriented Green Energy Statecraft
The CCTI exemplifies domestically-oriented green energy statecraft through its targeted approach to building Australia’s clean commodity industries. Unlike blunt supply-side measures that provide undifferentiated support, the CCTI employs a disciplined, performance-based approach to industry development that maximises the chances of success in competitive global markets.
By requiring open-book negotiations with producers and incorporating performance incentives into contracts, the CCTI ensures that government support is calibrated to actual needs and drives continuous improvement. This disciplined approach aligns with successful models of green energy statecraft observed in Northeast Asian countries, where government support is conditional on firm performance against clear production, export, and technology upgrading targets.
The CCTI’s focus on specific high-potential sectors— green iron, SAF, green hydrogen, and other clean commodities—reflects a strategic prioritisation of industries where Australia has sustainable competitive advantages. This targeted approach ensures that limited public resources are directed toward areas with the greatest potential for economic returns and strategic benefits.
As demonstrated in the Whyalla case study, the CCTI can catalyse the transformation of legacy industrial assets into future-oriented clean production facilities, creating pathways for a just transition in regional communities. This attention to social equity and regional development is a critical element of effective domestically-oriented green energy statecraft, ensuring that the benefits of the transition are widely shared.
Externally-Oriented Green Energy Statecraft
The CCTI also embodies externally-oriented green energy statecraft through its potential to strengthen Australia’s strategic relationships and position in global markets.
Australia has much to gain diplomatically, especially in our region, from positioning itself as a leader of ambitious decarbonisation efforts. In the context of the climate crisis, the CTCC’s establishment is clearly justified and should be easy to defend on both market failure and environmental security grounds. The CCTI is designed to operate within the framework of international trade rules while effectively addressing market formation challenges for clean commodities. Australia should seize the opportunity to be at the forefront of debates about what a climate-friendly international trade and investment regime might look like.
At the same time, by aligning Australia’s clean commodity development with the decarbonisation needs of key trading partners like Japan and South Korea, the CCTI creates a framework for deeper economic integration and strategic alignment.
The potential for trilateral ownership of the CCTI, involving Japan and South Korea alongside Australia, would create an institutional mechanism for cooperation on clean commodity development and trade. This approach recognises that in an era of growing geopolitical competition, Australia’s security is enhanced by deepening relationships with like-minded partners who share our values and strategic interests.
The CCTI’s approach to clean commodity credits anticipates the evolution of global regulatory frameworks, positioning Australia to shape emerging markets rather than simply respond to them. By getting ahead of developments like carbon border adjustment mechanisms and sectoral emissions intensity standards, Australia can secure first-mover advantages and influence the rules that will govern future trade in clean commodities.
This forward-looking approach to international engagement exemplifies sophisticated green energy statecraft, which seeks to leverage the energy transition to enhance a country’s strategic position and influence in the global system.
Socio-Political Foundations of Green Energy Statecraft
Effective green energy statecraft requires building and maintaining social and political consensus around transformation goals. The CCTI contributes to this consensus-building by offering tangible benefits to diverse stakeholders— from regional communities to industrial workers, from innovative businesses to environmental advocates.
By focusing on repurposing legacy assets and creating new high-value industries, the CCTI provides a positive vision for Australia’s economic future that can unite constituencies that might otherwise be divided over climate and energy policy. The emphasis on job creation, regional development, and industrial renewal addresses the legitimate concerns of communities about the impacts of economic transition.
The CCTI’s potential to deliver economic benefits while advancing environmental objectives helps bridge the false dichotomy between economic prosperity and sustainability that has characterised much of Australia’s climate debate. This integrative approach is essential for building the durable social and political consensus needed to sustain ambitious green energy statecraft over time.
Financial Foundations of Green Energy Statecraft
The financial dimensions of the CCTI align perfectly with the principles of effective green energy statecraft. By leveraging limited public commitments to mobilise much larger private investments, the CCTI maximises the impact of government resources in a fiscally constrained environment.
The CCTI’s contract-based approach provides the certainty needed for private finance to flow into clean commodity projects while maintaining flexibility for government to adapt as markets evolve. This balance between certainty and adaptability is a hallmark of sophisticated financial statecraft in the green energy domain.
Moreover, the CCTI’s potential to recover costs and even generate returns as markets mature represents a more sustainable approach to public finance than one-way subsidies. By giving government a stake in future upside through the ownership and trading of clean commodity credits, the CCTI creates pathways for taxpayers to share in the benefits of successful industry development.
The CCTI in the Context of Global Green Energy Statecraft
As countries around the world develop their approaches to green energy statecraft, the CCTI positions Australia as a sophisticated practitioner of this emerging art. While different from China’s state-led model or America’s subsidydriven approach, the CCTI represents an Australian path to green energy statecraft that leverages our unique advantages and addresses our specific challenges.
The CCTI’s focus on demand-side market formation complements supply-side initiatives like the Future Made in Australia program, creating a more balanced and effective policy mix. This comprehensive approach recognises that successful green energy statecraft requires deploying a range of policy tools in a coordinated and strategic manner.
By focusing on clean commodities—an area where Australia has natural advantages and established expertise—the CCTI plays to our strengths while addressing our vulnerabilities. This strategic alignment between policy approach and national circumstances is essential for effective statecraft in any domain.
About the Authors
Elizabeth Thurbon is Professor of International Political Economy, Director of Research, and Deputy Head of School in the School of Social Sciences, Faculty of Arts, Design and Architecture at UNSW Sydney. She is also Director of The Green Energy Statecraft Project, a collaborative initiative between UNSW Sydney, The University of Melbourne, The University of Sydney, The Australian National University, and international partners. She is currently serving a two-year term on the World Economic Forum’s Global Future Council on Equitable Transition (2025-2026), and is an elected member of the Executive Council of the Society for the Advancement of Socio-economics.
Oliver Yates is currently the Australian country head of GAW Capital and board member of the Smart Energy Council having been the first CEO of Australia’s Green Bank, the Clean Energy Finance Corporation. He has global experience in both the private and public sector regarding climate change policy and finance. Oliver was an executive director at Macquarie Bank for more than 10 years, being country head in the United States (1998‐2004), co-head Macquarie Capital Private Placements Group (2004‐2008) and cohead Macquarie Capital Products Group (2001‐2008).
Acknowledgements
The authors would like to acknowledge the expert review panel for their invaluable insights and suggestions on earlier versions of this report, and Dr Christopher Khatouki for his invaluable research assistance. The usual disclaimers apply.
This work is licensed under a Creative Commons license. You can reprint or republish with attribution.
Recommended citation: Elizabeth Thurbon and Oliver Yates (2025). The Case for an Australian Clean Commodities Trading Initiative [Studies in Statecraft] (Canberra: Asia-Pacific Development, Diplomacy & Defence Dialogue). Available at www.asiapacific4d.com/idea/ccti
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