Unlocking Asia-Pacific as a First Mover 2025

The Superpower Institute’s green iron production tax incentive proposal FIGURE 5 Sour ce: The Superpower Institute, 2025.86Carbon-intensive HBI Green HBI (flexible) AU$170/tonne pr oduction tax cr editA production tax incentive of AU$170 would eliminate or narrow the cost gap with carbon-intensive iron Inter national Eyre PeninsulaNo policy action Geraldton$770 $668 $554 Inter national Eyre PeninsulaAU$170/tonne gr een ir on production tax cr edit Geraldton$770 $668 $554 $600 $498 Superfunds and private investors remain cautious of nascent, capital-intensive green technologies, especially given inflationary pressures, equity market volatility and the wide range of market, project, technology and regulatory risks associated with such projects.87 Commercial lenders are equally hesitant to take on the combined “project- on-project” risks of investing in new low-carbon mining and green iron processing plants that in turn depend on the successful delivery of renewable energy projects to supply them low-carbon power. Without visible offtake contracts and bankable infrastructure, high-risk projects like green steel or hydrogen production are difficult for most commercial financiers to invest in or lend to. Even with offtake agreements, early-stage technologies still need to prove they can deliver credible, affordable supply – and that requires patient, concessional capital. Consequently, government agencies, development finance institutions (DFIs), multilateral development banks (MDBs) and philanthropies play a critical role in providing the blended finance and risk-tolerant capital needed to bridge the “valley of death that needs to be fixed,” as one workshop participant put it. Participants insisted that the government’s financial backing in particular – whether through grants, concessional loans, tax credits, procurement contracts, underwriting or support for shared infrastructure – is essential to unlock the strategic investor equity and commercial capital needed to fund these capital-intensive projects. Blended finance and the role of government in de-risking investmentEurope’s CBAM is beginning to change the rules of the game. One suggestion aired at the workshop was for the Australian Government to start lobbying at international forums to put a global price on carbon or at least to promote the idea of a regional CBAM, to align carbon pricing across Asia and extend Europe’s low-carbon ambition into the region. This idea is discussed in more detail below (see Chapter 4.5). Unlocking Asia-Pacific as a First Mover: Australia’s Green Iron Opportunity 32