Top manufacturers back ‘safeguard’ climate reforms

Australian steel giant BlueScope and explosives maker Orica have thrown their support behind the federal government’s new climate policy after originally fearing tougher emissions rules could hurt their competitiveness and imperil investments in the future of their manufacturing sites.

The votes of support from two of the country’s biggest manufacturers come despite Opposition Leader Peter Dutton saying at the weekend that heavy industry continues to hold “grave concerns” about the Albanese government’s safeguard mechanism, a policy that will tighten emissions limits on the nation’s 215 top industrial polluters.

While Dutton on Sunday pointed specifically to concerns in the steel sector, BlueScope Steel chief executive Mark Vassella said on Monday that talks with the government had been constructive and had landed on a series of important allowances for firms in difficult-to-decarbonise sectors.

“Subject to the final form of the legislative rules and the government’s additional support for industry, BlueScope’s previous concerns in respect of potential adverse impacts from the safeguard mechanism have been materially alleviated,” Vassella said.

Under the mechanism, the nation’s heaviest-polluting companies will be forced to cut their carbon footprint by up to about 5 per cent a year from July 1 until the end of the decade, either by purchasing carbon credits generated by carbon offset projects such as tree planting, or by switching old fossil fuel-based technologies to cleaner systems.

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However, manufacturers of products including steel, cement and aluminium – whose processes depend on fossil fuels but do not yet have commercially viable electric alternatives – will have to cut their carbon footprints by only 1 per cent a year. They will also have access to $400 million in grants to help them transition to cleaner operations.

BlueScope, a $9 billion ASX-listed steel manufacturer, has been working on a feasibility study for a $1 billion program to reline its mothballed blast furnace No. 6 at its Port Kembla steelworks. The company says emerging “green steel” technologies, such as using zero-emissions hydrogen to replace coking coal in the process, are “promising” but are “not yet ready for large-scale implementation” and may not be until the 2040s.

“The government has recognised the challenges facing hard-to-abate sectors, in particular the unique and urgent challenge of the No.6 blast furnace reline and upgrade project,” Vassella said.