Australia and India should partner up to accelerate the clean energy transition

India and Australia saw a fierce cricket Men’s World Cup final in 2023, but there is an opportunity to bat on the same team—for clean energy transition.

Prime Minister Anthony Albanese called India and Australia natural partners during his visit to India in March 2023 and had climate change high on the agenda during the G20 New Delhi summit in September. At a time of geopolitical uncertainty, it makes sense to work together in areas, ranging from critical minerals to green steel, that will fuel sustainable economic growth. Furthermore, bilateral collaboration for energy transition is critical, since many multilateral forums and initiatives are failing to address these challenges.

Australia and India both have great potential for energy transition. Australia is blessed with natural resources and India is one of the world’s fastest growing economies; it can also reap the benefits of a demographic dividend. Both have ambitious greening plans, with India’s clean energy, mobility and green hydrogen targets for this decade alone providing an investment opportunity that we estimate is worth US$500–550 billion.

The reliance on each other’s economies makes Australia and India natural partners. In 2022, trade between the two countries totalled US$31.4 billion, with exports from Australia to India making up more than 70 percent. Notably, nearly 80 percent of these exports were natural resources such as coal, gold, copper and natural gas. In critical minerals, Australia is India’s third-largest source of copper ore and the largest trading partner by far for nickel oxides and hydroxide. In collaborating on an energy transition, India and Australia have a unique opportunity to leverage these trading ties.

In the past 12 months, we have already seen increased alignment of Indian and Australian policies. The Australia-India Economic Cooperation and Trade Agreement (ECTA), which took effect in 2022, will enable unrestricted trade of most commodities and products. The two countries have also signed a Critical Mineral Investment Partnership, which identified five critical mineral projects that could be jointly developed. On innovation, the Australia-India Strategic Research Fund aims to support research in important areas such as new and renewable energies and resource circularity.

Building on this momentum, India and Australia should collaborate in four ways to support each other’s energy transition.

First, they should join forces to develop critical minerals supply chains. Both countries currently lack the technical expertise in mineral processing and material manufacturing for use in clean energy production and have not been able to fully leverage opportunities of indigenisation. For example, Australia is the world’s largest producer of lithium, and it exports nearly all of it to China, where it is used in batteries. Meanwhile, India imports most of its batteries from China. Developing the domestic mineral resources and raw material production ecosystem could take up to a decade. Striking a balance between imports and developing domestic manufacturing will be critical for an unimpeded yet secure energy transition. Australia and India can complement each other based on their strengths and weaknesses in the clean energy manufacturing value chain.

Second, India and Australia should develop a rules-based architecture for new and emerging sectors such as green hydrogen, critical minerals and clean energy manufacturing. With governments adopting protectionist policies around the world, harmonisation of standards and trade rules for new technologies is critical for maintaining an open, fair and inclusive system. India and Australia should take the lead in standardising and interpreting environmental, social and governance standards and defining key terms such as critical minerals, concentration, diversification and vulnerabilities. They should also leverage multilateral initiatives such as the Quad, Indo-Pacific Economic Framework for Prosperity and the Mineral Security Partnership to develop a rules-based architecture for the fuels of the future.

Third, Australia and India should collaborate on upskilling their workforces and promoting co-development of technology. High-level skills in mineral exploration, mining, mineral processing and manufacturing clean energy components will be important for raw material value chains. And to make the clean energy supply chain resilient and sustainable, they must prioritise the development of new materials, alternative technologies and recycling processes.

The two countries should build on the ECTA framework to increase the number of exchange programs for university students and faculty members. Academic institutions and industries in both countries could work together in the research and development of technologies needed to process minerals and manufacture raw materials. Australia’s academic and industry experience and India’s burgeoning graduates in science, technology, engineering and mathematics would complement each other in this effort.

Lastly, Australia and India should boost their mutual flows of investment. As recently as 2017, just 0.3 percent of Australian direct investment stocks were in India. This made up just 0.24 percent of India’s total foreign direct investment. Given Australia’s ambitious plans to scale up critical mineral and clean energy value chains, its industries should invest more in India’s growing industrial sector by participating in government initiatives such as India’s Production Linked Incentive scheme.

There is great potential in the improvement and development of new technologies, from mineral mining to clean energy product manufacturing. A strong partnership between India and Australia in an energy transition is like a test match, requiring trust, patience and agile strategy, as well as specialised and complementary skills. Fortunately, this test match will have winners on both sides.