IEEFA: Australia's Green Iron Export Ambitions Require AU$170 Billion Annual Investment Through 2040

Freight News — 07 August 2026

Australia's emerging green iron industry will need substantial investment and sustained government backing to capitalize on the global shift toward low-carbon steelmaking, according to a briefing note released on 7 August 2026 by the Institute for Energy Economics and Financial Analysis (IEEFA).

The report, titled Scale of Investment Needed for Australia's Green Iron Ambition, finds that green iron export revenue could reach AU$96 billion annually by 2040, based on forecasts cited by the Australian federal government. Achieving that target, however, would demand approximately AU$170 billion in investment each year over the next 14 years — a level approaching the peak of Australia's 2000s mining boom.

"Green iron production is capital intensive," said Lachlan Wright, energy finance analyst for global steel at IEEFA and the report's author. "Each facility requires an ironmaking furnace and electrolysers together with supporting solar, wind, batteries and transmission to supply clean electricity. In addition, rail and port facilities are required for both bulk supply of iron ore and export of green iron."

Global demand for green iron is rising as the steel industry decarbonizes — steel production accounts for roughly 7–9% of global carbon dioxide emissions, placing it among the largest industrial contributors to climate change. This decarbonization push coincides with forecast declines in two of Australia's largest exports, coal and gas. Despite commanding a price premium, green iron remains unable to compete on cost due to its energy-intensive production process.

"Australia is seeking to establish a green iron export industry," Wright said. "These exports would both support global emissions reductions and serve as a hedge against future declines in Australia's traditional fossil fuel exports."

The AU$96 billion annual figure by 2040, referenced in the federal government's Green Iron Investment Fund announcement, is premised on replacing metallurgical coal exports with an equivalent volume of green iron. Australia currently exports approximately 150 million tonnes per annum (MTPA) of metallurgical coal, which is equivalent to roughly 270 MTPA of green iron, given that approximately 0.55 tonnes of metallurgical coal is used to produce one tonne of iron.

"At current prices, 1 million tonnes of green iron capacity in Australia would require AU$7–10 billion in capital investment for ironmaking, electrolysers, solar, wind and batteries," Wright noted.

Renewable energy — essential to green iron production — accounts for roughly half of the capital investment required for any Australian project. Even South Australia, widely regarded as the nation's renewable energy leader, would need to more than double its utility-scale solar and battery capacity to supply the proposed Whyalla green iron project.

Australia is not alone in pursuing green iron and steel. Projects in Sweden, Germany, and other European countries are advancing similar initiatives, adding competitive pressure for capital and first-mover advantage in what could become a significant global market.

Nevertheless, Wright suggests that Australia can leverage its extensive natural resources and prior renewable energy successes to catalyze green iron investment.

"Several successful models which established a premium for renewable energy, including renewable portfolio standards, contracts-for-difference and feed-in tariffs could be adapted to green iron," he said. "For Australia, policy that can establish a green premium in those exports is needed. Crucially, any such policy must have sufficient scale and funding assurance to provide the investment certainty needed."

"Without it, Australia is unlikely to attract the large amounts of capital needed to deliver on its green iron ambitions," Wright concluded.

Source: IEEFA