Anthony Albanese hitches renewable energy dream to ‘third pillar’ climate deal with Joe Biden
Whether it was considered or merely convenient, US President Joe Biden has called the compact on climate change and clean energy the “third pillar” of the Australia-US alliance – a gift to Anthony Albanese but riddled with unresolved challenges arising from the transformation of US global policy.
The Prime Minister did not miss his cue at Hiroshima. He said climate change was “the entry fee to credibility in the Indo-Pacific”. Albanese said climate change was an “existential threat”, “an important part of our national security”, and that’s why it was now “an essential part of our alliance”.
Really? What do the Republican Party in the US and the Coalition in Australia think of this innovation? Given that climate change is a semi-permanent arena of domestic political dispute in both the US and Australia, deciding that climate change is “essential” to the alliance guarantees a fracture in strategic bipartisanship in both nations.
It means the pillars of the alliance would be threatened any time there was a change of government in Washington or Canberra. That’s smart? The exchange resonated with the exaggerated and empty rhetoric that often marks such meetings. Are we supposed to take this declaration seriously?
We should. It’s written into the formal documents released at the meeting. This is not a mistake. It constitutes a new compact between the Biden and Albanese governments. It is a response to the strategic and economic shifts, led by the US, that have challenging opportunities and grave risks for Australia.
Biden didn’t tell us how he sees the first two pillars of the alliance but let’s assume he means the ANZUS treaty and then AUKUS. Biden’s message: things are changing fast. He’s right and the Coalition should heed this. Biden called Albanese a “great partner” and the two leaders seem on song. But it’s a shame Biden couldn’t find fresh terms of flattery, having told Albanese that “you guys punch above your weight” – a stereotype that deserves retirement.
Albanese is now deepening the US alliance in ways unimaginable before he took office, yet this is an imperative given the unfolding Biden-driven changes in US policy. Albanese, like Scott Morrison before him, grasps that the sheer dynamic of geostrategic changes means an Australian PM must run an ambitious agenda and seize any opening he can get. The status quo is being continually demolished.
The backdrop is the recasting of US policy away from the interdependent world of economic liberalism and free trade to strike a new fusion between security and economics. The Biden response towards China is not to “decouple” their economies but to “de-risk” – that means renewing the US economy via clean energy, hi-tech, semiconductors, critical minerals and digital infrastructure – but with security against China the dominant paradigm to guarantee US superiority and sovereignty.
It is a massive US government-led industry policy enshrined in the Inflation Reduction Act with its potential to deliver $3.5 trillion of total investment via incentives that, on face value, will suck renewable investment away from many nations including Australia. Welcome to the new world. Albanese said the new US act was “the largest ever action by any country to deal with the challenge of climate change”.
But there was a catch. “The big risk with the Inflation Reduction Act to the world,” Albanese said in Hiroshima, “is that you’ll see capital leaves Australia to go to the United States.” Exactly.
At this point Albanese announced that he and Biden were turning the new US policy into a huge bonus for Australia, as distinct from being a negative. The joint Albanese-Biden statement said the President would ask the US congress to include Australia as a “domestic source” within the meaning of the Defence Production Act to facilitate technological co-operation under AUKUS and promote new US investment in Australian critical minerals. “I can’t underline how significant this is,” Albanese said. “This is about creating an enormous opportunity for Australia.” He had raised it with Biden and the President had responded. Canada had already won this concession.
It meant, for example, that without this concession hydrogen-based Australian industry would be incentivised to relocate to the US. Albanese expects Australian companies to be eligible to get fiscal support authorised in the US law when they team with US supply chains. That’s a breakthrough moment.
Is it too good to be true? Perhaps. We await the detail. How far does it extend? Is it a goal of US policy in the world of furious competition over renewables to support Australia to become a renewable energy superpower? Where does the economics end and the security begin? Is this what the third pillar of the alliance actually means? The assumptions are beyond heroic.
This phrase – Australia as a renewable energy superpower – rolls off the tongue of Labor ministers but exists somewhere between the daunting and the improbable.
Creating this new industry, as business analyst Eric Johnston wrote in this paper on Monday, will demand vast action on the tax, industrial relations, energy and regulatory front. It won’t work unless Australia is competitive on global capital.
The bureaucrats have done their work and that’s impressive. Albanese and Biden have signed a statement of intent for an Australia-US Climate, Critical Minerals and Clean Energy Transformation Compact – the aim being to accelerate the clean energy transition and build a domestic clean energy industry economy. The joint statement said the compact affirms “the third pillar of the alliance”.
Resources Minister Madeleine King trumpeted the compact in parliament on Tuesday with the government close to finalising its critical minerals strategy. Given that Australia’s critical minerals are decisive in solar panels, storage batteries, wind turbines and electric cars, Australia sees its US compact as the basis for a new industry to develop and process these minerals and rare earths.
The Albanese-Biden statement is specific: the two nations recognise the link between critical minerals and clean energy. The strategic purpose is pervasive but unstated: to deny China leverage or coercive power in these domains.
White House documentation explains in detail the elaborate Australia-US machinery being put in place with King involved in a ministerial-level taskforce involving her department and the US National Security Council reporting to the leaders. King told the parliament the compact reflected the new third pillar of the alliance. Biden said building critical mineral supply chains was a “huge step”.
At the same time the Albanese-Biden concord prepares the way for congressional approval to make AUKUS work by allowing US technological assistance to Australia.
Forget Biden’s missed trip to Australia. That’s irrelevant. On display in Hiroshima is an Albanese-Biden enterprise to deepen Australia-US co-operation along the cutting edge of the US de-risking strategy with China. We have AUKUS and now we have the third pillar – Australia is trying to ride on the back of Biden’s plan for government-led industry policy to deny China an economic/security advantage as the globe shifts towards clean energy.
Whether this is a mountain or a mirage, time will tell. But it vests Albanese with loads of foreign policy ambition that can be turned into domestic political advantage. He plans to visit China and he plans to thwart China. How long will the smooth sailing last?
More Coverage
How big tech is recalibrating around the DeepSeek threat
Silicon Valley owes its longevity to its ability to pivot and China’s new AI start-up could set it moving in a new direction.
Hate Crimes Bill needs to address higher threat level
The Hate Crimes Bill, which comes before parliament next week, needs surgery to address what is now a higher threat level to when it was first written up by Attorney-General Mark Dreyfus.