Section 1: Australia’s export economy is increasingly at risk

The report finds that Australia’s export model is increasingly exposed as global trading partners implement net zero commitments and reduce reliance on fossil fuels. Coal and liquefied natural gas (LNG) remain among Australia’s top exports, contributing around 12% and 9.6% of export earnings in 2021. However, demand is already declining in key markets such as Japan, South Korea, Taiwan and India. Under ambitious decarbonisation scenarios, Australian coal exports could fall by up to 80% by 2050, with LNG facing more moderate but sustained declines due to lower prices, high capital costs and increased global competition. Without diversification, these trends present a material risk to Australia’s long-term economic stability.

Section 2: Seizing the opportunity

The report identifies a significant opportunity for Australia to transition from fossil fuel exports to green exports. Australia’s renewable energy potential, critical mineral endowments, industrial capability, public research base and proximity to Indo-Pacific markets provide a strong comparative advantage in low-carbon industries. Government action through the Future Made in Australia agenda, including an initial A$23 billion investment in clean industries such as hydrogen, critical minerals, batteries and renewable manufacturing, is a positive signal. However, the report stresses that domestic industrial policy alone will not deliver export success without parallel efforts to create international demand.

Existing trade partners in Asia offer immediate opportunities. China, Japan and South Korea have all committed to net zero by mid-century but face domestic constraints in scaling renewable energy. Australia could export energy-intensive green products, such as low-carbon iron and steel, aluminium, ammonia and hydrogen, produced using renewable energy. Analysis cited in the report suggests Australian green exports could meet up to one-third of projected clean energy demand in China and South Korea, and around one-quarter in Japan by 2050, supporting partner decarbonisation while sustaining Australia’s export revenues.

Southeast Asia is identified as a critical growth market. The region accounts for around 60% of global GDP growth, and most countries have net zero or carbon neutrality targets by 2060. Regional decarbonisation could represent a global opportunity of up to US$300 billion per year by 2030, with Australia potentially capturing around US$10 billion annually. However, low levels of foreign direct investment, perceived risks and limited project pipelines are constraining progress, highlighting the need for active market development.

Section 3: Creating an international sustainable growth strategy that aligns trade and climate finance objectives

The report proposes an international sustainable growth strategy to align trade, diplomacy and climate finance with Australia’s green exports agenda. This strategy would build on existing policies, including Future Made in Australia and the Southeast Asia Economic Strategy to 2040, and requires strong coordination across government.

Sustainable growth partnerships with China, Japan, South Korea and India are identified as central. These partnerships should focus on joint transition planning, policy cooperation, green standards, research and development, shared investment opportunities and advanced market commitments to reduce offtake risk for emerging green industries. Mechanisms such as the Australia, Germany H2Global initiative are highlighted as practical examples of demand creation.

Climate finance is presented as a key tool, particularly in Southeast Asia. While Australia’s climate finance is currently dominated by grant-based adaptation funding, the report argues for more strategic use of blended finance instruments to mobilise private capital. Options include guarantees, first-loss capital and early-stage project development support. The report also examines the potential role of a bilateral development finance institution to strengthen Australia’s capacity to deploy climate finance at scale.

Conclusion

The report concludes that integrating trade and climate finance into a coherent sustainable growth strategy is essential for managing Australia’s economic transition. By combining domestic industrial development with targeted demand creation in the Indo-Pacific, Australia can reduce exposure to fossil fuel decline, strengthen regional partnerships and secure long-term export competitiveness.