Transitioning Australia-Japan Energy Partnership: Recalibrating to New Realities
Wednesday 16 July 2025 I Melbourne, Victoria
The outlook for energy trade and investment has changed markedly over the last year. In a sense, the transition strategy is itself in transition – more attention is now being paid to the practical realities of implementation.
The vision of building clean hydrogen exports to Japan as our primary replacement for coal and LNG is being widely rethought due to their high cost. Whilst hydrogen will still be an important fuel of the future, the high cost of shipping it means the focus has moved to enabling it to be used much closer to where it’s produced, to make more transportable goods such as clean methanol, ammonia and Direct Reduced Iron (DRI).
In the meantime, there has been a greater recognition by Australian governments of the importance of gas as a transition fuel. Australian interest in onshoring mineral processing and chemical production has grown. For its part, while remaining committed to long-term decarbonisation, Japan’s position, reflecting growing international uncertainty, has put increasing emphasis on energy security – including securing sufficient gas reserves – while putting greater expectations on renewables and nuclear power to underpin its domestic transition, as well as capturing carbon dioxide from fossil fuel use for export to storages such as Australia’s.
Our strategic fit remains strong – Australia with its modest population but large land area, abundant resource base and deep experience in highly sophisticated bulk resource production and logistics; Japan with its modest resources, large population, and strengths in manufacturing and technology, trade and finance; and our mutual trust from decades of successful engagement.
But barriers and risks remain. The difference between Australia’s and Japan’s resource endowments and economic circumstances mean that we will necessarily have different approaches to decarbonising with energy security. The scale of the task and the importance of these issues to both countries means that any such differences will continue to need to be managed carefully and with close consultation among stakeholders from business and government in both Australia and Japan.
Some great discussions at our “Transitioning Australia-Japan Energy Partnership: Recalibrating to New Realities” event in Melbourne, underpinned with a sense of resolve and determination to tackle the practicalities of decarbonisation, and an understanding that Australia and Japan, as they have many times in the past, need to work together closely if our countries are both to reach their shared net zero goal.
Key takeouts to emerge from conference sessions were:
- Australia and Japan have developed a partnership that has globally significant impact: over 60 years of creating new industries and resources supply chains together, benefiting both our countries and the region more broadly.
- We have the opportunity to do so again as we look to our shared goal of net zero by 2050. The fundamentals remain the same but the challenge is enormous, will require major investment, and international competition will be fierce. We need to be in it for the long haul.
- Global circumstances have reinforced the importance of understanding that energy security for both countries will be paramount, and decarbonisation efforts need to be seen against that backdrop.
- While the paths we take may be different – as dictated by our resource endowments – the end goal of decarbonised economies with energy security is shared, and we will not be able to reach it unless we work together.
- The task to build new industries is a familiar one, but the nature of the industries and markets – for example in relation to critical minerals – will be different, and will require new solutions.
- Cross-border measures – such as trade in carbon credits and in carbon itself – will have a role to play in enabling us to find optimal outcomes together.
- To meet the scale and immediacy of the task, when economies worldwide are seeking to achieve the same outcomes in the same timeframe, will require renewed attention to streamlining approvals processes in Australia in particular.
- Governments in both countries have a critical role to play, including in de-risking the development of new technologies and creation of appropriate frameworks, and they are supportive and constructive.
- The conference re-endorsed the idea of creating bilateral structures that allow for a more focussed, strategic, engaged and collaborative approach to bilateral planning, with business in the room.
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