(Bloomberg) -- Australia’s biggest opportunity in a net-zero economy would be to convert iron ore into green steel using hydrogen and then export it to China, according to Ross Garnaut, a professor of economics, former government adviser and ex-ambassador to Beijing.

In his latest book -- the Superpower Transformation -- Garnaut argues that shifting Chinese imports to zero-carbon steel would help lower the costs of decarbonization in the world’s second-largest economy, while adding immensely to Australia’s industrial development. 

The Asian giant produces and uses more than half the world’s iron and steel, most processed from Australian ores. In a green world, this would be done most efficiently via hydrogen, said Garnaut, who has authored several climate change reviews.

Generating sufficient zero-emissions electricity “will be a large challenge in China,” he said in an interview. “Realization of this great potential for both China and Australia would require the restoration of cooperative and productive trade relations.”

The following transcript has been edited for length and clarity.

You talk about China-Australia relations in the book. How critical is a resumption of healthy trade ties between the two countries for Australia’s zero-carbon future?

A high proportion of the trade opportunities in the zero-carbon world for Australia will be in China, just as a high proportion of the economic and trade opportunities in the high-carbon world are with China at the moment. And so it’s very much in the interests of both Australia and China that over time, we establish the foundations for large scale, stable and confident trade in the products of zero-carbon economy just as we did for the high-carbon economy.

Would an economic slowdown or a global recession slow Australia’s transition?

For Australia it will underline the importance of going more quickly and using these new investment opportunities.

The war in Ukraine has raised recognition that the world’s reliance on imported fossil energy is very insecure. And that one way of improving energy security is to rely more on renewable energy, a proportion of which can be obtained from countries like Australia in one form or another.

How high is your confidence in Australia’s ability to transform into a zero-carbon superpower?

I’m very confident about the nature of Australia’s advantages and the extent of the opportunity. Given our history, and the mess we’ve made of energy and climate policy over the last seven or eight years, one has to have doubts about whether we can put in place a stable policy environment. However, those doubts have to recognize that the new government has made a good start on these issues with revision of a lot of the policies that stood in the way of Australia using its opportunity. Overall, I’d say my confidence level is reasonably high.

Is the notion of Australia as a clean-energy superpower just something from academic circles or are we seeing actual investments and things moving on the ground?

It’s begun to move into the industrial regions of Australia. We already are seeing some investments of the kind that we will see as we build the super power. These include the sun cable project in the Northern Territory to export power by cable to Singapore. There are also a number of places in Australia with early development of hydrogen projects. These are early steps, very first steps. So it’s certainly moved into the executive floors of companies and into the boardrooms.

Do you see Australia ruling the world in clean energy?

No, we won’t rule the world. But we’ll be a very important player in the world. We won’t be the sole superpower. We will probably be the largest exporter of zero-emissions industrial inputs, just as now we are the world’s biggest exporter of iron ore, aluminum ores, LNG and coal. The nature of the exports will change and our position will be an even stronger one in the industrial inputs of the new economy than it was in the old carbon economy.

How does the world benefit from Australia’s energy transition?

Australia’s use of zero emissions inputs in energy and biomass could lead to us directly removing about 8% of the world’s carbon emissions. In addition, we’ll be the source of much more than 80% of the energy transition minerals that are needed in very large quantities.

From a policy perspective, what changes are needed in Australia?

I think what’s been announced is a good start, but it’s only a start. And we have to go much further. I think the government understands that. The detailed statement about the extra steps I’ve set that out in my book. There’s a lot of steps we still have to do. But the new government has got us started.

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