Production Tax Credit for value-add processing of Australia’s critical minerals
28.02.2024 - 03:30
Our report ‘Production Tax Credit for value-add processing of Australia’s critical minerals’, commissioned by the Association of Mining and Exploration Companies (AMEC), explores how targeted production tax credit for value-add processing of critical minerals can improve Australia’s competitiveness and help our domestic critical mineral sectors reach their potential. Our report finds that introducing a production tax credit for lithium, nickel, vanadium and rare earth metals can make Australia cost-competitive and create opportunities in the downstream processing of critical minerals. Australia’s critical minerals are central to the global energy transition, however global competition has put Australia at a cost disadvantage in downstream processing of critical minerals. Introducing a production tax credit of 10 per cent in Australia would help to equalise production costs with global competitors. While the production tax credit will increase fiscal costs over the forward estimates and medium-term, it will add $2.4 billion of economic activity and support 4,220 ongoing jobs.
Australia needs a targeted policy response to improve its competitiveness in critical minerals while adding $2.b billion to the economy and supporting 4,220 ongoing jobs.
Australia’s critical minerals are central to the global energy transition, however we are missing out on opportunities to refine our raw materials.
Australia’s critical minerals are central to the global energy transition; however, we are missing out on opportunities to refine our raw materials. Across lithium, nickel, vanadium and rare-earth metals, Australia has significant reserves and extraction potential, however we currently perform only limited processing, despite enjoying a natural advantage from proximity to raw materials and significant forecast global demand.
This is occurring against a backdrop of a global policy trend introducing policies to secure important industries, which have increased 46 times over the last 12 years. In critical minerals in particular, competitor countries such as the US, Canada and China have all introduced significant new initiatives to secure their sovereign capabilities.
A production tax credit for critical minerals can improve Australia’s competitiveness in the downstream processing of raw materials.
The IRA has left Australia at a significant disadvantage to the US for downstream processing of critical minerals. Using proprietary industry data from ten firms in Australia’s critical minerals industry, we have determined that Australia’s production is on average 10 per cent more expensive than in the US when it comes to refining critical minerals and producing battery active materials. This has been caused first and foremost by the US’ PTC which provides for a 10 per cent production subsidy both for critical minerals and active materials.
Downstream processing of critical minerals could add $2.4 billion and 4,220 jobs to Australia’s economy by 2035.
Eliminating the cost differential will lead to an additional $2.4b of economic activity, which is concentrated in mineral refining. This could result in an additional 4,220 jobs in the industry on an ongoing basis. The construction required to develop the plants required to refine minerals and produce active materials will create an additional 1,800 construction jobs at peak construction activity.
Read our latest posts
Unlocking Australia's R&D potential
Our research in collaboration with Atlassian, the BCA and Cochlear sets out a path forward for Australia to realise its R&D potential. Australia’s productivity growth is at a 60-year low, driven in part by declining business investment in R&D. Our latest report highlights the critical role large businesses play in Australia’s innovation ecosystem and the urgent need for policy reform. Despite strong talent and institutions, Australia underperforms global peers due to high costs and uncompetitive incentives. The report outlines six targeted reforms - including simplified R&D tax incentives and a commercialisation premium - that could together generate $7.7 billion in annual economic output and lift productivity by 0.1%, with a fiscally neutral impact. With the Strategic Examination of R&D underway, this is a pivotal opportunity to restore Australia’s innovation edge.
28 Jul, 2025
Digital platforms and competition in Australia
Our latest research in collaboration with Apple examines proposals to introduce an ex ante competition framework for digital platforms in Australia by assessing digital platform regulations in international jurisdictions. We find that jurisdictions that have implemented ex ante regimes have experienced implementation challenges, with consequences for users and the economy. This study highlights that the need for regulatory regimes to preserve the benefits delivered by platforms while maintaining the flexibility to adapt to rapidly evolving technologies.
24 Jul, 2025
Climate Risk Index for the European Energy Sector
Mandala Partners in partnership with Zurich Resilience Solutions has produced Europe's first comprehensive Climate Risk Index for renewable energy infrastructure across five major European markets. This groundbreaking analysis reveals the scale of climate vulnerability facing Europe's clean energy transition and provides actionable insights for building resilience across France, Germany, Italy, Spain, and the UK. Nearly half of Europe's renewable generation capacity is in critical climate risk categories, threatening the foundation of the continent's energy security and economic stability.
16 Jul, 2025
Shock Resistant
Shock Resistant outlines novel insights into the ways that platform workers in the US used platform work as a strategy for mitigating the impacts of the pandemic and cost of living crisis.
2 Jul, 2025