Australia on Tuesday committed AUD 6.7 billion ($4.4 billion) in its federal budget to a new hydrogen production tax incentive, Kallanish reports.

The incentive will offer green hydrogen producers AUD 2 ($1.32) per kilogram of green hydrogen over ten years, starting from 2027. The subsidy is seen as the government’s response to the US Inflation Reduction Act (IRA)’s hydrogen production tax credit, which currently offers nearly double the amount at up to $3/kg. 

According to the Australian Taxation Office (ATO), the subsidy will be available for “eligible Australian resident corporations with a time-limited and uncapped refundable tax offset.” The ATO adds the incentive will be available between 1 July 2027 and 30 June 2040, for projects that reach final investment decisions by 2030.

“The incentive amount will be informed by consultation prior to implementation,” the ATO notes, adding that “these changes are not yet law.” 

The Albanese government has committed an additional AUD 1.3 billion for another round of the Hydrogen Headstart programme, to “bridge the green premium for early-mover renewable hydrogen projects.” It will be available for 10 years, starting 2024-25, the government says in its budget.

Additionally, AUD 17.1m across four years have been earmarked to deliver the government’s hydrogen strategy. A further AUD 32.3m for the expansion of green metals and low-carbon liquid fuels, and AUD 15.4m in “foundational activities to support the development of green metals production” were also announced as part of the budget.

The budget measures were welcomed by the hydrogen industry, with the Australian Hydrogen Council (AHC) calling it a “bold vision” for the industry.

“Hydrogen delivers comparative advantage to Australia not only as a molecule but as the critical pathway to decarbonise hard to abate sectors, and establish new high value exports in green steel, green iron and green ammonia,” says AHC ceo Fiona Simon. “This budget reflects that production, technology and jobs are all essential parts of ensuring a future made in Australia for hydrogen.”

Fortescue’s executive chairman, Andrew Forrest, called it a “historic moment,” adding that “if introduced quickly,” the incentive will spur the establishment of “new green” industries, including green hydrogen, green ammonia and green iron, alongside creating “tens of thousands” of jobs and cutting emissions.

“[The tax credit] is crucial to getting green hydrogen projects off the ground fast and at a scale to build a major domestic industry and market,” Forrest adds. 

Australia is investing a total of AUD 22.7 billion in its Future Made in Australia package, of which, AUD 7 billion has been earmarked for a critical minerals production tax incentive (see related story).