Pathway to 2050

Economic modelling and analysis by Treasury explores 3 scenarios of Australia’s transition to net zero by 2050 (Treasury, 2025). This work informed the Australian Government’s Net Zero Plan and Sector Plans and includes potential economy‑wide and sector‑specific emissions reductions pathways. Treasury modelling provides useful insights on the potential cost‑effective timing, sequencing and size of sectoral contributions to the economy‑wide emissions reduction task. The Treasury modelling and analysis serves as part of the evidence base for potential decarbonisation pathways for the Industrial sector. 

In this section, we refer to the Baseline Scenario, in which Australia efficiently builds on existing climate policies and trends to achieve its net zero targets. The Treasury’s Baseline Scenario illustrates a cost-effective pathway for the industrial sector to contribute to reaching Australia’s net zero goal.

Treasury’s Baseline Scenario projects that emissions from Australia’s industrial and waste sector will reduce from 61 Mt CO2‑e in 2025 to 32 Mt CO2‑e in 2050. Investments in abatement technologies are expected to be a significant driver for this emissions reduction. These technologies include electrification and adoption of less emissions‑intensive production processes, which are projected to reduce emissions intensities across the sector by 72% by 2050. Emissions from waste remain a small but persistent source of emissions. Abatement through methods such as landfill gas capture is expected to reduce emissions in the sector by 2.5 Mt CO2‑e by 2050.

This modelling projects that Australia will be able to maintain (and in some cases, expand) its existing industrial capabilities. However, the decarbonisation of Australian industries will not be straight forward. Navigating a pathway to net zero will need careful coordination and planning between governments and the private sector. Treasury’s Baseline Scenario presents a case where we have successfully achieved this transformation.

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Projected scope 1 emissions for the industrial subsectors Baseline Scenario. Note that manufacturing in this figure includes the subsectors: food and beverage, pulp, paper and paperboard, and manufacturing & additional industries. Source: Treasury modelling (Treasury, 2025).

An area graph showing the intended emissions outlook by subsector from 2025 to 2050. The y axis of the graph is in million tonnes of carbon dioxide equivalent, the x axis in years. It shows the steady emissions decline across all subsectors from just over 60 in 2025 to just over 30 in 2050, with significant declines from the Alumina and Aluminium, Iron and Steel, and Concrete and Cement subsectors. The Manufacturing, and Waste and Resource Recovery subsectors do not appear to show significant change. Other metals refining and smelting, and Chemicals and Plastics, show minor reductions. 

Treasury’s modelling suggests that the industrial pathway to net zero at 2050 could occur in the following phases:

Near term (to 2030): Emissions reductions will largely come from facilities covered by the Safeguard Mechanism deploying commercially available abatement options such as energy efficiency upgrades, electrification where possible, fuel switching from coal to gas and use of alternative fuels. Support measures such as those from the Powering the Regions Fund can help these reductions in emissions intensity.

Medium term (to 2035): The Future Made in Australia agenda supports the iron, steel and alumina sectors to adopt cleaner manufacturing processes as the necessary technologies become available. This transition depends on having access to the necessary renewables and grid infrastructure. It will also rely on scaling up alternative feedstocks such as hydrogen and alternative fuels (see the Electricity and Energy Sector Plan for details). The Safeguard Mechanism will continue driving down emissions for large facilities. Other industrial subsectors will also continue their transition towards net zero, gradually adopting electrification and other abatement technologies as they become commercial and competitive.

Longer term (to 2050): Targeted intervention, including through the Safeguard Mechanism and Future Made in Australia agenda, can potentially reduce emissions from the ammonia, iron and steel, and alumina and aluminium sectors to 5 Mt CO2‑e of emissions, down from 25 Mt CO2‑e in 2025. Overall industry emissions are projected to decline, though residual emissions remain at 2050. Natural gas usage for the industrial sector is likely to decline but will remain part of the energy mix. Gas will continue to play a role in high heat industrial uses, as a feedstock for industrial products and for sectors where it is difficult to fully decarbonise due to technology limitations. As alternative fuels and technologies scale up and become competitive, these users can transition through options such as renewable electricity and hydrogen. Where natural gas remains in use, carbon management technologies will be a potential abatement option.

While scenario‑based analysis is a powerful tool in helping inform Australia’s net zero pathway, it is not possible to precisely predict the transition. The future is uncertain, and many factors will influence the net zero transition, including changes in technology, global dynamics and community responses.