Australian Prime Minister Anthony Albanese and U.S. President Joe Biden have signed a formal agreement that will see the two nations collaborate to develop solar, wind and storage technology, co-ordinate critical minerals supply, develop new battery technologies, and support emerging hydrogen markets.

The pair signed the Climate, Critical Minerals and Clean Energy Transformation Compact during a bilateral meeting held on the sidelines of the annual Group of Seven Summit in Japan at the weekend.

In a joint statement, the two leaders said “Australia and the U.S. will deliver sustainable, resilient and secure critical minerals and clean energy technology to the world.”

“We intend to identify areas where Australia and the U.S. can coordinate the development of our respective clean energy industrial bases, including but not limited to solar, wind, storage, and clean hydrogen materials and technologies.”

Speaking in Hiroshima, Albanese said the joint initiative was the “largest action by any country” to deal with climate change and to direct investment into the clean energy transformation.

“And if we think about industries like hydrogen, without that support, there would be a massive incentive for hydrogen-based industries to be based in the U.S.,” he said.

Albanese said the agreement will open up new opportunities for Australian manufacturers and suppliers and help address concerns that the impressive subsidies offered by the U.S. Inflation Reduction Act (IRA) will disadvantage Australian companies.

“So the big risk with the Inflation Reduction Act … is that you would see capital leave Australia to go to the United States. This is about addressing that. This is about creating an enormous opportunity for Australia,” he said.

While there is little detail about how the initiative will work in practice, the joint statement said the framework intends to “coordinate policies and investments to support the expansion and diversification of responsible clean energy and critical minerals supply chains, accelerate the development of markets for established and emerging technologies, and to meet the growing energy and adaptation needs of the Indo-Pacific.”

A climate change action plan is to be developed by the end of the year and new ministerial-level dialogue will be established between Australia and the U.S. to encourage stronger industrial collaboration and accelerate progress towards net zero emissions.

Biden hailed the agreement as a “huge step forward” in the fight against the climate crisis, saying climate and clean energy has become the “third pillar” of the Australia-US alliance, alongside defence and economic co-operation.

“This contract can enable the expansion and diversification of clean energy supply chains, especially as it relates to critical materials,” he said.