Designing fiscal tools for net-zero
Designing Fiscal Tools for Net-Zero: How a University Submission Shaped Australia’s Critical Minerals Strategy
14 May 2026
In 2022, billions of dollars in potential critical minerals projects hung in the balance. Monash researchers proposed a bold economic solution that helped shape national policy and unlock private investment.
Four years ago, Australia’s critical mineral sector had hit a roadblock.
Despite being home to some of the world’s largest reserves of lithium, cobalt, bauxite, nickel, and rare earths, investment was lagging far behind what was needed to meet net-zero targets.
High taxes, tight credit, and uncertainty over long-term government support were stalling projects, putting the nation’s clean energy ambitions at risk.
Collection of minerals.
“Investment was materially below what was needed for net zero pathways, reflecting a mix of high effective taxation, tight global credit conditions, policy/decarbonisation uncertainty, and growing international competition - all in a sector with very long lead times from exploration to production,” Professor Joaquin Vespignani, from the multidisciplinary Monash Critical Minerals Initiative, said.
It was clear that without intervention, projects would stall, costs could escalate, and Australia risked losing its competitive edge in the global clean energy race.
The research: From ideas to policy
In early 2023, Prof Vespignani and Professor Russell Smyth submitted a six-page policy recommendation to the Department of Industry, Science and Resources (DISR) as part of the Critical Minerals Strategy discussion paper.
The submission proposed two complementary fiscal tools aimed squarely at the sector’s key investment barriers:
- Decarbonisation Corporate Bond (DCB): Allows firms to discount bond interest payments against future royalties or income taxes.
- Decarbonisation Tax Discount (DTD): A targeted rebate designed to stimulate exploration and production investment.
These instruments addressed the sector’s most pressing obstacles: high taxation, limited credit, policy uncertainty, geopolitical risk, and international competition.
Professor Joaquin Vespignani and Professor
Russell Smyth.
They demonstrated how lowering the cost of capital and signalling credible, long-term government support could unlock the billions needed for Australia to meet net-zero targets.
“We wanted a practical fiscal tool that could neutralise the key barriers to investment by lowering the effective tax burden and the cost of capital, while giving investors the confidence that policy support is credible and long-term,” Prof Vespignani said.
“The Decarbonisation Corporate Bond proposal allows interest costs to be discounted against future royalties and/or income tax, effectively reducing the cost of capital and easing the tax drag on new projects.”
Impact on policy and investment
The submission directly informed the Federal Government’s 2023 Critical Minerals Strategy.
By 2025, it underpinned the Critical Minerals Production Incentive (CMPI) — a 10 per cent production-tax credit and loan facility projected to mobilise AUD $4 billion in private investment and generate regional employment in refining and processing.
The Decarbonisation Corporate Bond concept has been referenced in public–private financing models and in Monash’s Pacific Action for Climate Transitions (PACT) program.
“It was genuinely rewarding to see a submission framed around investment constraints and workable fiscal design feed into national policy thinking—especially around using incentives to build midstream and downstream capability, not just extraction,” Prof Smyth said.