Plans to produce green steel in the Pilbara and a push to process lithium onshore could lead to a shift in Australia's dig-it-and-ship-it mentality, a consultancy firm says.

Zero Emissions Steel Technology (ZESTY) developed by Australian technology company Calix Limited produces steel using green hydrogen rather than coal.

The company hopes the technology will reduce greenhouse gas emissions in the iron ore and steelmaking sectors.

"If you look at iron and steel, it's responsible for about seven per cent of global CO2 emissions — that's nearly 1.5 billion tonnes a year, so a huge problem," chief executive Phil Hodgson said.

"Nearly 44 per cent of [Australia's] export income comes from the export of iron ore, so if the whole industry is looking to decarbonise, Australia should be playing a major part in that."

In traditional steelmaking practices, coal is used to separate oxygen from iron at very high temperatures, which releases 1.8 tonnes of carbon dioxide for every tonne of steel produced.

Mr Hodgson said Calix's technology replaced coal with green hydrogen roasted through its ZESTY iron process at lower temperatures and released steam as a by-product instead of CO2.

"You can start to decarbonise the whole of the global industry by making a green iron here, capturing more value here," he said.

Production a 'drop in the ocean'

Western Australia is the world's largest supplier of iron ore.

Supply in 2021 reached 919 million tonnes.

At a trial site in Bacchus Marsh Calix has been producing 2,000 tonnes of green steel per year and hopes to increase that to 30,000 tonnes at its first commercial demonstration plant.

"Thirty-thousand tonnes a year is a drop in the ocean compared to the total exports out of there," Mr Hodgson said.

This week the company received a grant worth almost $1 million from the federal government's Australian Renewable Energy Agency (ARENA) to help fund a basis of design (BOD) and front-end engineering and design (FEED) study for the plant.

Mr Hodgson expected the commercial demonstration facility would be built in the Pilbara, close to the country's major iron ore producers and anticipated hydrogen projects.

He acknowledged the cost of production in its early stages would be "reasonably expensive", but said there was high demand for green steel.

"We're pretty confident that once we can start to produce this we'll find markets for it, because there's a huge demand for zero emissions steel and that demand will only increase over time," Mr Hodgeson said.

The commercial demonstration facility is expected to be operating in 2024.

Onshore battery production

Along with its work in green steelmaking, Calix has a midstream processing project underway with lithium miner, Pilbara Minerals, to add spodumene concentrate into lithium salt.

Historically Australia has focused on exporting raw materials, but analysis from CRU Group suggests downstream lithium battery production could be worth $30 billion.

CRU Group consultant, David Royle, said there was potential for industries to come together and begin producing lithium batteries onshore given Australia's supply of materials such as copper and nickel.

"If Australia kind of sits still and continues its model of just shipping it out, there could be a very big opportunity missed by not moving further downstream," Mr Royle said.

A "very big limiting factor" for battery production in Australia, according to Mr Royle, was the cessation of onshore vehicle manufacturing.

He suggested an interim focus on midstream lithium processing, an industry potentially worth up to $8 billion, would be a positive first step.

"Australia could definitely look towards hitting that midstream lithium hydroxide and other battery materials," he said.

"You'd want to step it out."

But Mr Royle said downstream battery production could still be a lucrative opportunity for a company willing to invest.

"If someone wants to take the plunge, it could be risky," he said.