Climate Change and Energy Minister Chris Bowen on Wednesday announced $32 million for a world-leading trial to help strip emissions from the aluminium supply chain.
"Australia is the world's largest exporter of alumina and cutting emissions from our alumina refining will ensure this industry can continue to thrive in a decarbonising global economy," Mr Bowen said.
Alumina refining accounts for about three per cent of Australia's emissions. Aluminium exports bring in around $14 billion in annual revenue and the industry employs about 17,000 workers.
The trial is expected to produce the equivalent of about 6000 tonnes of alumina per year and reduce the Yarwun refinery's annual emissions by about 3000 tonnes.
Potentially greening everything from cars to beer cans, the project is expected to be commissioned in 2025 and is at the heart of ending the industrial heartland's dependence on coal and gas.
"This pilot plant is an important step in testing whether hydrogen can replace natural gas in Queensland alumina refineries," Rio Tinto executive Armando Torres said.
Converting the entire plant to green hydrogen could reduce emissions by 500,000 tonnes per year, which is the equivalent of taking about 109,000 conventional cars off the road.
Rio Tinto has been working with the Australian Renewable Energy Agency (ARENA) on using clean hydrogen to replace gas in alumina refining at the Yarwun site in Gladstone.
The resources giant, which is Queensland's biggest energy user, has also partnered with Japan's Sumitomo Corporation on the $111 million hydrogen program at Yarwun aimed at lowering emissions from the refining process.
Sumitomo executive Seiji Kitajima said demonstrating real-world applications of hydrogen in industrial settings was essential to reducing emissions and achieving carbon neutrality by 2050.
The new investment, through ARENA, gives the green light for a 2.5 megawatt onsite electrolyser, a hydrogen storage facility and a hydrogen-capable burner to retrofit one of the refinery's large industrial ovens used in alumina refining.
Hydrogen is being testing in the calcination process, where hydrated alumina is heated to temperatures of up to 1000C.
If successful, the program could pave the way for global adoption of the technology at scale, Rio Tinto said.
Sumitomo will own and operate the electrolyser, which has a production capacity of more than 250 tonnes of hydrogen annually, and supply the hydrogen to Rio Tinto directly.
ARENA chief executive Darren Miller said the world-first pilot could pave the way for other industries and underscores the importance of low-cost green hydrogen to decarbonise Australia's largest industrial emitters.
The investment is separate to the $2 billion Hydrogen Headstart program that will invest in two or three major projects.
Globally, using renewable hydrogen could eliminate emissions from the calcination process that accounts for almost a third of alumina refining emissions.
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