Anthony Albanese unveiled the $70 million investment - which the government expects will be matched by the private sector - for the Townsville Region Hydrogen Hub program on Saturday.
This will create a $140 million pool of competitive grants, worth $30 million to $70 million, to get hydrogen projects up and running in the North Queensland region.
"The reason why we're doing hydrogen hubs around Australia is that the growth and potential of this industry isn't a niche industry," Mr Albanese said in Townsville, after returning to Australia following a two-day visit to Papua New Guinea.
"This is something that will make an enormous difference to Australia's economy."
He said it was no good pretending the world wasn't changing and denying that markets in Europe and the United States won't introduce carbon tariffs - extra taxes on goods based on the carbon emissions they produced.
"Or, you can get on the front foot," Mr Albanese said.
"You can change those industries, and their carbon footprint, so that they become not just industries that can survive, but industries that can thrive."
It's hoped the new projects will create green hydrogen, by splitting hydrogen molecules from water using renewable energy processes.
The hydrogen can then be used as a fuel that produces no carbon emissions, which are the driving force behind human-induced climate change.
Mr Albanese said the Townsville hub would create jobs and boost the Queensland economy.
By 2050, Australia's hydrogen industry could inject $50 billion into the economy while directly creating 16,000 jobs as well as another 13,000 positions for workers needed to build renewable energy projects used to create green hydrogen.
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