In a new report the think-tank says focusing on "green" steel production could create a multi-billion dollar export sector using Australia's plentiful solar and wind resources.

Green steel is made from renewable hydrogen rather than coal.

It could also save the jobs of coal miners and others reliant on emissions intensive industries, whose work is threatened by efforts to fight climate change.

The federal government is eyeing hydrogen for its export potential, but the Grattan Institute says it would be cheaper to produce green steel in Australia than shipping hydrogen to countries without abundant renewable resources.

Having 6.5 per cent of the global steel market amounts to $65 billion in export revenue each year, and could create 25,000 manufacturing jobs.

According to the Grattan Institute it's a win-win-win.

"It would create a new export industry, support carbon workers, and cut emissions," the report says.

"For too long, adding value to Australia's energy and minerals resources and creating sustainable jobs through manufacturing and exporting have been the stuff of dreams.

"Not anymore. If we get this right, we will resolve the great climate conundrum that has stretched our political fabric for more than a decade."

Energy Minister Angus Taylor says the government hopes to create a domestic hydrogen industry.

"Clean commodities made with Australian hydrogen will help us to become a world leader in the industry," he said.

Labor's energy spokesman Mark Butler think the government is more focused on spending taxpayer money on coal-fired power stations and the possibility of nuclear.

"A COVID-19 recovery plan which is focused on investing in new industry and brings forward investment in new renewable projects will create tens of thousands of new jobs, stimulate regional economies, and deliver cheaper power prices," he said.

Australian Associated Press