Prime Minister Scott Morrison announced on Wednesday that the federal budget for the financial year 2021-22 will include 539.2 million Australian dollars (416.1 million U.S. dollars) for new hydrogen production hubs and carbon capture and storage (CCS) projects.
He said that the projects would create more than 2,500 jobs.
"We want to make clean energy more affordable and reliable while looking for ways our investments can get more people into work," he said.
The announcement came one day before the Leaders Summit on Climate, where 40 world leaders, including Morrison, will explain what they are doing to fight climate change.
The government has previously said it will rely on low-emissions technologies to achieve its Paris Agreement goal of reducing carbon emissions by 26-28 percent from 2005 levels by 2030.
Andrew McConville, the chief executive of the Australian Petroleum Production and Exploration Association, welcomed Wednesday's announcement, describing it as a massive boost for the industry.
"Developing a local hydrogen industry could enable lower emissions both in Australia and internationally, reduce energy costs, deliver energy security, together with new employment and manufacturing opportunities," he said.