An agreement within the federal government on strong climate ambitions and a sensible strategy to achieve them will set Australia up for greater economic success this decade.
The case for action grew rapidly. The costs of action to reduce emissions are lower than expected. The costs and risks of climate change itself are becoming increasingly clear and serious. And as Australia’s largest trading partners put their own economies on the path to net zero emissions through deep cuts in 2030, their demand for minerals, energy and other goods will shift. We can make the most of their energy transition – and join it ourselves – or we can get run over by a hydrogen truck as others rush to meet the needs of our region.
The Prime Minister is simply speaking common sense in guiding the federal government towards a significantly advanced national climate strategy.
The full details of a long-term strategy are complex and ongoing work will be required to develop and rehearse them. But three major elements should be part of the orientations agreed by the government this year.
The first pillar is a firm long-term commitment to net zero emissions by 2050. This goal will provide welcome guidance for immediate action and long-term decision-making by a large number of public agencies, and will do much to end the mixed messages industry. received from Australian governments.
“Net zero” is shorthand, and there is room for nuance in the letter of a commitment. While all sectors of the economy can and must participate in a fair and efficient path to climate neutrality, scientific advice implies that agricultural methane needs to be deeply reduced and stabilized, rather than necessarily reduced to zero.
Carbon budgets are no different from budget budgets – they require medium-term discipline as well as long-term goals. The second pillar of a climate strategy should be a commitment to further reduce emissions during this decade. Australia’s advanced economy peers and our own largest states have set targets for 2030 ranging from 40% (Korea), 40-45% (Canada), 46% (Japan), 50-52% (States United), 55% (EU) and 68% (UK) below their peak emissions. There’s no magic number, but cutting Australia’s emissions by about half from our own peak would put us in the mainstream of the 2030 targets.
The third pillar consists of political orientations to support these objectives. Comprehensive design of policies to achieve the 2030 and 2050 goals will take much longer and will take much more time and consultation with businesses and other stakeholders. But the government can set clear directions. Low, zero and negative emission technologies hold the key to achieving significant emission reductions and greater prosperity. The biggest cost reductions will come from the large-scale deployment of the most promising technologies.
The next frontier in policymaking should therefore be economic incentives for the massive deployment of clean technologies. These policies must be substantial and supported to be invested; broad in the coverage of companies and technologies to be effective; and based on rigorous emissions data to ensure integrity.
Consultation mechanisms in 2022 include a strengthened safeguard mechanism with declining reference levels; incentives for the adoption of clean gas substitutes; and enhanced incentives for energy efficiency, notably through smarter use of energy and the concentration of distributed energy resources.
Trade competitiveness must be a priority in the design of these policies. But it is becoming increasingly clear that our competitiveness depends on the success of the transition to net zero emissions, not on its limitation. Ai Group’s research on emerging carbon border adjustments in Europe and beyond underscores that our industries can become more competitive if they can keep pace with decarbonization abroad. A well thought out policy will unlock the necessary investments. In contrast, both bad policy and the absence of policy will see Australia lose jobs and overseas investment.
The other central factor in pursuing a national climate plan is to ensure that affected communities, workers and businesses are not left behind, especially in our regions. The economic change involved is manageable – if it is managed in a way that prevents people from stepping between risks and opportunities.
Industry has welcomed the strengthening of emissions commitments and actions taken by major economies over the past year, and companies themselves are making more and more commitments themselves. Supercharger Australia’s climate plan will bring people together with their sleeves rolled up to make Australia’s next phase of growth a success for all of us.