Australia is still “the lucky country”: Seizing the Climate Opportunity

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Australia is still “the lucky country”, despite the outlook in the Government’s recent Intergeneration Report. The decarbonisation of the global economy presents Australia with the opportunity to transform itself from a nation that digs up rocks and exports them, into a country that produces some of the world’s lowest carbon products needed for the transition.

Australia possesses several advantages that give us an unfair edge.

· Abundant Renewable Resources: Australia is endowed with exceptional wind and solar resources, coupled with vast expanses of land, enabling the production of renewable energy on a large scale. This positions the nation to tap into the most cost-effective zero-carbon energy to power various industries.

· Critical Minerals: The country possesses significant deposits of critical minerals essential for the decarbonization process.

· Expertise and KnowledgeAustralia boasts world-class research and educational institutions, providing the expertise needed to develop and implement effective climate solutions.

What we urgently need is clear and supportive governmental policies that empower businesses, entrepreneurs, and households to make substantial, long-term decisions and investments in climate action. We need bold action and meaningful reform not minor policy updates.

We already have a remarkable blueprint for some of the necessary policies. The success of the US Inflation Reduction Act (IRA) has been evident within just a year. According to a recent Financial Times article, “Since the passage of the IRA and the Chips Act, over $224 billion in cleantech and semiconductor manufacturing projects have been announced in the US, promising the creation of 100,000 jobs.”

While we may not be able to outspend the US, we can certainly learn from it. It has proven exceptionally effective in spurring significant private investment, new industries, and job opportunities. (In my view, this stems from the fact that it primarily used incentives in the form of tax breaks rather than punitive measures, so carrot rather than stick, while also supporting a broad array of technologies across various sectors of the economy.)

It’s time to shift our perspective away from viewing climate action as a burden. Instead, let’s recognize it as a means of generating wealth and fundamentally transforming Australia’s economy. By doing so, we set ourselves and future generations on a path to economic prosperity. Contrary to the notion that taking no action incurs zero cost, the reality is far from that. The price of inaction is exceedingly high. Australia is poised to bear some of the most severe impacts of climate change. We are only beginning to witness (or forecast) the genuine financial and human costs — ranging from natural disasters and altered climatic conditions leading to drought and subsequent impacts on agriculture and food prices, to the loss of tourism due to the decline of the once-magnificent Great Barrier Reef or the loss of Australia’s AAA credit rating and flow on financial cost to name but a few.

What we need are policies that:

· Support households in transitioning to electrified systems, resulting in tangible household savings.

· Foster research, development, and deployment of novel technologies at scale, consequently giving rise to new companies and industries that generate employment opportunities.

· Regulatory certainty, incentives and reduced bureaucracy for corporates to make significant capital investments in new infrastructure to allow the transition to accelerate particularly for energy, industry and transportation.

These policies need to be actionable immediately and have an impact within the next decade. Also, if we are to embark on a significant program of governmental expenditure or forgone tax revenue, it’s imperative that the majority of benefits accrue to Australian citizens or companies rather than foreign-owned corporations.

Simultaneously, the government should:

· Cease subsidizing fossil fuel production

· Refrain from dictating the winners among various technologies

To truly reposition the economy and secure a significant global share in the decarbonized economy, Australia needs transformative government action and reforms. While this will undoubtedly be challenging and met with resistance, the opportunity is enormous and the cost of inaction too high.

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