This opinion article by Business Council chief executive Jennifer Westacott and President Tim Reed was first published in The Australian Financial Review on Saturday 10 October 2021.
For more than two years, the Business Council of Australia has been working to find the economically optimal transition pathway for the nation to achieve a net zero economy by 2050 at the least cost and greatest environmental, economic and social gain.
Our goal has been to move the country beyond re-prosecuting old debates that only serve to fracture and splinter, and instead ready Australians to take advantage of the enormous opportunities that decarbonisation offers.
Right now, Australia is in the global box seat.
And it’s why we are backing more ambitious interim targets to send undeniably strong investment signals that Australia means business and by moving faster and harder we are determined to lock-in first mover advantages in industries of the future.
Our solar, wind and rare earth metals are direct inputs in the production of renewable electricity, clean hydrogen and ammonia, and lithium-metal batteries. They are also indirect inputs into the production of a range of clean, mineral based products such as green steel and green aluminium. And we sit on the doorstep of many of the largest and fastest growing global markets for green products in the Asia-Pacific.
Global momentum towards net zero is unstoppable with governments across the world moving along with capital markets as decarbonisation becomes central to investors’ portfolio allocation decisions. Fourteen of Australia’s largest 20 trading partners covering 83 per cent of our exports have signed up to net zero emissions by mid-century.
Here in Australia, business is leading the way by rapidly adopting net zero and ambitious internal decarbonisation targets. The number of ASX200 companies making net zero commitments more than tripled between 2019 and 2020 — currently representing about 50 per cent of the market.
As the world moves to decarbonise by 2050, Australia faces a choice. As a nation we can either embark on a coordinated, planned transition or we can take a more costly, more haphazard route.
The BCA’s economic plan, informed by Australia’s leading businesses, reveals the dividend of early, nationally coordinated action is, in net present value terms, an $890 billion increase to GDP and the creation of more than 195,000 extra jobs by 2070.
On average Australians are around $5,000 better off per person in the year 2050 (in today’s dollars) — with regional Australians projected to be disproportionately better off than the national average.
To realise these gains, unprecedented levels of coordination are needed, preferably with bipartisan support, to align investment signals, enhance regulation and provide much needed policy certainty for business and communities.
Moving harder and faster also means we are better placed to confront the challenges ahead. Parts of regional Australia will inevitably require more change than the rest of the country but as our plan demonstrates they also have the most to gain through a proactive and smooth transition.
The decarbonisation of Australia’s economy won’t occur in Pitt or Bourke Streets, it will be in places like the Hunter, Latrobe Valley and Gladstone where we have the greatest potential to convert existing infrastructure, reskill workers and bring new technologies to scale that are on the cusp of being commercially viable such as hydrogen, green steel, green aluminium and green metals.
We regularly talk with regional communities about Australia’s future, and their overwhelming feedback is that they see Australia’s energy transition through the prism of opportunity. But they want to know what shape change will take, whether there’s a plan to achieve net zero emissions and how we can ensure people are not left behind.
Under the BCA’s economic plan, more ambitious interim target means Australia can bring forward early action where commercially viable options exist. This includes sectors such as electricity, and in activities where energy efficiency programs and fuel switching are viable today; it also means building a deeper and more liquid domestic carbon offsets market.
This front-loads the heavy lifting to reduce emissions, avoiding a tail with higher costs and disruption. It also buys us time to work on closing the technology gap in harder to abate sectors where commercially viable solutions don’t currently exist. This is an economy-wide target but different industries and different businesses will always move at a different pace.
By using existing infrastructure, we can leverage the Safeguard Mechanism to drive clear investment signals in new low, zero or negative emissions technology.
The government’s Safeguard Mechanism already places a ceiling on industry emissions, we are suggesting this be expanded and tightened to incentivise decarbonisation across the economy while continuing to support our trade exposed industries.
We are also suggesting the introduction of 10-year carbon budgets with five-year reviews to provide predictability and a clear pathway to net zero by 2050. These budgets would inform the Safeguard Mechanism and take account of technology.
Under the BCA’s plan, the Climate Change Authority would be empowered as a trusted source of advice, similar to the Reserve Bank of Australia, to recommend to parliament what on the makeup of carbon budgets but parliament would remain the ultimate decision maker.
Critically, the CCA would also be tasked with supporting regions with a National Regional Transition Taskforce established under its purview. This would proactively manage the transition in regional Australia.
Acting harder and faster means we can act now to put in place durable foundations to make the most of the global growth decarbonisation opportunities of the future.
Australians have the resourcefulness and drive to achieve more ambitious interim targets and ensure our journey to net zero is less disruptive and all Australians can share in greater economic, social and environmental gains.
Tim Reed is the president of the Business Council of Australia and Jennifer Westacott AO is the chief executive.