More incentives needed for green investments to compete with the US, says Stephen Jones

Financial Services Minister Stephen Jones has hinted that Australia could offer tax breaks to compete with America’s incentives for green investment.

Assistant Treasurer and Financial Services Minister Stephen Jones. Picture: Gary Ramage

The federal government will need to do more to match the incentives of the US Inflation Reduction Act for investing in green energy and the energy transition if it is to prevent capital from being “sucked out of Australia”, Financial Services Minister Stephen Jones has warned.

Speaking at the annual conference of the Australian Council of Superannuation Investors in Sydney, Mr Jones gave the strongest hint yet that the government was looking at more tax incentives for green energy investing in the wake of the US Inflation Reduction Act introduced last year.

The legislation provides $US400bn ($600bn) in incentives for a range of initiatives to encourage more investment in green energy, including renewable energy projects, support for the green hydrogen sector and the rollout of electric-vehicle charging stations.

Mr Jones told the conference the transition to a more sustainable economy needed billions of dollars of capital to be deployed each year, with estimates of it amounting to about 1.3 per cent of global GDP.

“There will be an international competition for capital and a strong desire to see it effectively employed,” he said.

“Countries that move quicker and are decisive will be advantaged. Those that malinger will be punished.

“The US Inflation Reduction Act will have an impact on the global deployment of capital.

“If we are not in the game, we will be left behind. Doing nothing is not an option.”

In an interview with The Australian after his speech, Mr Jones said the government was going to have “to look right across government at the impact of the Inflation Reduction Act and what it means to us as a country which aspires to be a renewable energy powerhouse”.

He said the passage of the US Act “changes everything” for Australia. “Capital is going to be sucked from every part of the globe into the US as a result of the Inflation Reduction Act,” Mr Jones said.

“If we want to be in the renewable energy game, we are going to have to respond.

“The amount of capital that is going to be required to (transition to a net zero economy) will be vast and it will go to the more forward leaning jurisdictions.”

While the government had already announced a range of policies to combat climate change and accelerate the shift to a lower-carbon economy, Mr Jones said there was “more to come”.

But he said he could not provide any more specifics on what these new policies could involve.

He said action on climate change was shifting from something that was thought of as a competitive disadvantage to one that was a competitive advantage.

“If we don’t act on this, we will be at a competitive disadvantage and capital will be sucked out of Australia and go to those jurisdictions where it is needed,” he said.

Mr Jones said polices on climate change announced by the government included securing the passage of the safeguard mechanism, which puts tighter timetables on big emitters to cut back on their carbon emissions, the announcement of a national electric vehicle strategy and plans for a Rewiring the Nation modernisation of the electricity grid.

He said the government planned to launch a green bond program in mid-2024 to raise more funds to finance the transformation to a net zero economy.

This would allow investors to support public projects needed for the transition, and “boost the scale and credibility of Australia’s green finance market”.

Mr Jones said this was part of the government’s strategy of putting out “the biggest possible lure to attract more green capital to Australia”.

He also used his speech at the conference to warn companies and funds that they face tough ­action by the corporate regulator if they were involved in greenwashing, with the government having given the Australian ­Securities & Investments Commission an extra $4.3m to continue its focus on the issue.

“Greenwashing corrodes the credibility of sustainable financial markets,” he said.

He said public commitments by funds and companies about their “green” products had to “be real” and not something that was just talked about by the marketing departments.

The extra ASIC funding would allow the corporate regulator to increase its surveillance of suspected incidences of greenwashing by companies.

Mr Jones said it was about “deterring misconduct” and would allow ASIC to “keep pace with overseas regulators in their concentration on greenwashing-­related enforcement”.

ASIC has indicated that cracking down on greenwashing is a priority issue for the regulator.

Companies and funds were now “acutely aware” of ASIC’s focus as a result of several actions in recent months, Mr Jones said.

He said the government was also looking at ways to standardise the reporting or “taxonomy” around green issues. Without these new measures, ASIC could only “catch out the most egregious examples of greenwashing”.

But Mr Jones said he believed there was broad support in the business sector for mandatory disclosure requirements for companies on their commitment to climate change.

“Most large businesses are already in the game,” he said.

“Mandatory reporting should be phased in over time both in terms of the entities covered and the reporting required.”

He said there was going to be a global competition for the billions of dollars needed to finance the transition to a net zero economy by 2050.

“It will require a massive shift in investment which will involve trillions of dollars a year,” he said.

“There is going to be a global competition for capital. If you are not in the game, you will be dragging behind.”