Editorial. Hard lessons on climate action keep coming

Some of the world’s biggest carmakers are in financial peril due to overly ambitious government plans for electric vehicles that did not match up with consumer realities. Air New Zealand has scrapped its 2030 climate targets as unachievable. The lithium market, along with nickel, has popped. And almost one-third of Australian companies are walking back their expectations of being carbon neutral by 2050. It is further confirmation, if any were needed, that for corporate leaders, jumping on the ESG bandwagon is not as easy or profitable as was hoped. One lesson here for government is that predicting the future, and picking industry winners, can appear very different on paper and in reality. Another lesson, as billionaire miner Andrew Forrest has recently shown in his decision to abandon overly inflated hydrogen ambitions, is that when economics demands it, the private sector can quickly change tack, something governments are loath to do.

This is all relevant given the Albanese government’s determination to double down on Australia’s climate targets against all evidence that meeting those already set is dubious at best. Air New Zealand had hoped to achieve a reduction in its carbon intensity through a combination of a switch to sustainable aviation fuel, lower-emissions aircraft and other changes. The company has now realised these advances owe more to hope than experience. Meanwhile, not all companies are as engaged in decarbonisation as the headlines would suggest. A survey of more than 500 companies from Schneider Electric says 28 per cent have no intention of meeting their Paris Agreement-linked commitments. A further 42 per cent say they have not begun decarbonising their operations. These companies are on a collision course with newly mandated climate-related financial disclosures that will penalise non-performers. From next year, Australia’s biggest companies will be forced to reveal extensive information on climate-related issues including governance, strategies, risk management and targets. Small businesses will not escape the net because large companies will have to include the carbon performance of their customers and suppliers.

As carmakers are finding out to their financial dismay, government mandate does not always translate into customers doing what they are supposed to do. Mercedes, Ford, Porsche and Tesla are finding out the hard way that the EV revolution has unexpected costs that can often hand a competitive advantage to China.