Net-zero target optimises clean-energy opportunities

As Australia prepares for the COP26 Climate Change Conference in Glasgow in three weeks, the Morrison government faces a delicate political decision with far-reaching consequences on whether or not to declare a formal net-zero greenhouse gas emissions target for 2050. The political risks must be weighed against the enormous potential opportunity that exists in meeting the technological challenge to deliver the energy and resources of the future to the world. On one measure, declaring a 2050 target is of little practical difference to what has already been set out by the government and in Australia’s ratification of the Paris Agreement. Symbolically, however, there is a world of difference. By not declaring a net-zero target Australia stands accused of pushing against good citizenship and global opinion. The forces encouraging a declaration now include leading business organisations and financial institutions that will dictate where trillions of dollars of global capital will be allocated into the future. To date, the federal government has stuck to a pragmatic line that it will make sure that promises made can be delivered.

The Morrison government says it already is committed to a net-zero target and is working on a road map to get there, hopefully by 2050. This is not sufficient for those enthused by the global push for climate change action or for hard-headed business leaders who see great opportunity in joining more forcefully the momentum for change. The difficulty is that opportunity is not equally shared and there will be losers as well as winners along the way. The extent of potential hardship is starting to hit home in Europe and will become more evident once the Glasgow meeting has receded into the past. Another dilemma is that the world’s biggest emissions nations, China and India, will continue to grow their emissions.

Another reality is that in Australia, climate change politics has a habit of changing governments and leaders. It is abundantly clear that to arrive at a satisfactory position ahead of Glasgow the federal Liberal Party must reach agreement with its Coalition partner. The Nationals are seeking an assurance there will be no unfair burden placed on rural constituents. This fits neatly, ironically, with the United Nations’ favoured framework of a “just transition” away from fossil-fuel industries. But it will come at some cost.

Overall, the government’s argument that climate change must be tackled with “technology not taxes’’ is the politically astute one. The big economic opportunity lies in supplying the energy resources of the future, an area in which Australia has a natural advantage. Encouraging investment and technological advancement to bring the cost of clean hydrogen, green steel, energy storage and carbon capture to commercial parity will position Australia well.

The immediate challenge is to ensure Australia’s actions and endeavours are properly understood. As Josh Frydenberg warned in his recent address to the AI Group, “we cannot run the risk that markets falsely assume we are not transitioning in line with the rest of the world”.

Our track record on delivering our commitments is solid. Not only did we exceed our 2020 Kyoto commitments, we are on the way to beating our Paris commitment to cut emissions by 26 to 28 per cent below 2005 levels by 2030. Emissions are down by more than 20 per cent since 2005. That is faster than the OECD average, and faster than comparable countries such as the US, Japan, Canada and New Zealand. One in four Australian households has solar panels, the highest rate on a per capita basis anywhere in the world.

Fourteen of Australia’s 20 largest trading partners have committed to net-zero emissions by mid-century and are shifting away from carbon-intensive imports. Modelling suggests a shift to a clean economy would boost GDP by $890bn and add 195,000 jobs over the next 50 years.

Nobody is pretending the politics of net zero are simple. Nor should anyone assume that declaring a net-zero target will placate those who will immediately seek much stronger near-term targets. The government must stick to its main theme that whatever is announced will include a credible road map to get there. The key message is Australia is on the pathway to carbon neutrality — that is, net-zero emissions. The government’s goal has been to get there as soon as possible. But, like the Business Council of Australia, the Minerals Council of Australia and the National Farmers Federation, The Australian believes it is prudent to set net-zero emissions by 2050 as a national goal.

The diplomatic and financial cost of not doing so is high and the political risk for Scott Morrison, by striking the right deal with the Nationals to protect jobs and livelihoods in the regions, is manageable but tricky: How best to pacify the extremists on the left and the right while delivering a credible policy that satisfies a modern, mainstream Australia.