Global warming a $420bn long-term threat, report says

A failure to restrict global warming to 2 degrees or less over the coming four decades will cost the Australian economy hundreds of billions of dollars, the Intergenerational Report will say.

More frequent and severe storms are expected to wash more of our beaches away, hurting tourism. Picture: Ashleigh Tullis

Failing to restrict global warming to 2C or less over the next four decades will cost the Australian economy hundreds of billions of dollars, as higher temperatures sap worker productivity, reduce crop yields and hit the tourist trade as the country’s beaches are washed away.

Treasury projections included in Thursday’s Intergenerational Report will highlight the long-term threat from climate change to the nation’s economy and budget if global action is insufficient to meet targets set out in the Paris Agreement.

If global temperatures increase beyond 2C above pre-­industrial levels, by 2063 more frequent and severe natural disasters as a result of climate change will drive a three-fold increase in commonwealth spending on its disaster recovery program, the IGR will show. “The direct impacts of higher temperatures on how we work are just one of the channels through which climate change will impact labour productivity, but one which could be significant,” the report will say.

“If global temperatures were to increase by up to 3C or over 4C, without adaptive changes to current ways of working, Australia’s aggregate labour productivity levels could decrease by 0.2 to 0.8 per cent by 2063.

“This is a significant economic cost, reducing economic output over this period by between $135bn and $423bn in today’s dollars, through the direct impacts of higher temperatures on labour productivity.”

The report will also warn of a hit to agriculture, saying “in the absence of adaptation measures Australian crop yields could be up to 4 per cent lower by 2063 in a scenario where global mitigation does not keep temperature increases below 3C this century”.

“These yield reductions could be largely avoided if global temperatures rise less than 2C, demonstrating the significant cost of not taking action to reduce emissions,” the report will say.

The IGR will also show how, under a 2C warming scenario, international demand for Australian thermal coal exports could be about 50 per cent of current volumes by 2063.

Australia does stand to benefit from a boom in demand for minerals that will be essential to the green energy transition, the report will say.

If the world moves more quickly and successfully limits global warming to 1.5C, demand for coal as a fossil fuel would be just 1 per cent of current levels in four decades’ time.

In contrast, global demand for lithium in this scenario would be more than eight times higher, Treasury estimates.

The IGR will highlight that global demand for these critical minerals – which include nickel, zinc and bauxite – will increase by about 350 per cent by 2040 as the world moves to the net zero emission target by 2050.

All the minerals are essential for the production of clean energy technology such as electric vehicles and batteries.

Jim Chalmers said “we have just what the world needs, just when the world needs it, and that’s what the Intergenerational Report has confirmed”.

“We have the chance to do more than just rip and ship our minerals – we can mine, refine and manufacture them as well, creating more jobs and opportunities for more Australians into the future,” the Treasurer said.

“This is our big chance and our big opportunity to deepen and broaden our industrial base and usher in a new era of economic prosperity for our country.”

The government has committed $3.5bn as part of a critical minerals strategy to support growth in homegrown industries associated with these resources to capture more of the value chain here.