Treasury Secretary Steven Kennedy says the uncertainty surrounding climate policy in Australia has done significant damage to the decarbonisation effort, undermining trust among business and the community while driving up transition costs.
Australia had policies in place to achieve its 43 per cent emissions reduction target by 2030 and was on track to achieve it, but Dr Kennedy warned that “implementation risks remain”.
“Beyond 2030, the task will get harder again. Achieving net zero by 2050 will require a further round of policies to drive the necessary emissions reductions in harder to abate sectors. New technology breakthroughs will be critical to achieve this,” he said.
There was unlikely to be a consensus on a market carbon pricing mechanism so most governments were instead pursuing a suite of policies, comprising market mechanisms, regulations, incentives, subsidies and tax expenditures to drive decarbonisation.
“There are real challenges in ensuring such approaches deliver the most efficient transition but nonetheless they can be effective in driving the needed transition, if well designed,” he said.
The comments were made in a speech unpacking the national interest framework that will underpin the government’s flagship Made in Australia policy, and which the government has committed to legislating later this year.
Delivering the keynote address at the United States Studies Centre’s conference in Sydney on Wednesday, Dr Kennedy said the national interest framework’s “net zero transformation stream” would allow the government to identify the domestic sectors best able to contribute to emissions reduction at an efficient cost and in areas of long-term comparative advantage.
Dr Kennedy said the most obvious area where Australia had a role to play at the global level was “in the supply of critical minerals” essential to the decarbonisation effort.
“Australia is one of only a few countries around the world with the natural resources, industry expertise and trusted trading relationships to fill this role,” he said.
“China controls 40 per cent of the world’s rare earth element reserves, accounts for 69 per cent of mined production and around 90 per cent of processing,” he said. “Even where its reserves are relatively modest, such as with nickel, it still accounts for around 28 per cent of global processing, and more, once ownership of foreign assets is considered.”
Dr Kennedy said this meant that the ability to respond to a supply shock was limited and that its consequences would be significant.
“This makes the arguments for government intervention compelling,” he said. “Importantly, this is not a situation where classic trade theory can, or should, be applied in a simplistic or naive manner.”
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