The Australian Government’s clean energy carbon pricing reform package provides welcome incentives and certainty to industry, investors, trading partners and the broader community by signaling that Australia is now committed to becoming a clean energy economy.
It will have important flow on effects for the electricity sector, renewable energy investment, business transformation, employment, training, and workforce development.
Crucially, it will reinvigorate a broader sustainability agenda by unleashing a raft of microeconomic reforms encompassing social, economic, and environmental changes that will transform the way we live and work, and what we value.
Assuming it isn’t rescinded by an Abbott led government, these reforms will catalyse our economy to set us on a path of sustainable prosperity.
This reform is well overdue. Despite its reputation as a sophisticated modern economy, export earnings from minerals, natural gas, agriculture and tourism have largely underwritten Australia’s economic growth in the recent decades. In crude terms, the nation’s economic value is priced on it being a quarry, a farm and popular holiday destination.
In his 2009 essay, ‘Pain on the road to recovery’, former Prime Minister Kevin Rudd said this was an unsustainable growth strategy. In his view, Australia needed to prepare for a future “beyond mining booms” by launching a new global competiveness strategy.
Rudd observed that Australia couldn’t sustain strong economic growth and ongoing improvements in living standards without lifting its productive capacity. Nor could it lift its global competitiveness, which has been sliding for the past decade.
Australia was one of only a few nations to escape the worst of the global financial crisis by borrowing heavily to stimulate the economy, jobs and investment. That crisis is still shaking economies across the globe and we will not be immune to a double dip recession, if there is one.
Despite low unemployment, positive trade terms and a strong currency, the nation has an ageing population and workforce, and we face an array of funding and environmental challenges in areas such as healthcare, retirement income, infrastructure, water scarcity and energy security.
Prime Minister Julia Gillard has accepted the challenge put by her predecessor, Kevin Rudd. She has shown that she is intent on reforming the economy by announcing a clean energy carbon pricing package that promises to put the nation on a path of innovation-led productivity and growth, rather than risk being at the mercy of cyclical windfalls from mining booms and global factors beyond the nation’s control.
Pricing carbon will hasten and reward capital investment in renewable and less carbon intensive forms of energy. This is well overdue – for too long stalling investment has put a brake on clean energy alternatives by large carbon emitters in sectors like mining, manufacturing, transport, commercial property, and power generation.
Critically, the reforms will hasten widespread adoption of energy efficiency behaviours and programs that will reduce our greenhouse emissions and make our economy more internationally competitive in a global trading environment where carbon embedded products and services will become less price competitive.
Taxing carbon and moving to a domestic carbon emissions trading scheme will cause short term pain and competitive pressures for our emissions intensive trade exposed sectors, such as coal, gas, steel and aluminium manufacturing, especially if the rest of the world is slow to move to carbon-trading. But change is coming and international markets that price carbon will irrevocably damage Australia’s terms of trade given our historical reliance on the export of carbon-based commodities.
In the US and the UK, companies such as Marks & Spencer, Nike, Target, Cisco, Campbell’s Soup, Hilton, TXU Energy, and Chrysler have reported saving tens of millions of dollars by adopting renewable energy, energy efficiency and recycling schemes.
Large Australian companies are cutting costs by taking a business approach to their environmental and corporate social responsibility obligations. Companies such as CSL, GPT Group, Metcash, Westpac, BHP Billiton, AGL Energy, Westfield and Telstra have been recognised internationally for their leadership in the way they measure, manage, report and reduce their greenhouse gas emissions.
The carbon tax will affect more than Australia’s top 500 biggest carbon emitters. All businesses now need to identify and quantify the direct and indirect cost impacts of the tax, including its impacts on their energy bills and supply chains, and their ability to absorb or pass on costs. This will require new expertise and tools for assessing how and where to target carbon abatement and energy efficiency initiatives.
Investors are now factoring carbon disclosure and climate change risks into funds management decisions. For example, the Carbon Disclosure Project (CDP) managed by the Investor Group on Climate Change represents institutional investors with total funds under management of about $AUD600 billion.
For the past decade, the CDP has surveyed the worlds’ largest listed companies on how they are managing climate change risks and carbon emissions. Some 3,000 organizations in some 60 countries now report to the CDP and its findings are distributed to institutional investors, corporations, governments and the public.
New figures published by market analyst form, Verdantix, reveal that investment in business sustainability reforms in Australia will reach $2.9bn within two years. This investment by our largest 140 companies covers major cost saving programs in energy efficiency, carbon management, sustainable supply chains, clean technology and sustainable product innovation.
Australia has a strong tradition of innovation and investment. We have the brains, resources and institutions to transform our economy and continue our prosperity. After several false dawns the politics of climate change has taken root in our political leadership.
The author of this article is Dan Gaffney of CarbonSystems.