Australia Is a Net Zero Embarrassment
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Australia is a net zero embarrassment afr.com/chanticleer/australia-is-a-net-zero-embarrassment-20201124-p56hg6 November 24, 2020 Chanticleer Australia's pathway to net zero carbon emissions by 2050 is littered with massive challenges. But the sooner we start the better it will be for the economy and potentially geopolitical relations. Nov 25, 2020 – 12.00am Day two of The Australian Financial Review Energy & Climate Summit put a harsh spotlight on the Morrison government's refusal to commit to net zero carbon emissions by 2050. Numerous speakers from business, politics and the investment community drew attention, either directly or indirectly, to Australia's increasing isolation on the issue of net zero by 2050. Australia is now out of step with our largest trading partners in Asia, about 60 other countries, the institutional investment community and a growing number of the world's largest industrial and technology companies. Prime Minister Scott Morrison's intransigence is garnering criticism from members of his own party, in particular the Liberal elder statesmen and women frustrated by the lack of action on an issue that is critical to younger voters. It was no surprise to hear former prime minister Malcolm Turnbull at the summit criticising Morrison's purely political approach to climate change. What is less well understood is the groundswell of criticism of Morrison's stance from once powerful conservative voices. A recent paper on energy reform by the Blueprint Institute, which was formed this year, warned that failing to commit soon to net-zero by 2050 will "diminish our international standing, and harm our competitiveness". Blueprint Institute's strategic council includes former Howard government environment minister Robert Hill and former Morrison government minister Christopher Pyne. Support for a net zero emissions target for 2050 has come from the Coalition for Conservatives which has seven ambassadors including Hill, Turnbull, former NSW premier Nick Greiner, former Howard government minister Philip Ruddock, former NSW Liberal state president Christine McDiven and former NSW environment minister Robyn Parker. 1/4 Rather than hide from Australia's global net zero embarrassment, these Liberal true believers are relying on science and analysis to change the prevailing views in Canberra. Domestic political forces have failed to sway Morrison towards a more enlightened climate change policy, but perhaps global geopolitics will given he is on a collision course with US President-elect Joe Biden. COVID-19 a catalyst Chris Ashton, the global chief executive of engineering group Worley, made three insightful observations which ought to make their way to Morrison's desk before he next talks to Biden. First, he said that COVID-19 had been a catalyst for an acceleration in the transition to a lower carbon economy. This is significant given that the global financial crisis in 2009 put a dead weight on climate change action for about five or six years. "COVID-19 has had a dramatic impact on the world's energy consumption, with the IMF indicating that the pandemic crushed global economic activity by 7 per cent, shifting from a forecast growth of 3 per cent to what looks more like a contraction of 4 per cent in 2020," Ashton said. "However, while overall energy demand may have reduced, the energy transition mega- trend has continued. History has shown sharp disruptions, such as the pandemic, are often seen as accelerators of structural change." Ashton said the pandemic would be seen as a catalyst for an inflection point in fossil fuel consumption. He quoted the latest updated forecasts from a leading Norwegian energy risk group, which has brought forward the peak of fossil fuel consumption from 2027 to 2020. In other words, a renewable energy train is coming and it would be irresponsible and irrational not to prepare the economy for it. Second, Ashton, who joined the summit via video from Worley's office in Houston, Texas, said that in a relatively short period of time the driver of the energy transition has shifted from a series of individual choices made by private citizens and their investment institutions to what is now the sovereign state. "The energy transition is... no longer a scenario – it is our reality," he said. Third, Ashton drew attention to the realpolitik of climate change. He believes Biden's climate policies played a part in the Democrats winning the election , which will give added passion to his ambitious carbon reduction targets. He said Biden's commitment to climate change and the energy transition is shown by the appointment of former secretary of state John Kerry as his climate change tzar. 2/4 Kerry, who represented the US at the Paris Climate Accord talks, is familiar with Australia and, in the past, has shown little sympathy for carbon-intensive economies trying to shirk their global responsibilities on carbon reduction. Emma Herd, the chief executive of the Investor Group on Climate Change, told the summit a commitment to net zero emissions by 2050 was crucial to help the private sector lock in energy investments over the next few decades. "All Australian states have a commitment to net zero. All our major trading partners have a commitment to it, although China is by 2060," she said. "There is an increasing reliance [that] that's what we are heading towards, so why can't Australia commit to it? If it's so inevitable and we are going to adopt it, why don't we just adopt it?" Profound implications But Herd later told Chanticleer there would be profound implications for Australia's carbon reduction over the next decade if we moved to a 2050 net zero target. She said Australia's Paris Accord emissions reduction target of 26 to 28 per cent by 2030 would have to be upgraded to targeted reductions of at least 45 to 55 per cent by 2030 if we were to meet net zero by 2050. Herd says the impasse at the federal government level over 2050 reminds her of the situation in 2006 when all the states had emission trading schemes and the Howard government refused to act. Prime minister John Howard eventually rolled over and took an emission trading scheme policy to the December 2007 election, won by Kevin Rudd. Today, the stand-off over decarbonisation is usually framed in terms of preserving jobs and fossil fuel exports. But another way of looking at it is that the longer the government holds off on making a commitment to net zero by 2050, the less time there will be to plan for the significantly larger decarbonisation task to be achieved by 2030. Australia risks a disorderly transition to a low-carbon economy which could destabilise the financial system. This exact warning is contained in a report published this week by the Financial Stability Board. To get an idea of the scale of the energy transition facing the world and its potential impact upon Australia, you only need look at the International Energy Agency's World Energy Outlook 2020. It focuses on the transition required over the next 10 years to align with net zero by 2050 and reduce global CO2 emissions to 20.1 Gt/year by 2030. 3/4 The IEA said its scenario would require the following steps: primary energy demand falls by 17 per cent, coal demand falls by 60 per cent, and virtually no subcritical and supercritical coal plants without carbon capture and storage remain. The scenario requires oil demand to fall by 34 per cent and natural gas demand by 10 per cent. Renewables (not including hydro and bioenergy) demand needs to increase by 425 per cent, and worldwide annual solar photovoltaic (PV) additions to expand from 110GW to 500GW. Strategies for Australia Power sector investment annually nearly triples from $US760 billion ($1.03 billion) to $US2.2 trillion, with more than one third spent to expand, modernise and digitalise electricity networks and half spent in renewables. There are a number of strategies that Australia will have to pursue if it is to have a credible plan for meeting a net zero emissions target by 2050. Some tried and tested strategies were laid out in chapter three of this year's World Economic Outlook published by the International Monetary Fund. The IMF examined the carbon mitigation policies implemented in a large sample of countries over the past 25 years or so, and examined their roles in the shift from high- to low-carbon activities and what impact that had on overall activity. "The analysis focuses on the power sector, which was the target of many of these policies," the IMF said. "The second uses three macroeconomic models to examine mitigation policies needed to get to net zero emissions by 2050 and how to design them to be as growth friendly as possible. "The third part of the approach examines the distributional effects of mitigation policies by modelling their impact on both consumption and labour income of households. It also looks at different ways of using carbon revenues to mitigate the adverse effects on those whose livelihoods would be most affected." Tony Boyd is the Chanticleer columnist. He has more than 35 years' experience as a finance journalist. Connect with Tony on Twitter. Email Tony at [email protected] 4/4.