Two years ago, Climateworks Centre set up a group to focus on stimulating the Australian economy with climate-aligned measures to fend off a possible post-COVID recession. Now the Australian economy also faces global supply constraints, high inflation and commodity prices, as well as an energy crisis stemming from the Russia-Ukraine war. How can government, business and community leaders ensure our economy continues to transition towards net zero emissions?
In mid-2020, the economic impacts of the COVID pandemic were starting to become apparent. Action on climate was at risk of stalling in Australia as governments and businesses turned their attention to preventing a national economic crisis.
The country was facing two generation-defining challenges: recovering from the coronavirus pandemic and responding to climate change. If tackled together, Australia’s response to these challenges could create win-win outcomes for the economy and the climate. It was for this reason that Climateworks Centre partnered with the Centre for Policy Development – also working with Australian Industry Group, Pollination and the Australian Council of Trade Unions – to establish the Climate and Recovery Initiative (CRI).
The initiative brings together some of Australia’s most influential and established leaders. The group includes representatives from federal and state government treasury and climate change departments, the Reserve Bank of Australia, the Australian Prudential Regulation Authority, the Business Council of Australia, and non-government organisations such as the Investor Group on Climate Change and the Australian Council of Social Services.
The CRI identifies ways the nation’s COVID recovery effort can be aligned with a transition towards a net zero emissions economy. It arms decision makers with the tools they need to make decisions that benefit both the economy and the climate.
Since establishing the CRI, we have hosted eight roundtables (in which discussions are under the Chatham House Rule) and two public forums.
Here are some of the ways the group has championed key proposals for more coordinated and effective climate responses.
Renewable energy industrial precincts and regional transition planning
Discussions at CRI roundtables informed the idea of renewable energy industrial precincts (REIPs).
The concept is a response to the need to scale up and accelerate climate solutions in hard-to-abate sectors such as industry if Australian states and territories are to meet their net zero commitments.
REIPs are regions wherein a cluster of industrial businesses (e.g. manufacturers) are powered by 100 per cent renewable energy.
Businesses in these precincts access low-cost renewable energy with the support of a mix of public funding and finance, due to the precinct either being located within Renewable Energy Zones or connected to renewable energy generation through high voltage transmission lines.
REIPs will help carbon-intensive industries to capture the benefits of cheaper renewable energy, scale up the production of low carbon products and deliver bigger economic and employment impacts. As a result, Australia can rapidly harness significant competitive advantage in a decarbonising global economy.
Incorporating climate risk and resilience into public sector balance sheets
Soon after its establishment, the initiative identified an opportunity for a new process to build climate risk and resilience into public sector balance sheets, and a way to coordinate resources and expertise across governments.
The idea was to incorporate an explicit focus on climate risk as part of the formal agenda for Commonwealth-State intergovernmental working groups.
Some state governments are now considering how to disclose climate risks in budget processes, which reflects an increased emphasis on climate risk and resilience by state treasuries.
Discussions that keep focus on climate action and economic recovery
In 2021, in the lead up to COP26 in Glasgow, participants discussed five priority policy areas the group could pursue to encourage smart investments and lay the foundations for Australia’s long-term growth and prosperity:
- Securing Australia’s position in a green global economy.
A discussion was held with Paul Bodnar, former Senior Director at the U.S. National Security Council and Special Assistant to President Obama on international climate policy.
- A vision for jobs and transitions in key regions.
Discussions on design considerations for a ‘Carbon Transition Commission’ or other national transition planning effort, with lessons from Germany’s coal transition commission and Collie, WA.
- Accelerating key investments and accountability mechanisms.
Discussions on a coordinated approach to incorporate climate risk into government balance sheets, and global developments in mandatory reporting and shareholder advocacy.
- Building net zero potential for 2050.
Discussions on the landmark IEA report Net Zero by 2050 and Commonwealth progress towards COP26.
- Strengthening 2030 targets.
Presentations from the British High Commission and the UN Sustainable Solutions Development Network to kicked-off discussions of how the world will change over the next decade.
Co-investment financing models for climate-related initiatives
In an effort to stimulate a clean economic recovery, the group identified a significant opportunity for a federal and state government co-investment partnership to scale up supply chain responses in all clean technology markets across all Australian states and territories and all sectors of the Australian economy.
Investment opportunities would be identified using a multi-sector goal-oriented approach, using ‘reverse auction’ style competitive rounds to achieve scale that catalyses market supply chains.
The idea is that significantly more private sector finance could be leveraged with a financing approach tailored to meet commercial and private sector needs, including with risk-sharing instruments provided by public investors such as the CEFC.
A greater amount of overall private sector capital could deliver bigger economic and employment impacts, lowering economy-wide emissions and leading to greater resilience of the Australian economy.
Two years on, is the Australian economy more climate-aligned than since the initiative started?
All Australian state and territory governments are now committed to net zero emissions by 2050 or earlier.
In Australia, we have seen significant corporate commitments that will contribute to driving the transition:
- Tomago aluminium smelter announced plans to switch from coal and gas to renewables by 2029
- Newcrest mining, Transurban and 47 other ASX200 companies committed to net zero by 2050
- Aware Super announced plans to divest from companies failing to act on climate change risks
- Robeco Asset Management announced it would drop Australian bonds if the government does not address transition risk
More than 130 countries have now set or are considering a target of reducing emissions to net zero by 2050 and the Council of the European Union has agreed to instate a Carbon Border Adjustment Mechanism regulation, which may have future trade implications for Australia.
New challenges ahead
Despite this progress, there is no room for complacency.
The global landscape now looks quite different to two years ago, with significant global supply constraints, high inflation and commodity prices, and an energy crisis stemming from the Russia-Ukraine war.
The latest stakeholder roundtable held a few weeks ago turned its attention to climate-aligned measures that can ease supply chain constraints and reduce demand, so that we don’t see a stepping back of the recent progress we have made on the climate transition.