The Trouble with Targets
What should Australia’s fair share in the race to net zero be? A 43% reduction in greenhouse gas emissions on 2005 levels by 2030, with eventual net zero by 2050 is a start, but the reality is twofold. Firstly, it is probably too slow, and, secondly, even if Australia were to reduce its emissions tomorrow by 100%, our actual impact towards climate change will still, alone, be almost negligible. Getting Australia to net zero as rapidly as possible should only be a first step in this race.
It is time to take a realistic view of our actual impact, our potential broader contributions to the global challenge, and to make uniquely Australian decisions on how to maximise both the global climate benefits, as well as the Australian economic advantages.
With over a hundred years of reliance on fossil fuels for economic prosperity and energy generation, our sudden shift to renewables is difficult. High transition costs raise opaque questions as to who should fund at-risk capital, and who should bear key risks in our increasingly complicated and electrified system.
It is a balancing act to ensure funding is efficiently allocated and available, within a stable financial and economic framework. “Rewiring the Nation”, with its $20 billion dollar commitment is a strong step in the right direction. However, there are many market risks in regulation which sit almost wholly with the private sector under current regulatory design. Consider the absorption of marginal loss factors, and the passing on of escalating labour and material costs (or even of broader system stability costs).
Private capital is repowering a cleanly-energised Australia and to accelerate this capital deployment, regulatory frameworks and discretion should enhance certainty and stability, rather than be regressive.
Exploring New Energy Sources
We also do not necessarily have the luxury to select how we get to net zero. Despite our brave rush towards renewable energy over the past decade, it is instructive that even today, States like NSW are regularly relying on fossil fuels for almost 80% of their daily electricity source. While there seems little doubt the backbone of our transition should be wind and solar, it makes little sense to leave other options off the table purely for historic or political reasons especially.
An egregious example of political wayside-ing in the energy debate is the treatment of nuclear power. Firstly, a historic Liberal government’s arbitrary moratorium on the use of nuclear energy inhibits any meaningful private sector evaluation of how such generation could feasibly be considered for Australian gain. Secondly, a not infrequent contemporary attitude seems to seek to stifle meaningful debate on this topic, along historic environmental or political viewpoints.
Both factors diminish our ability to meet the challenge of net zero.
In a time of environmental (and therefore also economic) potential crisis, a spirit of open-mindedness should guide our actions as we seek to accelerate towards net-zero. Nuclear generation has potential for other broad Australian economic benefits through resources exports (as other nations commit or recommit to this new generation technology), and defence and waste sector innovations.
Incentivising on a Global Scale
Our ability to invest in our neighbours and our per capita wealth means Australia has some luxury in choosing where our money goes and how we spend it.
Many major economies are leveraging this ability to globally incentivise greener policies. Take for example, the US-Australia critical minerals collaboration which includes building supply chains for electric vehicles and cooperating on the establishment of new Environmental, Social and Governance (ESG) and traceability standards to ensure responsible sourcing of critical minerals.
Working with our neighbours is, in the Australian context, the next frontier in the net zero challenge.
One nascent solution, borrowing from the EU, is a carbon border adjustment. Impose an adjustment on incoming and outgoing goods to match costs that would have applied due to regulatory costs for carbon-intensive products, had production of the incoming goods remained in Australia. Levelling the playing field for domestic manufacturers and producers whose country is ‘doing the right thing on carbon’ seems to make sense in what should ultimately become a global race for a truly global net zero.
Another idea, old now but not widespread at all, is an internationally standardised carbon emission label for consumer products. Giving people the necessary information to vote their dollars on carbon when purchasing both empowers consumers and creates the information necessary to support broader-scale multilateral efforts towards net zero.
In other words
Setting a goal of achieving net zero is the bare minimum, it is time to stop thinking of a transition to net-zero as merely a target to reach. We need to acknowledge that, globally at least, achieving net zero is not just switching to more wind or solar in the Australian context. We need to make uniquely Australian decisions on how to best manage the risks of this challenge, do more to encourage and stabilise investment, diversify our energy supply while playing to our actual and potential economic strengths, and, critically, use our global influence.