The 2021 IPCC Report found that the Earth is likely to warm by 1.5C by 2030. However, most net zero deadlines are not until 2050—this discrepancy means that urgent action on climate change, clean energy and decarbonisation is needed now. This requires a huge ‘transition’ at scale and speed—but it will go further than this.
Given our climate trajectory, businesses also need to develop climate resilience and the ability to manage the physical risks of an inevitably warmer planet.
This is the decade to deliver. Our climate future will be determined by our decarbonisation decisions and actions at this precise juncture. Time is not on our side and this is a call to action. How quickly can we adapt to the decarbonisation transition and how resilient to climate change can we become?
A transition roadmap
More than 130 nations as well as businesses operating in every sector, in every industry, across the world have now set or are considering a net zero commitment. Australia just committed to net zero by 2050 after much political wrangling. However, our climate crisis also demands that the commitments go beyond rhetoric and are matched by immediate decisions and actions.
Nations, businesses and communities all have a role to play in the transition:
- Nations: it is only Government that can provide an overall framework of policies, regulatory reform, global partnerships and investment and innovation incentives to position Australia to meet its commitments.
To not be leap-frogged by other nations in the clean energy world, Australia will also need to emulate the leadership of the United States and the European Union who are keeping 1.5C within reach through short and medium term reduction objectives and serious clean energy policy and regulatory reform.
- Business: bold decarbonisation decisions and actions by the clean energy pioneers have revolutionised global energy supply chains and are spawning development of the clean energy infrastructure of the future, such as large scale onshore and offshore renewable energy and hydrogen production facilities.
But the shift to sustainability must be made by every business, along its entire supply and value chain. This will differentiate a business that is part of the solution to our climate crisis from those that will become diminishing suppliers to the global marketplace.
- Community: the unrelenting pace and nature of change in 2021 evidences that the public voice has been heard. Community action and civil society attitudes will shape political will to influence a coherent, effective and just transition.
By way of example, just like Australia’s LNG industry, building a green hydrogen industry in Australia will take decades. However, for green hydrogen and ammonia to be delivered at scale to the global market in the second half of this decade, the investment is required today. The challenge for our nation is to drive cost competitiveness and attract capital and innovation for green hydrogen to be produced in Australia for under $2/kg before others in the global race to net zero.
Not only will today’s decarbonisation decisions and actions determine if Australia emerges from the transition as a green energy superpower, they will also determine to what extent we will all be left dealing with the devastating consequences of climate damaged business models and economies.
Climate change resilience
Currently, Earth is headed towards a climate in which extreme weather events will become commonplace. The Paris Agreement aims for less than 2C by 2050 but the UN’s Emissions Gap Report has current pledges seeing the world warm by 2.7C this century. Even if we meet less than 2C, businesses will still need to be resilient to the physical effects of climate change, which will still be severe.
In order to withstand climate change impacts, businesses will need to:
- Infrastructure: ensure infrastructure decisions factor in future climatic changes. In Canada, special wind turbines are designed to withstand the freezing temperatures of the Arctic; in Australia, the issue will be more frequent heatwaves, cyclones and rising sea levels.
- Workforce: ensure the role of human capital remains viable and productive in harsher climates. Indeed, a major mining company in the Pilbara was recently fined for exposing workers to working conditions over two days where temperatures reached over 37 degrees, resulting in the death of one worker.
- Diversity of energy sources: build energy systems that can accommodate a mix of clean energy derived from renewables and hydrogen. In a deeply electrified economy, hydrogen promises to provide vital ‘deep’ storage back-up during renewable energy droughts or if weather events damage energy systems. In this way, hydrogen’s role may go beyond decarbonising grids and the hardest to abate sectors.
- Community engagement: ensure they are meeting or helping to shape community expectations, as they could otherwise lose their social licence to operate, which could be value destructive.
If we do not adapt to this challenge, we will be left behind, facing lost growth opportunities and productivity, and paying for climate-damaged businesses. The clean energy transition holds enormous economic opportunity and promise: we all stand to gain significantly.