A strong future Australian economy can be created by embracing a low emissions economy, and risks sacrificing much of its economic advantages if its doesn’t, according to one of Australia’s leading economists.
Addressing the Stimulus Summit co-hosted by the Smart Energy Council and RenewEconomy, leading economist Professor Ross Garnaut said that there is an increasing appreciation of the benefits of acting on climate change, and the opportunities that exist in accelerating the transition to a clean energy economy.
Expressing optimism about the opportunities that exist in a transition to zero net emissions, Garnaut said that the transition provides a way for Australia to invest in future industries, while also supporting the economy to recover after the impacts of Covid-19.
Garnaut, who undertook a comprehensive review of climate change science and policy for the Rudd government in 2007, said that the economics of action on climate change had significantly improved in the period since the review was completed, as well as our understanding of the responsibilities of governments and the business sector to consider the long term impacts of climate change.
“The biggest change in the dozen years from my detailed analysis and recommendations was that it became clear that the cost of moving to zero emissions was going to be much lower than my modelling anticipated back then,” Garnaut told the Stimulus Summit.
“Not only would the cost of going to zero emissions be much lower, but it would be especially low in Australia, and then Australia would have special advantages in many economic activities as the world moves towards zero emissions.
Garnaut added that he believed that the fundamental science of climate change has not changed since his landmark review and that the economic and ethical need to act on climate change had only become clearer.
“The science hadn’t changed much, and there’s been a lot of good science since 2008. It has mainly confirmed average expectations about the impact of climate change and reduced uncertainty, without greatly changing reasonable expectations,” Garnaut said.
“There have been large changes in our understanding of our sensitivity to the ethics of climate change. Climate change is an unusual issue and requires us to think about how our actions today affect people a long way away in time and in geography, our societies and the ethical systems around which our societies have been built, have not been used to thinking about those timeframes.”
According to Garnaut, it was no longer a question about choosing between the costs of action and the costs of not acting on climate change, but rather that it was crucial to recognise that taking action to reduce emissions and investing in clean technologies would generate positive outcomes for the Australian economy in the long-term.
“A dozen years ago, it seemed that it would be an expensive path to get to zero emissions in time to hold temperature increases to two degrees, but based on my detailed modelling, it is a path that we should take because the costs of not getting there would be greater than the costs of making the adjustments to get there,” Garnaut told the Stimulus Summit.
“Now, I would say that the costs of accelerating the transition are very low for Australia, and if we do it right, those costs will be negative.”
Garnaut stressed that it was crucial that Australia was proactive in transitioning major industrial processes, including the extraction and processing of metals and minerals, as Australia was running the risk of being stuck with uncompetitive industries, and missing out on future opportunities under a carbon constrained global economy.
Garnaut cited the dramatic cost reductions achieved in both solar and battery storage technologies as some of the developments that have fundamentally changed the economics of the energy sector in Australia.
“It’s quite clear now that supply of large industrial projects from 100% renewables projects firmed by whatever technology is our lowest cost in particular circumstances is the low cost path to global competitiveness in a wide range of energy using industries,” Garnaut said.
“This is especially important in Australia because Australia is by far the world’s main source of many of the mineral minerals that require huge amounts of energy in their processing into metals.”
“In the zero emissions world economy, we’re rapidly losing whatever advantages we have in the high cost thermal energy economy,” Garnaut added.
Garnaut predicted that the Covid-19 responses might lead to an accelerated exit for many coal-fired generators across Australia. According to Garnaut, reduced demand and the increasing competitiveness of renewable energy technologies could push older coal generators out of the market.
“There’ll be increased supply of renewable electricity in Australia at the same time as total demand is down. That’s putting a great pressure on coal base generation, which is experiencing very low prices in the wholesale market and reduced quantities,” Garnaut said.
“The natural economic thing is for there to be early closure of more coal generation in these circumstances. I don’t think there’ll be a quick return to growth in total electricity demand.”
“In the next few years, there’ll be great, increased, pressure on closure of thermal power generation and once closed, those plants will not reopen, those technologies cannot compete with renewable technologies,” Garnaut added.
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