The National Reform Summit held this week was an important opportunity to drive consensus on how to respond to the big issues impacting Australia’s future prosperity. But, while it was whispered on the sidelines, one of the single largest impacts for future economic growth was missing from the final draft statement – climate change.
Climate change is one the most significant structural reforms currently taking place across the global economy. The need to limit global warming to two degrees is moving capital and changing the way industry operates. Whether technological, regulatory or market-based reform, the risks and opportunities of climate change will impact all industry sectors at all levels of the economy.
Greater consensus and the need for government, business and the community to partner on how best to position Australia in this changing competitive landscape is critical if we are to ensure Australia’s future prosperity. And we need to start hardwiring it into our decisions.
The Investor Group on Climate Change represents institutional investors with over $1 trillion in funds under management. Investors are engaged because financial research consistently shows that there are significant economic benefits to be had for nations which facilitate investment into low carbon technologies and infrastructure. Experience in the US also shows that new industries can be jobs rich, if done right. Increasing Australia’s attractiveness for global capital seeking low carbon investment opportunities has to be part of our economic future.
But whether we choose to act or not, climate change costs the economy. The OECD estimates that global GDP losses from climate change inaction range from between 0.7% to 2.5% in 2060. A recent report by Citi research found that failure to act on reducing global warming will create environmental liabilities of around $44 trillion in ‘lost’ GDP.
The recent economic modelling undertaken for the National Emissions Reduction Taskforce found that commitments already made by other nations will impact economic growth in Australia with GDP 0.16% lower in 2030.
The draft statement from the Reform Summit states “We believe in sustainable economic growth and the creation of high-quality jobs, with shared prosperity that improves the quality of life for all”. It is hard to see how climate change could not be considered in this context.
Economic and social reform will enable governments to invest in the long term prosperity of the nation and protect the social safety net and it will take place against a global backdrop of rapid economic growth in developing nations, including technological change with profound impacts on business models and how we work. All principles from the draft reform summit statement, and all equally applicable to the impacts of climate change.
We need to get better at thinking of carbon competitiveness and energy productivity as fundamental to economic prosperity in the next century. We need to get better at embedding emissions reductions into all of our investment decisions, public and private. And we need to get better at thinking through the social implications for jobs and communities of moving into a global economy defined by two degrees Celsius.
Economic growth and environmental protection are not in competition – they are inexorably intertwined. Effective climate change policy must also deliver increased productivity and intergenerational equity.
If Australia is to move forward into a low carbon future with confidence, we need to build consensus on the right policy agenda which incorporates the other, great reform of our time, climate change.