Submission: Targets set the direction and pace of policy ambition

Key points

1. Social licence is a significant factor in the successful adoption and implementation of any future climate policy. To fulfil obligations under the Climate Change Authority Act, the Authority should recommend the Government allocate at least $10 million a year to the Authority to undertake meaningful public consultation and communication on matters relevant to its functions.
2. Australia should not underestimate the power it has to stimulate global decarbonisation with its own Nationally Determined Contribution. Clear targets for clean industry exports in industries where Australia has comparative advantage and for the phase out of fossil fuel exports are needed to better inform future investment decisions. Phase out targets for fossil fuel exports will also support the transition to green energy infrastructure in our trade partners by signalling the direction of travel for one of their major energy suppliers.
3. Investors are seeking investment opportunities in a broad range of technologies and options, including those where Australia has a comparative advantage, including renewable energy, critical minerals and green hydrogen. The signals sent by the Future of Gas Strategy are inconsistent with recent Government statements to limiting climate change to 1.5oC and transitioning out of fossil fuels in the energy system by 2050. It also risks seeing capital that would not have otherwise been allocated going to emissions intensive activities, undermining an orderly transition and making meeting national targets more difficult. This will create stranded assets and increase the cost of national transition.
4. To support economy wide investment, mandates, rules, standards and public financing need to be embedded in investment-grade sector decarbonisation plans that add up to meeting national objectives. Actionable pathways will drive economic growth and attract investment while seizing on the net zero transition opportunities. Accordingly, investors have identified investable sector plans as their highest policy priority to attract capital to the transition in Australia.
5. Fiduciary duties and, in the case of Australian superannuation funds, legislation prevent most institutional investors from accepting below-market capital returns. This means that to invest in transition activities, investors must see them as viable and fundamentally sound business opportunities that meet stringent investment processes. Governments have a range of tools that can send strong market signals and create markets for new, clean products. When linked with green industry policy, ambitious decarbonisation targets send signals that can reshape economies. Effective industry policy includes push, pull, and enabling policies to shape demand and innovation.
6. Physical climate damages are very significantly under-priced in capital markets and the economy as a whole. Damages are significant already and will escalate with higher levels of global warming. Even if warming is limited to 1.5oC many critical systems that support investment will be at high risk requiring transformational adaptation actions. Warming above 1.5oC-2oC puts at risk the ability of Australia’s socio-economic systems to recover from compounding climate damages. To support private sector investment in transformational adaptation Governments should:
   1. Co-develop a finance strategy and plan to attract private investment into adaptation and resilience,
   2. Align adaptation across governments’ climate change activities,
   3. Facilitate public-private partnerships and develop frameworks to manage complex

      adaptation challenges,

   4. Develop and co-fund case studies for best practice private and public-private financing

      of adaptation and resilience,

   5. Legislate the National Adaptation Plan and National Climate Risk Assessment, and,
   6. Establish a coherent climate information, skills, and science strategy.
7. Finally, Australia cannot afford to be cautious. Australia has an opportunity to be bold, not because it should, but because it must. It is essential to wrestle back the capital that is otherwise being drawn to international jurisdictions with more established national economic policies and strategies. The purpose behind a target is not just to meet it, it is to drive ambition and innovation. IGCC would urge the Authority recommend to an ambitious target.