A new report from Deloitte Access Economics suggests that the Australian economy could be up to $3.4 trillion worse off by 2070 if it and other countries fail to act on global warming, and could miss out on more than 250,000 new jobs that could be created through a transition to zero net emissions.
In its new report, Deloitte Access Economics warns that the impacts of global warming on the Australian economy, based on the world’s current trajectory, could dwarf the impacts currently being experienced due to the Covid-19 pandemic, and that industries that have been hit hardest by Covid-19 lockdowns are also some of the most vulnerable to the impacts of climate change.
Deloitte’s analysis is based on a scenario where the world warms by more than 3 degrees by 2070, a trajectory that would see a reduction in Australia’s economic growth of around 3 per cent per year, and create 880,000 fewer jobs.
The warning is a potent one for Australia, which has sought to hide under the coat-tails of the two leading economies, China and the US, for its go-slow response to climate change. This report makes clear that this is a bad idea – firstly because it means Australia failed to seize the opportunities for the clean energy transition, and then gets hit by the impacts of a changing climate.
“Over the next 50 years, unchecked climate change will, in average annual terms, reduce Australia’s economic growth by 3% per year and cost around 310,000 jobs per year,” the report says.
“Deloitte Access Economics estimates by 2070, the economic cost of this will have doubled on average, shrinking Australia’s GDP by 6% – a $3.4 trillion loss in GDP in present value terms. Such economic losses are nearly equal to the impacts of Covid on the Australian economy today, occurring by 2055.”
“Let’s repeat that: by 2055 Australia will experience economic losses on par with Covid, getting worse every single year due to unchecked climate change.”
In contrast, Deloitte projected that under a scenario where the world is able to keep global warming within safe limits, an embrace of transition to a zero-emissions economy in Australia could see the addition of more than 250,000 jobs, and grow the economy by as much as $680 billion over the next 50 years.
The hardest-hit industries include trade and tourism, expected to be $500 billion worse off, a loss of Australian manufacturing worth $330 billion and $350 billion in lost activity in Australia’s mining sector. Reflecting losses across these industries, Deloitte highlights that it is Queensland, Western Australia and the Northern Territory that are expected to be the most impacted Australian jurisdictions.
“The economic fundamentals that make Australia strong today, are equally what can expose the economy to disruption and change,” the report says. “Agriculture, construction, manufacturing, tourism related industries and mining all feature consistently across the three risk categories: Covid economic risk, climate change risk and economic disruption risk.”
Conversely, Queensland would be one of the biggest winners under a transition to zero net emissions, with more than 185,000 new jobs added, the vast majority of new jobs created under a zero emissions transition scenario, with both Queensland and the Northern Territory forecast to achieve a 5 per cent boost to gross state product.
Deloitte expects that ‘locked-in’ global warming, that is set to occur based on current greenhouse gas concentrations is expected to create a $23 billion a year drag on the Australian economy, but that the net cost of transitioning to zero net emissions would be around $67 billion by 2050.
The report follows the release of the recommendations of the Royal Commission into National Natural Disaster Arrangements, which found that Australia’s 2019-20 bushfire season alone claimed the lives of 33 people, destroyed 3,000 homes and caused an estimated $10 billion in financial losses.
“A $67 billion economic cost to transform the economy by 2050 is a small price to pay, relative to the size of our economy,” the report says. “In dollar terms, for comparison, the current JobKeeper program is costing the federal budget just over $65 billion this year alone – and this is the necessary price Australia is paying to minimise the worst economic consequences of Covid.”
According to the Climate Action Tracker initiative, current government policy settings has the world on track for between 2.1 and 3.9 degrees of global warming, well short of the 1.5-degree aspiration of the Paris Agreement, and largely in line with the scenarios modelled by Deloitte.
The Morrison government has refused to commit to a zero net emissions target by 2050, saying that it would follow the commitments of the Paris Agreement which includes a softer ambition to reach zero net emissions sometime in the second half of the century.
A growing number of Australia’s major trading partners have adopted formal zero emissions targets, which in recent weeks have included Japan, South Korea and China – the three largest buyers of Australian coal and gas.
Australia’s foreign affairs minister Marise Payne refused to ‘welcome’ these commitments, saying that the Australian government merely ‘acknowledged’ the targets, and suggested that the Morrison government would not be influenced by other countries when setting Australia’s long-term targets.
It was a position criticised by Labor climate and energy spokesperson Mark Butler, who said the Deloitte report showed the consequences for falling to adopt a zero emissions target.
“Every state and territory in the country are committed to the climate target because, as CSIRO says, net zero emissions grows the economy, delivers higher wages and lower power bills,” Butler said.
“In the deepest recession in almost a century, Australians need a government that will commit to serious climate action because that action will deliver on our future as a renewable energy superpower and as Deloitte have confirmed, will create more jobs, more wealth and a stronger economy.”