It can’t have been by chance that Reserve Bank deputy governor Guy Debelle chose to begin his landmark speech on climate change impacts on Tuesday night with the first few lines of Dorothea Mackellar’s iconic poem:
‘I love a sunburnt country, a land of sweeping plains, of ragged mountain ranges, of droughts and flooding rains.”
Climate deniers have been using these golden lines to insist that climate has always changed, always will, so there is no point trying to do anything about it, least of all invest in what they demonise as the “unreliables”, wind and solar.
It’s been a favourite of our current crop of politicians – from Barnaby Joyce to Tony Abbott, to Craig Kelly and to current deputy prime minister Michael McCormack, and to ginger groups like the Saltbush Club, featuring the ex-CEOs of mining giants BHP and WMC.
It’s why Australia currently has no coherent climate policy, and no energy policy.
Debelle used it to make the point that Australia has always suffered from droughts and floods, but the impacts were becoming more intense, and affecting not just the agricultural sector, but the whole economy.
“Climate change presents significant risks and opportunities for a broader part of the economy than agriculture,” he said. “Both the physical impact of climate change and the transition are likely to have first-order economic effects.”
Debelle says this is of critical importance to the RBA because – like any other major economic impact such as the internet or minerals boom, or recession – the central bank needed to take this into account when looking at the appropriate policy settings.
He said we needed to think in terms of trend rather than cycles in the weather, and about the longevity and severity of events, particularly as this affects assets and insurance.
More than that, policy makers needed to think about how the economy was adapting to both the change in climate and the opportunities and challenges in the transition to a clean energy economy.
- “The transition path to a less carbon-intensive world is clearly quite different depending on whether it is managed as a gradual process or is abrupt,” he said. “The trend changes aren’t likely to be smooth. There is likely to be volatility around the trend, with the potential for damaging outcomes from spikes above the trend.”
It was a call for a managed transition, and having a plan and consistent policies – something that has eluded Australia for years, thanks to the very climate deniers, from within and without governments, who have worked to de-rail all workable initiatives.
Debelle also made the point that huge opportunities exist.
He noted that wind and solar were well below the cost of fossil fuels, and with this graph below echoed the findings of the CSIRO and the Australian Energy Market Operator that, even with storage, wind and solar were competitive with current wholesale prices, and would soon beat it with further cost reductions.
“The cost of storage of electricity through batteries is also declining rapidly, and pumped hydro storage can effectively operate as a very large battery.”
The RBA cares because the scale of investment – and future investment decisions – and the price signals of these investments will drive changes in behaviour “within the horizon period” which monetary policy focuses on.
“Hence we need to gain a better understanding of what is driving those changes and what is in prospect to affect future changes.”
But it wasn’t just domestic choice influencing the economy and the RBA’s interest. Overseas moves to low carbon economies would also have an impact on Australia, and present more opportunities.
China was clearly becoming less dependent on coal. That would impact thermal coal exports, but natural gas is expected to account for a larger share of its energy mix, and Australia is well placed to help meet this increase in demand.
“More generally, Australia is also benefitting from the increased demand for battery inputs (especially lithium) and other metals that are used intensively in renewable generation,” he noted.
The RBA is not the first major financial institution to issue a wake up call on the impact of climate change. The Australian Prudential Regulatory Authority has done so previously, and so have international financial authorities such as the Bank of England, also warning about the risk to financial stability.
The climate deniers and the fossil fuel promoters were having none of it.
Trevor St Baker, the donor to the Liberal Party who wants the current government to commit taxpayer money to support his multi-billion dollar coal generator investments, said it was “highly inappropriate” of the RBA to talk about climate change and then even went on to lament the proposed strike by school students over inaction on climate.
“The speeches they are making are totally inappropriate,” he told ABC’s Radio National Breakfast. “The fact is that in an islanded community you must have at least 50 per cent of any time of the electricity demand supplied by synchronous generation.”
But St Baker’s hopes for new coal generation do not fit in with the shift to clean energy. “For the Reserve Bank (deputy) governor to be entering the debate at a time when we have university students supporting a school children strike to go 100 per cent renewables in Australia by 2030 is just part of the problem,” St Baker said.