Australia needs to accept that global momentum is building towards investment in the decarbonisation of the global economy, driven by both the private and public sectors alike, Australia’s most senior Treasury official has said.
Treasury secretary Steven Kennedy said Australia faces some “difficult choices” as investors looked for opportunities to shift finance into projects and infrastructure compatible with global sustainability goals.
“These two trends towards alignment [of investment with sustainability] – public and private – I think are going to be very powerful forces in shaping future global investment flow,” Kennedy told an event hosted by the Centre for Policy Development’s Climate and Recovery Initiative, on Friday.
“There are some difficult choices here. There might be aspects that do not align with Australia’s national interest. We don’t have to like what’s happening, but we do have to be engaged and involved, and we must have a credible alternative that appropriately aligns with others,” Kennedy said.
The Morrison government has agreed to a net zero target by 2050, but at the same time has sought to expand its fossil fuel industries, particularly the production of coal and gas.
Kennedy, who previously served as deputy secretary of the now-defunct Department of Climate Change and Energy Efficiency, said Treasury already understood the impacts of climate change on the Australian and global economies and incorporated considerations as part of its’ day to day’ work.
“Our own forecasts, when we think about future demand for coal, for example, we use the IEA climate-related scenarios. But those things are just built into our day to day work because frankly, we just see climate change as a crucial first-order issue in the economy, and it’s integrated into our economic analysis,” Kennedy said.
Kenndy added that he saw a “key benefit” of the Treasury being involved in modelling the federal government’s climate change policies, even though it had little input into the recently published modelling of Morrison government climate change policies.
“There’s a key benefit and Treasury being involved in climate modelling, I think has been influential in the debate for us to be able to point to, effectively the confidence around the global consensus on climate change and what that now means for countries that perhaps wasn’t present in the past,” Kennedy added.
Treasury was largely uninvolved in recently released modelling of the Morrison government’s zero net emissions “plan”, apart from a couple of treasury officials who had been seconded to the federal industry department to assist in its preparation.
The Morrison government has sought to resist global momentum for a shift away from fossil fuels and fossil fuel subsidies, including pushing for watered-down agreements across multiple international forums, including COP26 in Glasgow and the G20 meeting in Rome that immediately proceeded it.
Macquarie Group CEO Shemara Wikramanayake told the forum that it was important for governments to be active in setting policies for a transition to a low emissions economy.
“Ultimately, what the private sector needs is for the public sector to set the priorities and the target and a glide path. So, it’s regulatory frameworks, its policy, its pipelines of investment, it’s possibly investment agencies,” Wikramanayake said.
Wikramanayake said that Macquarie had already begun incorporating adaptation measures in the infrastructure projects the group was involved in, recognising the impacts of climate change that were already becoming evident.
“Sadly, climate change is upon us. And we are having extreme weather events,” Wikramanayake told the CPD forum. “We’re having melting of the glaciers, rising sea levels.”
“There are a lot of communities who are going to be impacted without being able to wait for mitigation solutions. We, at the moment, certainly invest a lot in our asset portfolio in adaptation as a feature of the asset.”
“So, we’re putting cables underground in Finland to survive freezing winters, we’re lifting the Goethals Bridge in New York state, we’re putting geohazard warnings on geothermal assets in the Philippines, that all makes good economic sense for the private sector doing this,” Wikramanayake said.
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