The risks to the Australian economy are clearly uneven, with certain industries, communities and regions particularly exposed. Without mitigation or policy measures, the risks to employment are more heavily skewed to domestic actions, because it is relatively more labour intensive than the export orientated markets. This is a challenge explored in the Investor Group on Climate Change’s Empowering Communities report. In reality, there will be measures put in place by governments to assist affected regions – indeed how best to do this is already being actively debated.
While this modeling focuses on the risks, it is also worth considering that the transition towards net zero is likely to generate significant economic activity. The investment in developing and implementing new technologies, commercializing research and development and maximizing Australia’s advantages in clean and new energy sources could be a significant economic windfall, boosting our GDP.
A global journey to net zero
How Australia tackles the journey to net zero is critically important, but this analysis highlights that we need to have a close eye on what the rest of the world is doing, and any commitments made in relation to COP 26 must be considered as we plan the Australia of the future.
Australia’s major trading partners – such as China, Japan, South Korea, the United States, and the European Union - may make additional commitments to climate action, and have the financial resources to credibly make the transition.
The commitments and actions from developing countries is perhaps less predictable because of their greater reliance on older technologies, but their choices and actions are also critically important for Australia.
The first mover benefits of any economic change are significant, especially when the shift is going to be felt broadly across the economy.
Whatever the outcome of COP 26 and the remaining uncertainties, the economic impact of global decarbonisation is coming and will impact Australia’s export base. The earlier we prepare for this change, the better placed we will be as, and when, these shifts arrive.