EY modelling reveals broad implications for Australian economy from COP 26

(Sydney) The majority of the risk to Australia from the global transition to net zero emissions comes from the abatement policies of our trading partners, with 64 per cent of our GDP exposed, according to new modelling from EY.

With 82 per cent of Australia’s goods exports destined for countries with a net zero target, EY Chief Economist Jo Masters said that the targets announced by our trading partners at – and following - COP 26 are crucial to the Australian economy.

“The direction of travel towards global decarbonisation is clear, and this will impact Australia’s export base, whether we like it or not,” said Ms Masters.

However, more ambitious targets at the COP 26 summit could help accelerate investment in new technologies, commercialisation of research, and maximising advantages in clean and new energy sources.

Ms Masters observed that this investment was crucial to offsetting the risk to Australia’s GDP as currently around 85 per cent of the dollar value of Australian exports are in the top 25 per cent of emissions intensity in their production, up from 55 per cent in the late 1980s.

“The associated risks to Australia’s economy are largely due to the actions taken by other countries on the journey to net zero, while our response is entirely within our control,” said Ms Masters.

“Businesses operating in the industries, communities and regions likely to bear the brunt of this change have the opportunity to act now to unlock this investment and government action can help maximise the economic windfall from the transition.”

EY Chief Sustainability Officer Mathew Nelson said that business leaders across the economy are grappling with the domestic and international challenges of net zero.

“Businesses in every sector and industry are trying to understand the impact of the transition towards net zero, recognising that we can take action now to mitigate the risk created by our trading partners adopting net zero strategies,” said Mr Nelson.

“There are strategic opportunities for Australia in a globally decarbonising economy. The only thing that is clear is that those organisations who move now, will gain a significant long-term advantage,” Mr Nelson concluded.