With climate legislation on its way and a clear commitment to decarbonise electricity generation, Australia is no longer an international pariah on climate change. But the government can and must do more to seize the job-creating opportunities offered by a greening global economy.
High labour costs, high energy costs and high transport costs have historically focused Australia's trade strategy on exporting large quantities of raw material. Australia's labour costs remain relatively high, but our workers are also highly productive. And Australia's future no longer involves high energy costs: it can produce abundant and cheap renewable energy. Earlier last century, faraway Europe and the Americas were our principal export destinations; now our major markets - and major potential markets - are within the Indo-Pacific region.
The government, by accelerating the energy transition, has the opportunity to turn Australia into a clean energy export manufacturing powerhouse. The higher up the value chain our exports are, the more diverse our potential markets. China will always be an important trading partner for Australia. But a shift in focus from raw commodities to export manufacturing - particularly of renewables-based, energy-intensive goods - provides an opportunity to reduce our dependence on a single market. Manufacturing to replace imports can increase supply chain security and protect against border closures in the event of future disruptions to global trade, including another pandemic.
Regions currently dependent on fossil fuels for their employment and prosperity have the skills and infrastructure needed by manufacturing industries powered by clean energy. Such industries will need support to scale up quickly to the level needed to meet demand and to provide the jobs our regions need to prosper.
The government has promised special measures for trade-exposed enterprises under the Safeguard Mechanism for large domestic emitters. Such measures could justifiably include levies against foreign producers facing less stringent emissions reduction requirements. The European Union has introduced such a carbon border adjustment mechanism which, until recently, threatened Australian products. For exporters competing with such producers, the government could consider compensatory subsidies on a case-by-case basis. Given the low cost of renewables, however, the energy transition is likely to make our energy-intensive industries more rather than less competitive, particularly in markets seeking low-carbon products.
Although the focus of policy attention has rightly been - and should continue to be - on reducing emissions at source, high quality negative emissions offer another job-creating trade opportunity. The government has commenced a comprehensive review into Australian Carbon Credit Units (ACCUs) to ensure that credits are high quality and enduring. Australia, with abundant land, stable geology and strong governance, is a prime site for future negative emissions industries.
At present the most effective technology for doing this is natural: trees, vegetation and soil. Australia is already well placed to benefit from expanding its natural carbon drawdown, with the added benefit of protecting our globally important biodiversity.
But natural drawdown is unlikely to be enough to meet the world's carbon drawdown needs. Technological solutions for capturing emissions and even for extracting carbon from the atmosphere are under development. These go well beyond carbon capture and storage from fossil fuel projects, which has largely failed to live up to its advertised potential. Much early work is underway in Australia and the government could help to coordinate and fund that research within a broader national negative emissions strategy.
The future trade benefits of such an investment are considerable: the world is moving to net zero and, while governments and business should continue to focus on reducing emissions at source, there will be a need for significant removal of greenhouse gases from the atmosphere in order to achieve global climate goals. Australia could lead the world by adopting separate targets for reducing emissions at source and for removing carbon from the atmosphere. Such transparency, combined with rigorous accounting and governance, would make high-quality Australian offsets attractive not only to domestic companies seeking to meet their climate commitments, but also to a rapidly growing international market.
Australia can be a renewable energy superpower and a negative emissions economy, creating jobs while helping our international partners to meet the needs of our heating planet.
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