This is our last chance to set the Australian economy on a trajectory that could secure our long-term prosperity in a decarbonising world. In the short-term, we need to prop up the economy against the pressures of COVID-19. As we have limited economic resources, if we can’t do so while transitioning the economy, we may not have another opportunity.
Fortunately, groups like Beyond Zero Emission (BZE) have demonstrated that it’s relatively straight-forward to do both. Startups are an integral part of such win-win solutions and there are relatively easy ways for the government to encourage more private sector investment into startups deploying technology needed for the transition.
We need to recover and transition at the same time
Australia has two enormous economic challenges in front of it. In the short term, like the rest of the world, we need to navigate the economy through the COVID-19 crisis. In the long term, we need to transition our economy to remain competitive as our trading partners decarbonise to meet increasingly ambitious climate targets.
If we don’t decarbonise as well, we’ll be left behind. A significant proportion of Australia’s export revenue comes from fossil fuels and carbon-intensive products. That has created a lot of wealth for Australians to date but the demand for our carbon-intensive exports won’t last forever.
Fortunately, Australia has more than one trick up its sleeve. Just as our wealth in fossil fuel resources has enabled us to become a leading carbon-intensive energy exporter to date, our wealth in renewable energy presents an opportunity to become a leader in low emissions exports.
As leading economist Ross Garnaut claimed in his book, Superpower, “if Australia rises to the challenge of climate change it will emerge as a global superpower in energy, low-carbon industry and absorption of carbon in the landscape”.
The Sun Cable is already putting this vision into action, aiming to “produce approximately a fifth of Singapore’s electricity through solar power, sourced from the Australian desert and transmitted via a High Voltage Direct Current (HVDC) cable”. Others are looking to export renewable energy in the form of green hydrogen and related products.
But changing the course of an economy isn’t cheap and propping it up against the pressures of COVID-19 will reduce our ability to make long-term investments after the crisis is over.
That’s why this could be Australia’s last chance because if we don’t spend wisely and implement measures that will provide both short-term and long-term economic viability at once, we could be left behind. We need to somehow address our short-term economic challenge while setting ourselves up for long-term prosperity at the same time.
The BZE Million Jobs Plan is a valuable and timely addition to the national discourse as it’s a recipe for having our cake and eating it. It’s a plan for creating over a million jobs in the next five years and in the process transforming the Australian economy to one that will be competitive on the global stage for the foreseeable future, creating the industries that will employ generations to come.
Startups can generate short-term and long-term jobs
But where will these jobs come from? What are the businesses that will hire people into new positions?
A large part of the answer is the construction industry. According to BZE, building 90GW of new renewable energy and expanding the transmission network will create 26,000 at peak construction activity. Over 100,000 peak jobs would be created if BZE’s proposal to provide home energy retrofits for 2.5 million low-income households was implemented.
But to produce long-term jobs, big businesses outside the construction sector need to play a role.
Unfortunately, most existing large businesses are constrained in their ability to hire new staff as they’re under constant pressure from shareholders to cut costs. This pressure will only increase in sectors that have had a revenue hit due to COVID-19. From my experience as a management consultant at the Boston Consulting Group, I know the easiest way to reduce costs is to lay off staff – reduce jobs, not create them.
What we need are new large businesses, and we need them quickly. There’s a word to describe new businesses that have the potential to become large quickly – startups.
Startups are one of the few entities in the economic system that are in a good position to hire large numbers of people and retain them.
The government could leverage more private sector investment into startups
Startups are also well positioned to use private sector capital to create jobs. Presently, many startups are keeping their staff employed through the JobKeeper Payment scheme, but that can’t last forever (unless my calculations are seriously off).
While large businesses typically pay salaries out of revenue, rapidly growing startups often pay salaries at least partially out of capital they’ve raised from private sector investors. A large proportion of the funds invested in startups by EnergyLab’s angel group is used to hire new staff in a range of areas including engineering, sales, customer service and operations.
Therefore, by incentivising private sector investment into startups, the government can stimulate long-term job creation.
The Australian government has already made efforts to encourage private sector investment into startups, but a lot more can be done. There are tax incentives such as a 20 per cent income tax offset for the amount invested in eligible startups. The equivalent UK scheme it’s modelled on goes much further, with a 50 per cent tax offset. It would be relatively straightforward to ramp up our tax incentives to similar levels.
To maximise the impact of tax incentives, more generous benefits could be provided for investing in startups commercialising technologies in strategic areas. What qualifies as strategic could be determined by Australia’s Technology Investment Roadmap. While the roadmap isn’t finished yet, key areas are likely to include green hydrogen and soil carbon sequestration – low carbon technologies that Australia can develop a competitive advantage in.
Investing in the right startups can create the jobs of today and tomorrow. With just a small tweak to an existing policy, the government could unlock more private sector investment in startups that are building the industries that will build wealth for present and future generations.
James Tilbury is the chief executive officer of EnergyLab, a national cleantech startup accelerator and network dedicated to the clean energy transition. He’s also a member of the Australian Sustainable Finance Initiative and the Investor Group on Climate Change.
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