News from the front desk, Issue 531: The intergenerational report appeared out of the blue this week, close to six years since the last edition. Some of us may have even forgotten the government had a little tool up its sleeve to simultaneously shock and reassure us of our economic fortunes for the next 40 years.

For reference, the previous 2015 IGR was delivered by Treasurer Joe Hockey under then Prime Minister Tony Abbott and before that, in 2010, the IGR was handed down by Treasurer Wayne Swan under Kevin Rudd.

This year, as well as the effects of spending $291 billion in direct economic support during the pandemic and a population composed largely of “chardonnay-sipping retirees”, climate change was deemed worthy of a mention. Or possibly was impossible to ignore.

While not given the attention many of us would have liked to see, the document did give an overview of the risks climate change poses, government’s intended response, and even an acknowledgment that the effects were already being felt in the form of more severe and frequent natural disasters.

For a government that has spent the past decade actively stifling sustainability efforts the tone was oddly celebratory.

PwC chief economist, Jeremy Thorpe has been reading IGRs since before most primary schoolers were born. He told The Fifth Estate that for one thing, IGRs are more a political exercise than an impartial Treasury document.

“The document is prepared to paint a scary picture of the future, but to never be too challenging of the current government of the day,” Thorpe said.

“So this is not an impartial roadmap of the future. This is a roadmap of the future as the government sees it in its frame of reference.”

With that in mind it makes more sense to see the Treasurer simultaneously trying to take credit for Australia’s achievements so far, while placing the responsibility of averting disaster on yet to be invented new technologies.

The tone was so unnervingly comforting, we were lulled into a state of cognitive dissonance and started to think that maybe the hands-off approach was working?

Maybe to walk the uncertain road to net zero, the government should put its wallet on the counter and get out of the way to let private industry drive innovation and change.

Just this week government funding was announced for the Heavy Industry Low-carbon Transition Cooperative Research Centre (HILT CRC), to help Australia’s highly polluting heavy industry sector transition toward zero net-carbon emissions by 2050.

The man who led the successful bid, Professor Gus Nathan from Adelaide University, told The Fifth Estate that government funding was crucial in providing confidence to unlock further investment from industry partners.

Nathan along with a team of the best and brightest from research centres across the country had teamed with industry to drive the creation of new green steel, concrete, aluminium and everything else required to see our heavy industry sector achieve net zero.

Mission accomplished as far as the government’s concerned. At the cost of just $39 million Australia’s well on our way to net zero or at the very least getting those pesky Europeans off our back.

Mmm, yes and no.

The CRC program is the government’s primary research support scheme and has been running for over 30 years. So while it’s a well oiled machine with the power to drive crucial research for the good of Australia, it has little if anything to do with the government of the day.

The review process is independent of government. Although the relevant minister, which happens to be Christian Porter, has the final say in awarding funding and an opportunity to claim some of the glory.

“The minister only does the final stage of approval and announcement,” Nathan said.

“We were not contacted by government or invited to do it, it’s just a completely independent process.”

So what’s giving industry the incentive to pump money into researching new green technologies when our government doesn’t seem to mind emissions one bit?

The answer my friends is that sweet behemoth, the global economy and those same pesky Europeans and other countries making tangible transitional targets.

“Around the world there’s now a growing demand for green products. For example in Europe, governments have collectively introduced the carbon border tax which means they’re saying ‘our net emissions will be net zero by 2050 and anything we’re going to buy that come from processes that are not net zero will have to pay a tax.”

So in a way the transition is being led by government, just not our own government.

But our government must be doing something right. As the IGR directly stated, “Australia has made, and continues to make, a significant contribution to global emissions reduction efforts, reducing emissions faster than many similar advanced economies, as well as the OECD and G20 averages,” the report stated.

Pretty confusing when you consider the amount of commentator criticism (who me?) of Australia’s pathetic international track record. So what’s going on?

Professor Steven Sherwood is an expert on climate change and atmospheric science from the University of New South Wales. Last year he led 80 academics, officially calling on the government to take more action reducing emissions.

He explained it was difficult to prove or disprove the government’s claim due to the variation of metrics used to measure such success.

For instance, Climate Action Tracker backs the government’s claim to a degree, placing Australia on par with most of Europe, and actually better than the US in its climate action.

However, the New Climate Institute, which uses a wide base of metrics places Australia 56th out of 61 countries on its Climate Change Performance Index.

Sherwood said it’s not clear why there should be such discrepancies in assessing Australia’s performance but it may come down to several unique factors in Australia’s emissions profile.

“One is we are by far the biggest coal exporter, so do those emissions count against us or the countries we sell it to? Another is we are starting from a very high-emission, coal-fired, baseline so we could ‘improve’ and still be pretty poor,” he said.

“We have also been relying on things like ‘avoided deforestation’ and counting that as carbon reduction, which is controversial because it is not a long-term solution, especially if bushfires keep getting worse and all that carbon goes right back into the atmosphere again.”

Finally he says that we, along with the US, have a federal system which depending how it is interpreted may or may not take into account commitments by different levels of government. 

“All Australian states have made strong commitments to decarbonise and are taking concrete steps well ahead of the federal government, so if this is counted we would look much better than if only federal policies were considered.”

Going to the moon without a rocket

As much as the federal government might like to blow the whole thing off and fly to Hawaii, it still has a crucial, central role to play in Australia’s transition to net zero.

“If you look at how the US got to the moon in the 60s it wasn’t by saying ‘well it would be nice if we would go to the moon and here’s some technologies that we’re going to put some money into that might get us there and you guys sort it out’, there was an announced goal,” Sherwood said.

Jeremy Thorpe from PwC sees the government’s role in general as six-fold. Funding, regulation, buying power, coordination, information spreading and last but not least, taxation.

“If we’re going to get to 2050 net zero, or whatever the government’s target ends up being, it’s going to have to pull each of those levers in some way or another,” he said.

For example he says that the government can set standards and requirements for new projects to incorporate circular economy initiatives.

Government can direct funding, which it is partially doing, to support industries during this period when they are exposed to potentially higher costs of transition without immediate financial benefit.

He gives the example of electric vehicles, where up front, money may have to be spent where the payoff is not an economic payoff, but an environmental one. Much harder to justify for some.

“We might end up spending a lot more on electric vehicles. In the way we traditionally think about things, we’re spending more money for the same function so we’re getting less value. But our value is saving the environment and therefore mitigating some of the costs of climate change.”

As a buyer, the government can also afford to spend money in new industries as they transition to becoming financially stable enough to stand on their own.

“Take solar panels as an example, they were expensive when they started, but when you get scale costs come down. And that’s where I think governments can actually make markets by  intervening to be a buyer of new materials that will drive those costs down.”

Is net zero even the answer?

Even with the government’s half hearted ambitions of achieving net zero Sherwood said there remained serious pitfalls, including the potential of relying too heavily on unproven large-scale carbon capture.

“There’s been a lot of discussion about net zero by 2050 in the research and policy community, and the danger with it is that it’s possible to hide things. It’s possible to buy credits, or put carbon into reservoirs, like growing trees, that are not really a long term solution. So you have to be very careful what you mean by net zero,” Sherwood said. 

“I think a lot of ‘net zero thinking’ is assuming that we’re going to be pumping lots of carbon out of the atmosphere and therefore for now it’s ok to just keep emitting because we’ll take care of it later. And I think that’s a really dangerous assumption.

“Because we don’t know how feasible it is to do this at any scale that would actually matter, it’s being done now on a small scale but it’s expensive. And so can we ever scale that up? We don’t know.”

We don’t know seems to be the government’s answer too but as far as we’re concerned that’s not good enough.

In the interest of balance, it’s also not clear what the Opposition’s plans are should they ever take government again. We just hope it’s better than the current one.

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