As somebody involved in climate change campaigning over many years, it was heartening to finally see an ambitious global agreement with the potential to shift the world to a low-carbon economy and keep the planet as far below two degrees of warming as possible.
The fact that there was substantial participation in the Paris Agreement by the private sector, including from many Australian business representatives, is an exciting sign that those with the power to make a real difference are taking their role in tackling global warming seriously.
In his reflections on the Paris Conference, Sir Nicholas Stern described the new agreement as creating a “virtual cycle of endorsement”, with investors having greater clarity on the direction of policy and therefore able to more confidently make forthright decisions about their investment portfolios, while governments on the other hand will be impelled to “stand behind their agreements”.
This requires a major change in thinking and effort with a clear need for companies and financial institutions to develop and disclose their carbon liability under different climate scenarios, and governments to help set the right rules in favour of the low carbon green economy.
New AGL chief executive Andy Vesey made his intentions clear when he said, “We’re getting out of the CO2 business.” AGL has much at stake if they don’t, as do the banks. A number of the big four have made hefty commitments over the last 12 months or so, each acknowledging the importance of keeping global warming below 2°C.
For example, the new Westpac chief executive Brian Hartzer stated in his address to the AGM in December: “Westpac will continue to evolve its frameworks, policies and position statements, linked to concrete action to ensure our lending and investing activities support an economy that limits global warming to less than two degrees, based on research into the carbon intensity of our activities.”
If this greening of our economy is to succeed, it will require the intervention of government through “smart” rules that favour a low carbon, green trajectory and break the carbon lock-in of vested interests. While neoliberals may protest that government shouldn’t pick winners or be too interventionist, it is the character of these rules that will help make the transition either smooth or bumpy.
The government has a fundamental role to play here, and it is only when the new pathway has been established with smart policies that the role of government can be diminished and entrepreneurial initiative allowed to flourish. The next election will be a great opportunity for all sides of government to step up to this challenge.
The opportunities abound for Australia to drive a shift towards a low carbon economy with an abundance of resources and smarts in renewable energy. Australia’s own Scientia Professor Martin Green and his team from the University of New South Wales delivered the highest efficiency ever reported for converting sunlight into electricity – 40 per cent – the highest for any commercially viable solar power system.
Another area of economic endeavour Australia should explore is resource productivity and the “circular economy”, where what was once considered waste is turned into a resource by intentional design, using biological principles found in nature, where nothing is wasted. For example, construction waste currently makes up a huge 40 per cent of all municipal waste but can be repurposed into something productive again, saving enormous amounts of energy and materials.
If we were to start today with industry policies to develop a circular economy we could catch up with other major trading partners such as Germany and the EU, Japan, Korea and now China, who are all well ahead of the game. For example, China is rapidly taking a leadership position in all energy and resource productivity aspects, and in mid-2008 it passed its first circular economy law – Law for the Promotion of the Circular Economy – to require adoption of resource efficiency and industry development towards an export industry.
This new way of thinking around the circular economy and renewable energy is a radical departure from the conventional linear level of thinking in which raw materials are mined and extracted at one end and wastes are dumped at the other end, both exploiting nature’s sink without much constraint or future thought.
As Professor John Mathews has articulated there are a number of principles to greening the economy that Australia will need to adopt. These include a focus on renewable energy and clean technology; supporting a shift to a circular economy and enabling finance to drive the transition; trade agreements that support the uptake of clean tech; greater investment in green infrastructure and smart grids; taxing pollution and the exploitation of irreplaceable natural resources, with a penalty for companies that are part of the carbon lock in (they’ve had decades of notice); a willingness to support public expenditure to catalyse green shoots; and better accounting methods and government leadership that unpins ways to support and finance the green economy.
At the turn of the 19th Century, Australia rode on the sheep’s back and we had the second highest GDP in the world. Last century we rode on the back of the wheat and mining booms. The green, clean low-carbon economy could be Australia’s next boom given our abundance of natural resources and innovative thinking, but it will need a change in thinking and clever intervention by governments. The Paris Agreement is a great opportunity for governments and businesses to show the kind of leadership that will create Australia’s next economic boom.
Monica Richter is business engagement manager climate change at WWF-Australia.