The Australian government’s policy towards climate change is in stark contrast to the rest of the world. Is this policy promising to help bolster a fledging economy or is it folly by reinvesting in climate-exposed industries?
It is no secret that the current Abbott government in Australia is not in line with much of the world’s global commitments towards climate change. On a per capita basis, Australia is one of the world’s biggest emitters of greenhouse gases. The current conservative government has established a policy of reshaping the discourse in terms of climate change and renewable energy, instead promoting coal and removing investor incentives for solar and wind energy.
This is best exemplified by scrapping the Labor government’s previous ‘carbon tax’ (the first of its kind in the world) that linked taxation directly to emissions volume. It has been replaced with a direct action scheme that pays polluters to not emit as much carbon and pollution as previously.
Although Australia is a resource-based economy whose massive ‘boom’ in iron ore has now subsided, the question remains whether promoting coal and fossil fuels is still a viable solution for foreign direct investment and the economy in general.
The folly of climate change discourse in Australia
The current Australian government has shown its skepticism to climate science and the global community’s attempt to mitigate climate change. In their first term of office, the Liberal government removed the positions of Minister of Climate Change and Minister for Science. This skepticism seems to run through the dialogue being espoused by the government including top advisors stating that “climate change is a UN hoax” and it is a “hook to establish a new world order.”
The Prime Minister himself has previously admitted his dismissal of climate science. He has actively promoted that “coal is good for humanity, coal is good for prosperity, coal is an essential part of our economic future, here in Australia, and right around the world.” This proposition has seen a massive spike in government subsidies for the coal industry, with new mining plans being approved such as the controversial Shenhua site in New South Wales.
In the last few weeks, the Australian government has also shown its displeasure towards wind power. Top government officials argue that wind power is an “eyesore” and have ordered a study into the health effects that wind power can cause to communities and individuals. There has been a full frontal assault on wind power to the effect that the Clean Energy Financial Commission, an independent statutory body, has had its investment mandate changed so it can no longer invest its resources into wind and solar power.
Prime Minister Tony Abbott has stated, “it is our policy to abolish the Clean Energy Finance Corporation (CEFC) because we think that if the projects stack up economically, there’s no reason why they can’t be supported in the usual way. But while the CEFC exists, what we believe it should be doing is investing in new and emerging technologies — certainly not existing wind farms.”
This implies that the CEFC can only invest in “new technologies,” such as bioenergy and ocean power. There seems to be a push for private sector involvement in renewable energies. However, without any subsidies to encourage investment and resources being directed to the mining and oil and gas industries, this is essentially the death knell for the renewable industry in Australia.
Present and Future Investment Issues
Resource investment still continues to be a key priority for the current Australian government. The federal government has provided over $4 billion worth of subsidies for the mining industry in Australia alone. With the falling price of iron ore and decreasing demand from China, the industry is beginning to bottom out. The price of coal on the international market has almost halved, coupled with another large drop in share prices for listed coal companies.
As the resource boom comes to a close it is essential for Australia to diversify its areas of investment. However, the economy is suffering from a lack of foresight on this issue. The money that could have been made from the resource boom to diversify into other secondary and tertiary industries has been lost due to mismanagement. This was exemplified by a reversal of the “mining tax” in the first term of the Abbott Government, which saw a 30% tax on mining and iron ore profits.
The risk associated with continuing exclusive support for climate-exposed industries is getting higher, and diversification is needed. With a reduction in the incentives for investors in the renewable sector, Australia is hindering future investment in a growing industry. Not only does this send a negative message to future potential investors in this non climate-exposed sectors, but also tarnishes future international and private investment in other potentially economically beneficial sectors.
A rethinking of the policy towards climate change investment needs to be taken seriously in the coming political discourse. The potential economic benefits that could occur, particularly in a country like Australia with its vast solar and wind energy capability, are immense. As Australia closes doors to investment, it will not be so easy for other doors to open in the future.
