The climate crisis is an expensive affair, but net zero is actually cheaper for Australia than inaction. Here's why this might be a controversial topic for some.
The Liberal and National parties have argued against the net zero target by 2050, claiming it will be too costly. For instance, David Littleproud, the Nationals leader, incorrectly stated that achieving net zero by 2050 would cost a staggering $9 trillion, threatening Medicare and the NDIS. Similarly, Liberal senator Leah Blyth suggested that Australia can't afford to be an environmental steward.
However, focusing solely on the costs of transitioning to net zero emissions by 2050 overlooks the economic consequences of not addressing climate change. The question is: How does the cost of net zero compare to the cost of inaction or delaying the transition?
Several studies have modeled this, and the findings are eye-opening. At least three recent analyses conclude that a well-coordinated effort to reach net zero by 2050 is far more cost-effective for Australia and the world.
One such study, by Ortec Finance, revealed that if climate change is left unaddressed, Australia's GDP in 2050 could be 9% lower than it would otherwise be, resulting in a loss of several hundred billion dollars. Even a delayed net zero response, where governments take swift action on emissions after 2030, will be more expensive than a smooth transition.
The Ortec Finance report isn't an isolated finding. A Treasury report in September analyzed three net zero scenarios and concluded that clear and credible climate action would boost jobs, wages, and living standards. Conversely, a disorderly transition would lead to job losses, reduced business investment, lower wages, and higher power prices in a shrinking economy.
The Investor Group on Climate Change's modeling further supports this. They found that current global policies, leading to 3C of warming, would cost Australia's GDP $656 billion by 2050. In contrast, an orderly transition to net zero would make Australia's economy $590 billion stronger than the 3C warming scenario.
Quick Guide: Ortec Finance's Climate Transition Scenarios
- Net Zero: This scenario represents a well-coordinated, rapid transition to a low-carbon economy, with a global temperature rise of 1.6°C by 2100. It assumes adaptation and lower physical risks due to lower global temperatures.
- Delayed Net Zero: This scenario involves a sudden policy boost in 2030, followed by ambitious low-carbon policies. It leads to stranded assets and financial disruption due to rapid risk pricing in markets.
- High Warming: This failed transition scenario simulates the outcomes of current policies, resulting in a 3.7°C temperature rise by 2100. The transition occurs only due to economic factors, without new climate policies, leading to severe physical risks and multiple climate tipping points.
