Investors could shun Australia without 2050 net zero commitment, RBA warns
Australia faces an intensifying risk of global investors divesting bonds or equity if we don’t join other nations in making a net zero emissions commitment for 2050, the Reserve Bank has warned.
© Provided by The Guardian
Photograph: David Gray/Reuters
As Scott Morrison tries to persuade the Nationals to adopt new climate commitments ahead of the Cop26 in Glasgow, RBA deputy governor Guy Debelle told an investment conference on Thursday climate risk was raised in “most conversations I have with foreign investors – this is a marked change from a few years ago”.
© Photograph: David Gray/Reuters
The Reserve Bank has warned Australia faces a bigger risk of investors pulling out if the Morrison government does not adopt a 2050 net zero emissions commitment.
Load Error
Debelle said “to date” there had not been a marked shift in investor appetite for Australian bonds or equity “with only a few small exceptions”. He noted the Riksbank discontinued its investment in bonds issued by Queensland and Western Australia state governments “a few years ago”.
But the Reserve Bank deputy governor said the outlook was clear. “There is a risk we will see more of these divestment decisions sooner rather than later.”
“Governments in other jurisdictions are implementing net zero policies,” Debelle said.
“Both of these are effectively increasing the cost of emissions-intensive activities in Australia.
“So, irrespective of whether we think these adjustments are appropriate or fair, they are happening and we need to take account of that. The material risk is that these forces are going to intensify from here.”
Debelle has previously warned that climate change poses risks to financial stability, and argued that warming needs to be thought of by policymakers and business as a trend and not a cyclical event.
Video: Victoria and NSW expected to see ‘strong rebound in jobs’ due to COVID roadmap (Sky News Australia)
The treasurer Josh Frydenberg drew on similar themes in a speech he made recently laying out the economic case for Australia to adopt a net zero target. He warned Australia had a lot to lose if participants in global capital markets believed “we are not transitioning in line with the rest of the world”.
The RBA deputy governor said on Thursday the transition to low emissions provided “plenty of opportunities for Australia”.
“Reflecting our endowment, Australia has been an energy exporter for many decades, and there is no reason why this should change,” he said.
“Australia is also endowed with resources that have the potential for Australia to continue to be an exporter of energy – but renewable rather than emissions-intensive fossil fuels.”
Debelle noted the transition would impose costs in some regional communities. But he said the economic transformation currently underway in the South Australian city of Port Augusta demonstrated “the opportunities are potentially there for the very same communities”.
He said Australian states were moving ahead with policies to drive the transition, including policies to address structural adjustment challenges in the regions. “Likewise, Australian companies are seeing the opportunities provided by the changing climate and investing in them.
“There are challenges ahead in managing the transition and in managing the financial risks,” he said. “But with the risk comes a great potential for reward.”
As well as the push to commit to net zero emissions before the Cop26 in Glasgow, the prime minister has been under increasing pressure from the investment and business community to commit to cutting emissions by about 50% by 2030, in line with scientific advice and goals set by major developed nations.
Related: Business Council shifts climate position to back 50% emissions cut by 2030
The Nationals are not yet on board with the 2050 commitment. Cabinet discussed a policy roadmap and Treasury modelling underpinning the plan on Wednesday. No decision was taken. The Nationals party room meets on Sunday to consider the options.
Some Nationals remain implacably opposed to adopting net zero, and the junior Coalition partner will demand new commitments to revitalise regional Australia and boost employment in return for supporting any shift in climate policy.
Guardian Australia understands Morrison has also told colleagues he wants to increase Australia’s existing 2030 emissions reduction target before Glasgow. New emissions projections to be released shortly are expected to forecast Australia will beat the current target of a 26-28% cut by 2030 compared with 2005 levels.
But with some Nationals openly hostile to signing up to a mid-century net zero commitment, and others on the fence, it is unclear whether Morrison will have the political capital to be able to take the extra step and increase the 2030 target.
Sources say Australia has raised with both the UK and US governments the idea of publicly declaring it would “overachieve” on its 2030 target without formally increasing the goal, but both allies have pressed Morrison to deliver the formal increase rather than window dressing.
Source: Thanks msn.com