The National Party has abruptly ended its commitment to Australia's net zero emissions target for 2050, proposing instead to water down climate policies and emissions targets. This dramatic shift, drawing on a new report, represents a significant political development that could have far-reaching economic consequences for the nation.
The Economic Cost of Climate Policy Uncertainty
According to climate policy expert Professor Frank Jotzo from the ANU Crawford School of Public Policy, abandoning net zero would prove economically damaging across multiple fronts. Walking away from the commitment would undermine investment confidence, raise power prices, drive up taxes, and harm Australia's green export potential while damaging international relationships.
While the Nationals' announcement doesn't necessarily represent future government policy given their junior coalition status, the mere spectre of policy reversal creates uncertainty that spooks businesses and investors. The Treasury's net zero modelling report highlights the cost of a disorderly transition, estimating that wages in 2050 would be 2.5% lower and per capita GDP 1.6% lower compared to steady progress toward the government's 2035 emissions target.
Flawed Emissions Claims and Power Sector Risks
The Nationals have claimed Australia has been cutting emissions at double the OECD rate, stating that while OECD countries reduced emissions by 1% annually, Australia achieved 2% yearly reductions. However, this argument contains critical fallacies in its representation of the data.
When land use and forestry emissions are excluded, Australia's emissions have only fallen 5% since 2005, placing the country below the OECD average rather than leading it. Additionally, Australia's wealthier status and higher per capita emissions create both greater opportunity and higher expectation for emissions reduction.
The party's suggestion to prop up ageing coal plants through government intervention would prove particularly costly. The energy market is naturally phasing out coal in favour of cheaper wind and solar power, and keeping coal on life support would mean higher power prices or increased taxes to fund subsidies.
Squandering Green Opportunities and International Standing
The policy shift threatens to undermine Australia's emerging green commodity opportunities, including potential exports of green iron and ammonia, along with sustainable, high-value agriculture. These opportunities rely significantly on Australia's climate reputation, and other countries are poised to capture these markets if Australia retreats.
After years as a climate laggard, Australia's improved international reputation on climate policy now faces jeopardy. This comes at a critical moment as the COP30 climate conference convenes in Brazil, where Australia's stance will be closely watched by Pacific neighbours and trading partners.
The world's energy and industrial systems are shifting to low-carbon options regardless of Australia's political positioning. The fundamental question remains whether Australia will embrace this transformation to its advantage or lock into declining industries while economic opportunities pass by. As previous economic successes stemmed from embracing new opportunities like the China-led resources boom, choosing prosperity over politics would align with sensible climate policy.
