$4 trillion turnaround for Australia if act on climate change: Deloitte report Nov 2020

2 November 2020: If climate change goes unchecked, then Australia’s economy will be 6% smaller and have 880,000 fewer jobs by 2070. That’s a $3.4 trillion lost opportunity over the next half a century. But there’s a $680 billion dividend that’s ours for the taking if we do rise to this challenge, along with 250,000 more jobs.

In a report last year – A new choice: Australia’s climate for growth, Deloitte Access Economics flipped the debate by modelling the impacts on Australians of not addressing this existential threat. And doing nothing comes with huge costs.

The Australia-first analysis comes to some sobering conclusions, including:

  • Taken today, more than 30% of employed Australians and over 30% of national income sit in industries exposed to economic disruption and risk from climate change and unplanned economic transition
  • By 2070 – in the lifetime of Australians in their 20s, 30s and 40s today – the economic cost of doing nothing is an economy which is 6% smaller, a $3.4 trillion loss in GDP in present value terms, and with 880,000 fewer jobs
  • In contrast, a new growth recovery, delivering net zero by 2050 and consistent with keeping global warming to 1.5C, could add $680 billion (in present value terms) and grow the economy by 2.6% in 2070, adding more than 250,000 jobs.

The report sets the benchmark of economic growth – one where damages from global warming are included –against which the cost of inaction or the costs and benefits of action should be assessed.

Deloitte Australia chief economist, Chris Richardson, said: “If you think COVID is awful, then you should be prepared to fight against an even bigger threat. COVID shows the cost of overlooking catastrophic risks. So it’s an urgent wake-up call for us to get ahead of that other big risk – climate change.

“The best and most effective way to tackle climate change is through market mechanisms. Australians need policy and regulatory reform that modernises our economy and unleashes business investment.

“The benefits of acting are huge. But we are fast running out of opportunity.”

Principal report author, and Deloitte Access Economics lead partner, Dr Pradeep Philip, said: “The costs of climate change are still rising each year, as are the costs associated with reducing the risks it presents.

“Climate change is no longer a possibility. It is a reality. Doing nothing is now a policy choice, and it is costly.

“Australia’s farmers, builders, manufacturers, miners and tourism-related businesses are in the front line of the risks of climate change as the world responds.

“While there are a significant number of jobs and growth at risk – enough to drive future recessions – the good news is that the rest of our economy can help create the change we will need.”

Doing nothing will be a costly choice. Choosing net zero will be an economic necessity

“All of these numbers are sobering,” Dr Philip said. “By 2050 Australia will experience economic losses on par with COVID every single year if we don’t address climate change. That would compromise the economic future of all future generations of Australians.

“But taking a new and resilient economic path in response to climate change, actually presents unprecedented opportunity. It would see Australia’s economy growing and the creation of jobs.

“Whatever Australia does or doesn’t do, the global warming which has already taken place will hurt our lives and livelihoods. This cost is locked in – it is the cost of delay.

“This tells us that there is isn’t a ‘no cost’ option. So if we could take action today to prevent the next great recession from climate change, why wouldn’t we?”

We’re all in this together

“Both government and private sector investment needs to get cracking to accelerate Australia’s inevitable shift to a low emission future. Every day’s delay costs Australians more,” Dr Philip said.

The report notes that policies aimed at strengthening economic growth can support low-emission pathways, and actions to stimulate investment in low-emission investments can strengthen economic growth job creation.

This needs to be about high-growth industries such as mining new minerals for new technologies, investment in the upgrade and replacement of Australia’s infrastructure, such as transforming the National Electricity Market and thinking about new energy structures, pricing and regulation in this area, driving innovation in advanced manufacturing, and addressing emissions efficiency in traditional economic sectors.

“Yes, there’ll be costs. And there’ll be some losers. But we’ll all be losers if we fail to act,” Dr Philip said.

“And there are far better paths for us to choose – the technologies and ideas to create a new growth economy in Australia that is resilient to risks are available today. Our climate does not care about borders, politics, or ideologies, so the ultimate solution to mitigating global warming risk still has to be co-ordinated global action.

“For Australia, the reality is that we stand to lose the most from unanswered climate change, but also stand to gain significantly from action. Quite simply, we have every incentive to drive the global agenda for our national interest.

“There is no free ride. As a country, we need to choose to change, and the time to do it is now.”

TO DOWNLOAD THE REPORT: https://www2.deloitte.com/au/en/pages/economics/articles/new-choice-climate-growth.html

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