Join the dots on our clean energy-led economic future

A bit of systems thinking paints a clearer picture of where the Australian Government is headed on the energy, transition, and climate and carbon-related economic reform. This is important as the Anthony Albanese-led Labor team approaches the third and final year of its first term, punctuated by next month’s Budget 2024. Then the countdown to the next election begins in earnest, with the rival Peter Dutton-led Coalition backing a ‘hold the renewables, go nuclear’ strategy.

MURRAY HOGARTH: OPINION

If you want to transform an established house, you have a choice: renovate or rebuild. There’s even a TV show to help!

When it comes to transforming a national economy, however, knocking it down and starting again isn’t an option. Everyone has to keep living in it while it transitions.

So you have to renovate. The main choice is between incremental additions, doing cosmetic upgrades but keeping the main structures in place, or step change with real structural transformation.

Australia’s economy, and especially our energy system, is approaching a crossroads: more cosmetic reworking, some of which we’ve been doing already, or complete step-change overhaul?

Some context.

The Albanese Labor Government has been copping a lot of flack over the past two years. From progressives for being too small-time and unadventurous about its change agenda. And from conservatives for being too radical and woke.

A common default political position is that if you are being attacked from both sides, you must be getting it about right!

I don’t think that will work for the Albanese Government, if it wants to be sure of winning a second term of government, and for my money it doesn’t think so either.

Look at the bread crumb trail being laid down this year already.?

STEP 1: Do something big about the most pressing public pressure point here-and-now, the cost of living for everyday Australians.?

Box ticked with the overhaul of the multi-billion dollar Stage 3 tax cuts, giving more to low and middle income earners, and less to wealthy taxpayers, almost the opposite of what the original Coalition policy planned.

The political cost is a big broken election promise for Albanese and Labor. But no-one seems too exercised by that. Because it’s fair and sensible in the circumstances, popular with a majority of the punters, and kicks in from 1 July this year, perfect election-year timing.

STEP 2: Clean up the work in progress, pieces of the puzzle that are important, but mainly already expected, and not game-changing individually.

The Capacity Investment Scheme (CIS) to drive more big solar and storage kicked off in March (open for business), aimed at replacing old coal-fired power stations as they exit the grid. Fuel efficiency standards are being legislated, finally, even if a little weaker than many had hoped for, and will in turn help drive more uptake of electric vehicles (EVs).

Mandatory corporate reporting of climate-related financial information starts being phased in from 1 January 2025, with Scope 3 emissions reporting requirements to follow. A National Energy Performance Scheme (NEPS) is in the pipeline; the $2 billion Hydrogen Headstart is underway, being steered by a newly re-empowered Australian Renewable Energy Agency (ARENA); the Clean Energy Finance Corporation (CEFC) now has over $30 billion in Australian Government funds to invest, including the $19 billion Rewiring the National Fund for transmission lines; and the $15 billion National Reconstruction Fund (NRF) is proceeding, which includes several billions for clean energy and low carbon.

These initiatives are all part of the new structural support, mainly long overdue, for a much bigger renovation of the national economy.

STEP 3: Start to show your hand with bigger pieces, which we’re seeing now, in April 2024, roughly a year out from the likely date of the next national elections.?

The National Press Club launch of the Net Zero Economy Authority, with its founding chairman, Labor and union movement stalwart Greg Combet, signalling its willingness to intervene in the economy for change (Immediately before he heads off to run the $200 billion-plus Future Fund, Australia’s sovereign wealth fund, which can help pay for some of the transformation, along with Australia’s nearly $4 trillion superannuation industry, where Combet was recently a key figure too, as former Chair of Industry Super Funds (ISA).

Making leading businesswoman and diversity campaigner Samantha Mostyn the incoming Governor-General, effective 1 July 2024, bringing with her deep experience in matters related to climate change, carbon and sustainability. A largely symbolic role, sure, but important symbolism nonetheless, and her qualifications are from being symbolic.

And most recently, just last week, Prime Minister Albanese announced the Future Made in Australia Act, Australia’s at least partial answer to big global initiatives like America’s Inflation Reduction Act (IRA), which includes over $AUD500 million for homeland energy transition and net zero innovation and investments, and Europe’s similarly-motivated Green Deal.?

The PM said: This is not old-fashioned protectionism or isolationism – it is the new competition … we must recognise that the partners we seek are moving to the beat of a new economic reality.

STEP 4: Bring it home in the pre-election Budget 2024 (where substantial billions have gone uncommitted, until now at least, in part to avoid inflationary spending).

More detail on the Future Made in Australia Act will follow in next month’s Federal Budget, including investment and incentive elements (i.e. Show us the money).

Like anyone who’s not in the room where it happens, at best we can only make educated guesses on this one.?

But it makes sense that substantial billions can be allocated to medium and longer-term economic reform, rather than short-term sugar hits, without reawakening the inflation demons. And at the weekend, on ABC Insiders, Treasurer Jim Chalmers was foreshadowing ‘significant’ and ‘substantial’ measures, including but not limited to tax-based incentives.

It’s also shaping up as a stark counterpoint to the Opposition. Which is pinning its big energy and economic ‘renovation’ hopes on stalling renewables. Thereby prolonging coal, oil and gas. While fast-tracking unproven 21st? century nuclear technologies (currently illegal in Australia anyway).

The Coalition is claiming this is the path to deliver lower-cost, zero-carbon energy to Australians in a meaningful timeframe, with less government intervention in the economy. But it’s struggling to convince anyone other than its true believers that this can play out as claimed.

Whichever ‘renovation’ path prevails with the voting public, this all adds up to a big shift from the ‘gas-led recovery’ the Morrison Coalition Government (2018-2022) had as the answer to almost everything, the Covid pandemic included.

There’s some bad news, however.

Even if the ‘Australian house’ gets the full ‘renovation’ treatment, as currently proposed by either side of politics, it will be too little too late without massive speeding and scaling of additional action.

In climate crisis terms, it will count for little if it’s not followed by decisive action, by 2030, on the really big-ticket items:?

• Ending fossil fuel subsidies (estimated to be worth nearly $60B a year in Australia alone).
• Putting a price on carbon.
• 100% renewables by 2035 at the latest, and at least 75% emissions reductions by then as well.
• Food and water technology and process breakthroughs.
• Sweeping home and commercial/industrial electrification and de-gasification.?
• And solving hardest-to-abate sectors like airlines and cement, with real progress on 'green steel' already showing up.

It’s a really big home renovation project, for Australia and the world.

Murray Hogarth is an independent guide to business and other organisations, specialising in positioning strategy, stakeholder engagement, thought-leadership and storytelling for sustainability and the energy transition. He is a co-author, with Paul Gilding and Donald Reed, of Single Bottom Line Sustainability: How a value centered approach to corporate sustainability can pay off for shareholders and society (Ecos Corporation, 2002, find here).