Climate change a $3.4 trillion opportunity for Australia

Inaction on climate change could cost the Australian economy $3.4 trillion in the lead up to 2070, while the right steps could add nearly $700 billion. A new Deloitte Access Economics report charts the course ahead.

“Climate change is no longer a possibility. It is a reality. Doing nothing is now a policy choice, and it is costly,” stated report author and Deloitte Access Economics lead partner Pradeep Philip. The report details how temperatures will rise, frosts will disappear, sea levels will rise, the ocean will grow acidic, and rainfall will devastate at times and disappear at others.

The resultant economic cost for Australia adds up to a 6% contraction – $3.4 trillion – and the loss of nearly a million jobs by 2070. No doubt, some sectors will feel the brunt more than others, specifically ones that depend on land or weather patterns. Agriculture, mining, resources extraction and energy – some of which are central pillars for Australia’s economy – are all on the front lines.

These sectors will have to fundamentally transform their operating models, all while demand for their output will remain stagnant or decline as the years progress. Other sectors such as manufacturing, construction, transport will also need fundamental change, although demand here might actually increase over time.

As the economic squeeze tightens, jobs will come under the axe. Deloitte Access Economics reports that a quarter of the whole Australian workforce is deployed in ‘emissions-intensive sectors,’ leaving them exposed. By 2070, this could mean 880,000 fewer jobs on offer in the Australian economy.

Philip described these numbers as “sobering,” and put them in context of the severe economic impact being felt as a result of Covid-19 this year. “By 2050 Australia will experience economic losses on par with Covid-19 every single year if we don’t address climate change. That would compromise the economic future of all future generations of Australians.”

This is the outlook if attitudes towards climate change remain indifferent. On the flipside, taking the right action at this pivotal moment poses a sizeable economic opportunity in itself. Policies that encourage sustainable business, incentives to boost sustainable investments, and involvement from the business environment make up the need of the hour for Australia.

The way forward

Together, the public and private sector need to revamp Australia’s infrastructure, transition its energy landscape and drive innovation in manufacturing. The goal is to align with low-emission targets such as net-zero by 2050 – a standard being set by leading businesses across the globe.

None of these efforts can reverse the damage already done. The cost of global warming is “locked in” according to Philip. That being said, there is an opportunity to prevent further damage, and offset some of the high costs with targeted economic growth. In fact, concerted efforts to combat climate change could add nearly $700 billion to Australia’s economy by 2070 – a boost of nearly 3%. This is in addition to 250,000 additional jobs created.

“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,” explained Deloitte Australia chief economist Chris Richardson.

For Philip, two things need to be kept in mind going forth. One is urgency. “Every day’s delay costs Australians more.” The second is that no one business, government body or even country can tackle the crisis alone. “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.”