Australia deserves to pay climate risk premium

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A firefighter gives instructions near a bushfire at the Windsor Downs Nature Reserve, near Sydney September 10, 2013. More than 550 firefighters are working on several bush fires across New South Wales (NSW) that have left one house destroyed and six firefighters injured, according to the NSW Rural Fire Services. REUTERS/Daniel Munoz (AUSTRALIA - Tags: DISASTER)/File Photo - RC2D8Q97X8AN

MELBOURNE, Nov 18 (Reuters Breakingviews) - Australia’s federal government is blowing hot air into the global warming conversation. The coalition led by Prime Minister Scott Morrison finally adopted a net-zero emissions target in part due to fears that money managers would punish the country for not having one. The plan was initially vacuous enough read more , but new details confirm the lack of seriousness – and the potential cost.

Canberra’s updated Future Fuels and Vehicles Strategy underscores how little the government intends to do to reduce emissions before 2030. An extra A$178 million ($130 million) for electric-charging and hydrogen-refuelling stations and such will complement what companies including Tritium and BlackRock-backed (BLK.N) Jolt do. Missing, however, are even better options like capping tailgate pollution, eliminating remaining import tariffs and other taxes, and providing federal incentives to electric-vehicle buyers.

The government expects its measures will help put 1.7 million clean cars on Australian roads, or about 9% of the country’s light-vehicle fleet in 2030, Breakingviews estimates. It would eliminate just 8 million tonnes of CO2-equivalent in total by 2035, roughly what the country’s transport sector spewed in one month in 2019.

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The reason is that more than 500,000 additional petrol-powered motors would be zipping around. And hybrids and “super-efficient” gas guzzlers, not electric vehicles, would make up virtually all the clean cars, according to the models underpinning the overall net-zero plan that was released last week.

They contain plenty of gems. For one, there’s a ceiling of 2 degrees Celsius, not 1.5 degrees, for the average global temperature increase since pre-industrial times. The report only posits that net emissions fall by 85%, eschewing the rest to save the coal and gas industry A$4.9 billion. It further predicts the value of fossil gas exports will grow 13% by 2050 and highlights 62,000 possible new mining and manufacturing roles with almost no mention of climate-related opportunities in other sectors. Think-tank Beyond Zero Emissions puts those at 1.8 million jobs nationwide.

Such greenwashing keeps on the table the potential investor penalty Treasurer Josh Frydenberg raised in a September speech. Last week’s modelling estimates it would reduce investment in the country by an average 5.5% through 2050 and lop almost 1 percentage point off GDP. Even if understated, on current policies, it would be a well-deserved risk premium.

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CONTEXT NEWS

- The Australian federal government on Nov. 12 released the modelling behind its plan to reach net-zero emissions by 2050 that it unveiled on Oct. 26.

- It followed an announcement on Nov. 10 that the government would commit A$500 million ($363 million) to a new fund to make equity investments in early-stage domestic firms developing technology to combat climate change, and it expects private-sector investors will contribute the same amount.

- The Low Emissions Technology Commercialisation Fund would be managed by the government’s green bank, Clean Energy Finance Corp. The coalition right-wing government also wants to amend the institution’s remit so that it can invest in carbon capture and storage. Both initiatives require new legislation.

- On Nov. 9 the government unveiled an updated Future Fuels Strategy, increasing capital available to A$250 million from A$72 million. The fund will focus on public electric vehicle charging stations and hydrogen refuelling stations; household smart chargers; commercial fleets; and heavy and long-distance vehicle technologies.

($1 = 1.3767 Australian dollars)

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Editing by Jeffrey Goldfarb and Katrina Hamlin

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