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Australia climate wars flare as China and others make carbon vows

Asian net-zero goals, Biden's rise and domestic divisions pressure Morrison

Climate activists display banners in front of the Sydney Opera House as part of a "Fund Our Future Not Gas" rally in late September.   © Reuters

SYDNEY -- It is the kiss of death for Australia's political class -- contributing to the demise of three prime ministers over the last 10 years. Now a fresh row is heating up over climate and energy policy, testing the leadership of the country's two main political parties.

The federal government, led by Prime Minister Scott Morrison, is pushing a "gas-led recovery" from the coronavirus pandemic. But it is also under increasing domestic and international pressure to adopt a net-zero emissions target following such moves across the Asia-Pacific region, as well as the environment-minded Joe Biden's U.S. election victory.

At the same time, the issue is causing a headache for opposition leader Anthony Albanese, who heads the Australian Labor Party. The ALP has seen its shadow resources minister resign over the party's stronger climate stance. He argued the center-left party is losing touch with its working-class base over green policy -- a view shared privately by many Labor parliamentarians.

The picture grew even more complicated last week following the passage of renewable energy legislation in the state of New South Wales. The 32 billion Australian dollar ($23.6 billion) plan, initiated by the same center-right Liberal Party that governs at the federal level, has sparked a clash within the party: The federal energy minister raised concerns that the plan could have "unintended consequences" and lead to an increase in power prices.

Political observers say the turmoil reflects the country's growing demographic divide. "It goes to the new class divisions which exist in Australia," said Nick Economou, a political scientist at Monash University.

"The inner-urban Australia, which is overwhelmingly involved in the services industry, tends to be extremely affluent, well-educated and can afford the price associated with climate change policies," he explained. But it "is pitted against a more blue collar, less well-off, less educated and a non-urban residential Australia."

The differences are so stark that Economou believes there will never be a national consensus on the issue, as voters "will just not accept the proposition that a climate change policy that results in higher taxes or higher prices is something they should support."

Indeed, Australian consumers already pay some of the highest electricity prices in the world, which is why the federal government wants to spur the gas-led recovery from COVID-19. It has committed AU$52.9 million to unlock more gas supply for domestic consumption, but some analysts are skeptical that the proposal is viable in a world seeking net-zero emissions.

Australian Prime Minister Scott Morrison arrives for a visit to Japan in mid-November. The Japanese government recently vowed to achieve net-zero emissions by 2050.   © Reuters

"The fundamental problem with the gas-led recovery is that it simply not going to happen for one simple reason, the gas companies themselves are in trouble and are not investing," said Bruce Robertson, an analyst at the Institute for Energy Economics and Financial Analysis, a think tank.

The election of Biden -- who has vowed to promote clean energy and pursue net-zero emissions by 2050, while floating the possibility of carbon tariffs on imports -- is consequential for climate action, according to Robertson. But he thinks what really makes a recovery powered by high-polluting industries unlikely are changes in emissions policies across Australia's core export markets for coal, liquefied natural gas and iron ore.

China, Japan and South Korea have all pledged to go net zero in the coming decades, too. Australia, meanwhile, aims to cut emissions by 26% to 28% by 2030, based on 2005 levels. This makes it an outlier as one of the few countries in the developed world not to commit to a national net-zero goal.

"Net-zero emissions has really changed the game for Australian exports. I think the phase-out of coal will be pretty rapid from here," Robertson said. People in government "who profess that coal has a future are misleading their constituents in a cruel and knowing way," he added.

But this sentiment is not shared by veterans of Australia's resources sector who are bullish about mining's future in developing economies including Vietnam, Bangladesh and India.

Greg Pawley has worked in Australia's resources sector since he was 16 years old. Now 54, he has held senior leadership positions across mining operations in Australia, South Africa and India.

While he acknowledges there may not be the same employment opportunities in the sector, he claims that reports of mining's death have been greatly exaggerated. Sure enough, market research company IBIS World forecasts industry revenue to grow at an annualized 2.8% through to 2024-2025.

Interventionist policies are undermining sector confidence, in his view.

"The government needs to have a legislative framework which doesn't play favorites between renewables and existing carbon technologies, so the market can determine it," Pawley said. He added that "the lack of consistency at a state and federal level is undermining investment."

"Our [power] plants are aging and need replacing," he said. "These are big investments and companies won't invest without certainty."

A coal-fired power plant in the state of New South Wales: The state plans to replace aging coal facilities by building AU$32 billion of renewable energy infrastructure.   © Reuters

Four of the five existing coal generators in Australia's most populous state of New South Wales are expected to reach the end of their technical lives over the next 15 years. This urgent need to replace the power plants resulted in the multibillion-dollar reforms from the state's Liberal Party.

Under the legislation, private companies will be supported to help build AU$32 billion of critical renewable energy infrastructure across the state. The bill is arguably the most ambitious energy plan in Australia. Proponents claim New South Wales residents will pay among the lowest electricity prices within the OECD due to the reforms.

"We didn't just end the climate change wars, we won them," the state's energy and environmental minister, Matt Kean, boasted in an interview with Nikkei Asia shortly after the bill's passage. Those "wars" are widely seen as a major factor in the downfalls of Morrison predecessors Julia Gillard, Kevin Rudd and Malcolm Turnbull.

Kean is adamant Australia can become the "Saudi Arabia of green energy." He is not the only one who sees such potential. Consultancy group EY placed Australia third on its Renewable Energy Country Attractiveness Index -- citing the market's "ambitious ... green energy export plans."

Kean has no time for claims that an influx of renewable energy will lead to high power prices for consumers, nor does he believe Australia's mining sector is on its last legs.

"It's not one or the other," he said. "We have got a lot of existing precious minerals and metals that can be used to power all the stuff we need to move to those cleaner forms of renewable energy."

As investment into green energy continues and state governments signal a more proactive approach, Kean believes Australia can still reach net-zero emissions by 2050 with or without a federal commitment. Every state government in Australia has adopted the emissions target, despite the central government's reluctance. Victoria, for one, will invest AU$540 million to develop six new renewable energy zones across the state.

Monash University's Economou echoed Kean's view, suggesting Australia's green energy revolution might be hiding in plain sight.

"People forget that [Australian] states have a lot of power and influence over this stuff ... and they are getting on with it."

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