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You are here: Home / Archives for Federal Budget

17 April 2019 By David McEwen

Sea Change by Regulators Spells Climate Risk but Potential Opportunity for Businesses

With major regulators making increasingly direct and clear statements about directors’ liability relating to the management of climate change risks, the “unforeseen” excuse is no longer going to cut it. In recent months major Australian regulators the RBA, APRA and ASIC have made it clear that the implications of climate change must be effectively considered in corporate decision-making.

The risks range from the obvious, such as increased physical asset exposure to the effects of extreme weather and the impacts of rising sea levels, to the more subtle, such as increased supply chain costs should material greenhouse emissions pricing be imposed or declining demand for an organisation’s products if low-carbon substitutes become cost effective (such as is starting to occur with renewable energy generation and electric vehicles).

For food producers, potentially declining agricultural yields in one location given changing temperature and precipitation patterns could potentially be offset by switching production to other geographies, though this approach carries other risks.

As evidence of the deleterious impacts impacts of climate change; its anthropogenic origins; and the liberal economic policies that have turbo charged it in recent decades permeates ever-more into the mainstream consciousness, another business risk is that left-leaning groups will gain more political control and may institute significant regulation to arrest further environmental degradation. This could adversely impact a wide range of businesses whose externalities are not priced into their products.

Even if this doesn’t occur at a political level, there are signs that communities have had enough, with dozens of grass roots campaigns to lobby change from organisations associated with various forms of pollution. Plastic waste is perhaps the most visible currently, with communities achieving single use bag bans in many jurisdictions and some announcing the phasing out of straws and single use containers. In terms of greenhouse emissions there are multiple community protest actions against specific coal, oil and gas projects, alongside a growing call for governments to ban new coal investment while accelerating moves to curb and reduce emissions.

And even if your business appears to have nothing to do with energy, transportation or agriculture it may not be immune from climate change. Coastal tourism, alpine sports and banks with exposed loan portfolios are three such examples, not to mention infrastructure managed by local and state governments. A few years ago there was even a backlash involving a million signature petition against beloved toy maker Lego for its co-branding deal with Shell, at a time when the oil major was planning to drill in newly accessible Arctic areas.

On the other hand, for some companies and industries, climate change also presents an opportunity. Adaptation to the many effects of a changing climate and rising sea levels; the decarbonisation of energy, transportation and industry; and measures to clean up the environment are likely to create value for many innovative organisations, particularly those who can demonstrate an authentic brand story.

Talk to Adaptive Capability today to understand the risks and opportunities of climate change to your business.

Filed Under: Australian Government Climate, Climate Change Adaptation, Ecological Footprint Measurement, Federal Budget

12 March 2015 By David McEwen

An Intergenerational Moment

An Intergenerational Moment
The Australian Government’s latest Intergenerational Report was released last week but misses an opportunity to start a key conversation. Looking 40 years into the future – what used to be two generations but is now closer to one given that the average age of parents having their first child birth is now over 30 – it is updated every five years or so.

In this case the report predicts the Australian population will have grown to around 40 million (from just under 24) – not unlikely given the current net growth of 1 person every 90 seconds or so. The average person will be older, with relatively fewer of working age and many people living longer into retirement. We’ll need a lot more healthcare and pension costs will soar, which will need to be funded from a relatively smaller tax base due to the reduced overall labour participation rate.

Meanwhile, by 2055, atmospheric carbon dioxide concentrations are expected to be anywhere between 480 and 580 parts per million, up from around 400 today (a 20-45% increase) and from about 320 when formal records began around 60 years ago. Average global temperatures, in turn, are likely to rise by a further 1-1.5 degrees C over current levels. Mean sea level rise is likely to be between 5 and 30cm. In these projections, the lower level of each range assumes deep cuts are made urgently to global greenhouse gas emissions.* To borrow a cricketing term, the “required run rate” involves cuts of around 6% per year, versus actual performance last year of an estimated increase of about 2.5%**

While it does contain a brief section on climate change, the 2015 Intergenerational Report is largely silent on the effects of these impacts of climate change on Australia’s future population and economy. In terms of its use as a facilitator of hard conversations between governments and the people, it fails to ask critical questions such as:

How will we keep our elderly (and outdoor workers such as farmers and construction personnel) safe from searing heat waves, which are expected to increase in intensity and frequency and exacerbate our health spending crisis?

How will we ensure fresh water security for a population base nearly 70% greater than today’s, particularly with rainfall patterns becoming more erratic?

How will we maintain a productive agricultural sector to feed Australians (and our export partners) with alternately parched, drenched and warmer farmlands?

And how will we deal with exposed coastal property and critical infrastructure such as ports, key airports and roads from storm surges that will be significantly heightened by rising seas and cyclonic winds?

If our tax base is already weakened by changing demographics and private insurance may become unaffordable, how will we afford the level of investment necessary to adapt to climate change and the likelihood of more frequent and costly natural disasters?

Within these questions, however, lies significant opportunity for a range of industries to position both existing and new products and services to the next generation of government, consumer and private sector buyers.

Talk to Adaptive Capability today about safeguarding and enhancing your business’ future.

 

*Source: United Nations Intergovernmental Panel on Climate Change Assessment Report 5, released 2014; ranges are approximate and have been estimated from graphs appearing in the report.
**Source: CO2 Now

Filed Under: Australian Government Climate, Climate Change Adaptation, Federal Budget, Risk management, Stakeholder engagement

10 July 2014 By David McEwen

Grim times ahead for Australia’s largest industry

Coal Loader

Business has been booming in the mining sector – until now. Here’s why investing in all the wrong places is setting Australia on the economic back foot.

Australia’s economy has effectively ridden through the last six years of economic uncertainty on the back of the mining boom. But as the world moves towards cleaner energy sources, remaining ‘open for business’ as the world’s quarry is putting Australia on an unsustainable path at odds with the evolving demands of many developed and developing economies.

The fast facts

  • Mining is Australia’s largest industry by revenue – combining direct mining activities and the associated mining services industry, the sector accounts for nearly 20 per cent of Australia’s $1.5 trillion GDP.
  • Australia’s growth is too dependent on mining – the Australian Bureau of Statistics notes that 80 per cent of GDP growth in the March 2014 quarter was contributed by an 8.6 per cent surge in mining output, though this was in part due to a relatively benign storm season.
  • The sector is almost half dirty energy – Fossil fuel extraction accounts for around 45 per cent of the mining industry’s output, the remainder being comprised of iron ore, other metals and minerals. The majority of coal, oil and gas output is shipped abroad, accounting for about 20 per cent of Australia’s exports.
  • Mining creates fewer jobs than you think – while it’s one of the nation’s most lucrative industries, the fossil fuel mining sector only employs about 80,000 people, well under 1 per cent of the Australian labour force. Which perhaps is just as well.

Yes, there will continue to be a market for fossil fuels decades to come. But despite massive expansion of coal-based power generation in China and India, there are signs that the growth spurt is coming to an end and demand may quickly waver.

Busting some renewable energy misconceptions

Historically renewable energy sources have been significantly more costly to operate – but there have been a number of game changing developments in clean energy sources around the world that Australia will move too late to cash in on when demand for fossil fuels dries up.

Building a new wind farm recently reached life cycle cost parity with a coal fired power plant of equivalent output, and large-scale solar technology is expected to become just as cost effective in the next couple of years.

There is huge investment in battery storage technologies, meaning it will be increasingly feasible for wind and solar plants to continue supplying the grid when winds are light or the sun isn’t shining.

And growth in renewable energy investment continues to accelerate even as the world’s appetite for coal is waning, driven by the early warning signs of climate change.

A recent report from the Association for Sustainable and Responsible Investment in Asia predicts that Chinese thermal coal demand could peak by 2020 and then start to decline. Despite building hundreds of new coal fired power plants in the last decade, China is one of the world’s biggest investors in renewable energy and its people, who currently suffer from chronic air pollution, are clamoring for a move towards cleaner energy and industry.

Australia is set for a hard landing

Meanwhile, Australia is still investing massively in the very things its largest trading partner is actively seeking to rid itself of: fossil fuel extraction and the associated infrastructure, including the controversial expansion of the Abbot Point coal terminal in the middle of the world heritage-listed Great Barrier Reef. These are investments with a multi-decade economic life.

Australia’s government seems intent on ignoring the warning signs – both economic, social and climatic – and continuing to support a toxic and archaic industry. The recent Federal Budget affirmed that it is simultaneously hell bent on destroying Australia’s renewables sector, right at a time when investment and incentives should be switched out of fossil fuels and into clean energy.

Loss of the fossil fuel mining sector would be a drop in the ocean in terms of job losses though more significant in terms of company tax receipts. But rather than plan proactively for this inevitable and essential transition, Australia seems intent on setting itself up for a very hard landing.

Whether directly, indirectly or passively through misdirected government action, all sectors face a level of risk from climate change and other global environmental issues.

Talk to Adaptive Capability today about safe guarding your business’ future.

Filed Under: Australia Mining Sector, Australian Government Climate, China Sustainable Energy, Clean Energy, Climate Change Adaptation, Climate Change Mitigation, Coal Mining China, Federal Budget, Green Energy, Mining Boom

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