Political bickering over climate change creating concern for overseas investors

Australia risks losing investment to the US, Asia and Europe as the reignited climate wars bring instability and uncertainty back to the policy environment, business groups warn.

Prime Minister Anthony Albanese and Opposition Leader Peter Dutton traded barbs over emissions reduction targets and policies for the third day in a row in a ramp-up of an argument that is unsettling business.

The Opposition has said Australia is unlikely to meet its 2030 target of a 43 per cent cut in emissions and therefore it isn’t worth having one at all. Forecasts show Australia on track for a 42 per cent cut.

Frontbenchers also insist the Coalition is still committed to reaching net zero by 2050 but getting there won’t be a linear pathway — in other words, the heavy lifting can be done later on.

Mr Dutton linked Labor’s emissions targets to higher power prices.

“There are many people who are worried about our economy going into recession by the end of this calendar year … Australians are struggling to pay their power bills, and yet the Prime Minister wants to sign us up to an arrangement that’s going to massively increase the price of electricity,” he said, referring to the 2035 target Australia needs to submit early next year under the Paris agreement.

Mr Albanese has attacked the Coalition for having no credible plan to deal with climate, saying on Wednesday it was “an extraordinary failure of leadership from Peter Dutton”.

As the political bickering rages on, investors are considering their positions.

The Investor Group on Climate Change’s managing director of policy Erwin Jackson said that over the past two years, the proportion of investors nominating policy instability as a barrier to bringing their money to Australia had nearly halved, dropping from 70 per cent to 40 per cent.

“Confidence in investment in Australia has been increasing over the last two years after decades of investors investing in other jurisdictions to deliver good long-term returns to their members,” he told The Nightly.

“Without stability, without clarity, investors will continue to shift their investment to the United States, to Asia, to Europe, where policy settings are clear, they’re stable and they’re credible.”

The Carbon Market Institute’s members include large emitting companies that are in the midst of planning major investments in clean technologies and need to know what the operating environment would look like.

Chief executive John Connor said businesses needed longer-term market signals, including what politicians planned for targets beyond 2030, to give them the confidence to spend money.

“Business leaders have reacted to the prospect of further policy uncertainty with deep dismay. There should be no backsliding,” he said.

The Business Council of Australia warned earlier in the week that interim targets between now and 2050 were critical to track progress and give investors certainty.

Treasurer Jim Chalmers said any move to walk away from emissions targets “would create extreme uncertainty in investor circles” and abandon the vast economic and industrial opportunities open to Australia.

“By ripping up Australia’s emissions reduction targets Peter Dutton would deny our workers and businesses the economic opportunities of renewable energy and send a shiver up the spine of investors here and around the world,” he said.

Mr Albanese accused Mr Dutton of being terrified of the future.

“Peter Dutton wants to scare that investment away and wants Australia to fail,” he said.

Mr Jackson said a core point missing from the political debate was that targets were not just about driving investment across the economy that contributed to growth, but they were about reducing the damage of climate change.

The point of the Paris Agreement was not to reach net zero by 2050, but to limit warming to 1.5C, which requires large cuts to emissions sooner rather than later.

“Over the next few decades, climate change is expected to knock $40 billion to $1.7 trillion off economic growth in Australia, and its close regional partners,” Mr Jackson said.

“Ultimately, that’s why investors want governments to take action on climate change. It’s actually about protecting long-term returns from climate change itself.”