An answer to Australia’s languishing productivity lies in its response to the threat of climate change, an independent government advisory body has found.
Adapting to growing climate-related risks while also reducing emissions and transitioning to clean energy will enable higher productivity growth and living standards, according to an interim report by the Productivity Commission.
The findings come as Treasurer Jim Chalmers prepares to convene a roundtable in search of a solution to the nation’s lagging productivity.
“Australia’s net zero transformation is well under way,” commissioner Barry Sterland said.
“Getting the rest of the way at the lowest possible cost is central to our productivity challenge.”
By minimising the costs of reducing emissions through careful policy design, resources would be freed up for more productive activities, the interim report found.
It recommended ensuring incentives to invest in technology that can achieve reductions.
The Renewable Energy Target and the Capacity Investment Scheme, for example, will not support new investment in renewables after 2030, which means new market-based incentives should be implemented to eventually replace them.
The report also recommends incentivising heavy vehicle operators to reduce emissions.
Long-overdue reforms to Australia’s main environment law would also better protect the natural world by introducing national standards and improving regional planning, while speeding up approvals for infrastructure to make energy cheaper.
Though Australia has already set targets to cut greenhouse gas emissions 43 per cent by 2030 and achieve net zero emissions by 2050, the interim report found Australia will face significant climate-related risks regardless of emissions reductions.
This means adapting to climate change is integral to growing productivity.
The government has been urged to boost resilience to climate perils, which would lower the cost of disaster recovery and help maintain quality of life while Australia grapples with the impacts of climate change.
Australians’ homes in particular must become better adapted to climate risks, prompting the Productivity Commission to call for a housing resilience rating system and resources to help households, builders and insurers more easily identify upgrades.
Dr Chalmers’ roundtable will convene later in August and some invited to attend have already called for similar reforms.
Former Treasury secretary Ken Henry in July urged the government to overhaul the nation’s environment laws or risk Australia missing its most important economic goals.
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