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National Australia Bank chair Philip Chronican says the government should stick to its ambitious target to dramatically lift the role of renewable energy in the country’s electricity grid by 2030, as he warned the nation faced a $270 billion hit to its exports as the world moves away from fossil fuels.
While Australia has abundant natural resources, Chronican said on Thursday that demand for those emissions-intensive exports would decline after 2030.
NAB chair Philip Chronican said Australia could shed about 1 per cent of its GDP every year until 2050 without further action towards net zero.Credit: Elke Meitzel
“Unless we take a proactive approach to it, it’s likely that we’re going to suffer from a loss of economic output,” he said. “Other countries will be looking to improve their own emissions positions, and we’re not currently positioned to meet that demand.”
As NAB released a report it commissioned from Deloitte that highlighted the opportunity from decarbonisation, Chronican also underlined the cost of not doing enough.
Citing the report, he said fallout from insufficient action on Australia’s transition could wipe about 1 per cent off the country’s gross domestic product every year, which he said was “meaningful when you’re growing 2 to 3 per cent a year.” The report projects Australia’s existing exports will decline by $270 billion by 2050 under current net zero policies.
On the other hand, boosting the competitiveness of green industries in Australia could create a $435 billion economic opportunity, the Deloitte report said.
Realising this opportunity would require a rapid build-up of Australia’s renewable industry and supportive infrastructure to take advantage of the country’s sun, land, wind and water endowments, Chronican said.
The federal government has set a target for renewable energy to make up 82 per cent of the electricity grid by 2030. Despite the tight time frame for achieving the target, and expert concerns it will be tough to achieve, Chronican said the government should stay the course.
“The problem with deferring the target is that it puts off a lot of the rest of the transition we’re going to need to make,” he said. “At this stage, the best path is to focus on the barriers to us meeting that target, and a lot of those barriers come down to the lead times that it takes projects to get planned.”
While Chronican said he understood the need for governments to have an “insurance policy” by keeping coal power stations running until sufficient renewable infrastructure was guaranteed, he said he would “hate to think that that became an excuse for not pressing ahead with building the renewable infrastructure we’re going to need.”
The NSW and Victorian governments have this month announced support mechanisms to keep coal power stations running for longer than planned if necessary.
Chronican said the scale of government investment in renewables in the US was another complicating factor in Australia’s green transition, but stopped short of calling on the Australian government to take the lead on financing investments.
“There’s a risk that given the size of the investment being made in the US, it could suck talent and capability out of the Australian market,” he said. “It’s not that we’re looking for significant subsidies from governments, but we are looking for that policy certainty so that we can harness private capital. People want to know that the targets that the government set out are going to be adhered to and that the economics is going to be supportive over that timeframe.”
Chronican said NAB was not looking to harden its line on the financing of new gas projects, and that it would continue to finance them at “roughly the same level for the next couple of years.” However, he said the bank would look to cut its gas exposure between 2025 and 2050.
While iron ore, coal and gas have been in high demand for the past 20 to 30 years, providing a substantial boon to Australian living standards, Chronican warned fossil fuel exports could take a hit in the long term.
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