Madeleine Gordon | Climate Change and Energy Security Fellow
We’ve heard a lot about how much a transition to renewable energy will cost Australia. Lost mining jobs, shifts in investment, retraining expenses: it’s not a pretty picture. But if the fires this summer tell us anything, the status quo may be an even pricier option. It’s time to stop looking at how much a renewable transition will cost in isolation and start comparing it to the price of inaction.
Estimates indicate that the cost of these bushfires will be anywhere between $3bn and $13bn. It is hard to price damage while it is still being done.
Tourism, Australia’s fifth-largest export, has been hit hard. Domestic and international travellers have returned or stayed home at what is, for most coastal tourism-based economies, peak season.
Agriculture has also suffered. Areas impacted by the fires are home to about 9 per cent of Australia’s cattle and 12 per cent of sheep. More than 820 000 hectares of agricultural land has burnt. This has devasted farming families and businesses and driven up food prices.
In fire-impacted communities, the economic effects have compounded. The same families that lose their properties are often the employers whose infrastructure or crops burn or the employees who are made redundant due to business disruptions such as smoke, evacuations and falling consumer confidence.
The burden on volunteers is also significant. Even under the government’s financial support program, someone who usually earns $300/day is only eligible for 20 days of support. As we enter our sixth month of firefighting, those involved in long-term efforts are left empty-handed.
While these impacts are significant, Australia is in a strong position to fund recovery efforts. The country’s fiscal position provides a buffer that the government must continue to draw on to help communities rebuild.
But while the budget might survive this summer, what about the next? Scientists have warned about the expected increase in the frequency and severity of natural disasters. Australia knows just how expensive these events can be. The Black Saturday fires are estimated to have cost $4.4bn. And Cyclone Tracy? In today’s dollars, that was a $6.6bnclear-up effort. That’s not a future Australia can afford.
In fact, in January, the Bank of International Settlements, effectively the world’s central bank, warned the Reserve Bank of Australia (RBA) of the possibility of a climate change-induced global financial crisis. It argued that ‘green swan’ events, severe shocks to the financial sector caused by climate change, could lead to a fire sale of carbon-intensive assets due to a loss of investor confidence. In this instance, the RBA may be forced to buy up these assets to avoid a recession.
It is in this context that we must consider the cost of a transition to renewable energy.
How much would a transition cost? Focusing only on the price of coal-generated power relative to that of renewables, coal is currently cheaper although renewables are expected to draw equal this decade and become cheaper between 2030 and 2040. We must also consider the financial ramifications of shutting down Australia’s $61bn coal industry and the start-up costs of developing new industries. These factors are difficult to price accurately but will undoubtedly be significant.
Communities dependent on coal mining also fear that a move away from fossil fuels will jeopardise their economic livelihoods. While this is an issue, it is not a reason to avoid a renewable future. This is because climate change has the same potential to destroy communities’ principal industries. Already this summer, local economies up and down the southeast coast have been crippled. Tourist hotspots such as Merimbula, Batemans Bay and Jervis Bay were left as ghost towns. Down near the Victorian border, the Eden Chipmill, a key supplier of local jobs, lost a 100 000 tonne woodchip pile. Victoria’s Gippsland, a region responsible for 22 per cent of national milk output, lost significant cattle and feed. Over in South Australia, 90 per cent of Kangaroo Island Plantation Timbers’ plantations have burnt.
While economic restructuring and rebuilding will always be expensive, at least a renewable transition happens on our terms, not nature’s. With the price of inaction constantly rising, economic concerns are not a good enough reason to put off a clean future. We can move away from coal or be left standing over our coals. The choice is ours.
Madeleine Gordon is the Climate Change and Energy Security Fellow for Young Australians in International Affairs.