The start of a second Trump presidency has led many to question the future outlook for energy in Australia and around the world, and what impact the new US administration will have on the move towards net zero.
Economist Ross Garnaut AC, who is Professor Emeritus at both The Australian National University and The University of Melbourne, spoke to Andrew Jaspan, Editor-in-Chief of 360info, about where things now stand.
Last November, you seemed to think there were real prospects for renewables in the world and the move towards net zero. You thought that the political and international settings for the environment were favorable. What’s your feeling today?
Oh, I certainly thought there were prospects of moving forward. A number of aspects of the international settings were favourable.
China is not only the world’s main producer of capital goods for the new economy, but also by far the world’s biggest user of renewables. Last year China produced more renewable energy than the rest of the world combined. Europe and other economies of Northeast Asia are also making good progress.
And that creates a huge opportunity for Australia to use some of our renewable energy resources to support new industries exporting goods, especially to Europe and Northeast Asia — countries that can’t generate the renewable energy to do it themselves.
The election of Trump doesn’t change the physics [of climate change] one bit. Atmospheric physics doesn’t care who wins American elections or what commentators are saying on Fox News.
Climate change is getting more severe and that will require a response, even though that may be an ignorant response. If it turns out to be an ignorant response, that would undermine our social and political order.
But it may also engender a positive response. I certainly think [Trump’s election] will have a negative effect on the US’s interaction with the international community. It may not have such a big negative effect in the United States, because Trump may not find it easy to repeal all the Biden measures.
One of the first executive orders President Trump signed was to withdraw from the Paris Agreement again. How do you see the impact of that decision on the rest of the world?
Well, that’s up to the rest of the world. It will be influential. But, the rest of the world can choose to resist that influence. If the rest of the world bows to the influence, that could seriously affect commitments towards net zero in major economies generating a large amount of greenhouse gases, such as China, Japan, Korea, the European countries, and India. That would certainly have a big negative effect on international development towards net zero.
But it’s not certain that will be the case. China sees a geopolitical opportunity in America’s withdrawal from Paris. It’s already actively promoting its own decarbonisation. China is a huge ship to turn around, but it’s turning around. And it has momentum now in moving its industries towards a zero-carbon economy.
It will use its industrial strength to enhance cooperation with other countries wanting to move to net zero. And the speed of that move depends on their domestic politics and whether governments of the centre right or centre left, remain in power in the big European countries, such as Germany, France, and the UK. If they do, there is every prospect of the Paris commitments surviving, despite the change in US.
But if the US developments become instrumental in changing political direction in the rest of the world, then that will have a big negative effect on the world’s action on climate change.
For big carbon-emitting businesses will that now mean they can do whatever they want in terms of gas and oil exploration in the US? Do you expect that to follow in the rest of the world as well?
We still have a lot of business commitments to taking action on climate [change]. But for some businesses those commitments are only skin deep, dollar deep, and we’ve already seen some reversals in the rest of the world. Macquarie Bank, for example, headquartered in Australia has retreated on Paris commitments. Many companies around the world will use the US changes to pull back on those commitments.
We can’t rely on voluntary action by business to deliver good outcomes. You need policy and incentives because most businesses will only do what is profitable. Nevertheless, there are opportunities for businesses that are prepared to stay the course on climate commitments and they will be in a strong position when America comes back to the Paris agreements, as it may.
What about business decisions in Australia, particularly for gas and oil exploration?
The mood has certainly moved. The barriers to Australia increasing its emissions and not meeting emissions targets has been weakened. However, both the government and opposition remain committed to net zero.
If we in Australia allow too much gas development, it will become impossible for us to achieve net zeroby 2050. The outcome depends on our own political choices and the decisions that Australian governments make over the next few years, at a time that Trump is signalling that he has little to no interest in renewables.
How do you see the opportunities for renewable development in Australia? I’m thinking particularly of opportunities for rural Australia.
Renewable energy is the cheapest form of energy. There’s lots of smokescreens around that but serious people in business know that you wouldn’t invest now in a coal-based power station because it would not be as cheap as investing in the best renewables backed by storage.
Renewable energy has got a life of its own because it’s become cheaper. That wasn’t inevitable. I did not presume that was the case in my 2008 Climate Change Review, but it’s turned out to be a much lower cost than the alternatives. That’s a great boon to Australia.
If we get it right, we’ve got the lowest cost renewable energy of any large country. And that could be the basis of strong competitiveness in a wide range of industries that use a lot of energy. Most of these — and the jobs in them— are based in rural and provincial Australia.
In fact, the economic growth in the next half century in Australia will be disproportionately in rural and provincial areas because that’s where the zero-carbon industrial growth will be.
South Australia is one of the world’s great regions for renewable energy. Energy-based industries in the Mid-West, Western Australia and the central west of Queensland will also do very well in the future.
So there will continue to be good progress towards renewables but it will not be fast enough without active policy support.
Renewables in the United States got a big boost from Biden’s Inflation Reduction Act. The biggest beneficiaries were Republican states that voted for Trump and whose votes he needs to get anything through Congress. Trump won’t get any law through to repeal the act without Texas votes. Texas is now much bigger than California in renewable energy.
The boom in renewable energy from Biden’s IRA has been great for development in west Texas. I wouldn’t back Donald Trump to get those Texans to vote to end their economic boom.
The same goes for Australia. The central west of Queensland shares with the central west of Texas great strengths in renewable energy.
If we play our cards right, and if the rest of the world moves towards net zero, we can be a great exporter of energy-intensive goods. Probably the world’s biggest renewables exporter.
For the Australian economy, there will be many more jobs than in coal and gas.
Given the case for renewables, why do you think the Coalition is pushing so hard on the need for nuclear energy?
I don’t know why. I am not in the Opposition’s head.
What I know is that with our very rich renewable energy resources, nuclear is an expensive option. It is also an option in the far distant future, long after a lot of our coal plants start falling apart.
No one wants to build a new coal plant. It’s obviously uneconomic in competition with renewables.
Some people say: “Well, France and China are using nuclear energy, so why not Australia?”
Those countries do not have Australia’s renewable energy opportunities. And often their nuclear programs are being cross-subsidised with their nuclear weapons programs.
That is the case with France, where nuclear weapons and nuclear power generation are developed side by side. For Australia, the economics wouldn’t take you in that direction.
In the run up to the election with cost of living one of the critical issues along with energy prices, what should Australian voters think about when they turn their minds to the cost of energy?
We will not lower the cost of energy by slowing down progress on renewable energy.
Is electricity storage and batteries a key issue in Australia?
Yes, that’s part of the story. With batteries we will get reliable power from renewable energy “when the winds aren’t blowing and the sun is not shining”. Battery storage is one of the untold success stories of Australia. We are having a great battery boom. We are putting more large grid scale batteries to stabilise the grid into Australia than in any other country. What’s going on in Australia is transformational. Its an important part, but not all of what is required and what can be provided, to make an electricity system with very high proportions of solar and wind power both secure and reliable.
Originally published under Creative Commons by 360info.
Ross Garnaut
Director
Ross Garnaut AC is a renowned economist specialising in development, economic policy and international relations. He is Professor Emeritus at the University of Melbourne and a Fellow of the Australian Academy of Sciences. His contributions to trade policy and climate change have made him a trusted adviser to successive Australian governments.
