By Abbas Nazil
Australia’s latest 40-year economic outlook has been criticised by climate and economic experts for failing to adequately account for the growing financial and social costs of climate change.
The seventh Intergenerational Report, released by the Australian government, projects how the country could look by 2066 and acknowledges that worsening global heating could affect productivity, agricultural yields, tourism and coastal communities.
However, experts said the report significantly understates the scale of the economic risks associated with climate change and does not sufficiently account for impacts that are already being experienced across the country.
Associate Professor Ben Neville, deputy director of Melbourne Climate Futures at the University of Melbourne, said it was a serious omission for the report to discuss Australia’s long-term demographic and economic outlook without properly incorporating the economic consequences of climate change.
The report states that the effects of global heating over the next four decades remain highly uncertain, with the pace of the global transition towards clean energy identified as one of the major sources of uncertainty.
It also warns that rising sea levels could have significant consequences for coastal and low-lying communities, while increasing temperatures could reduce worker productivity, affect agricultural production and damage the tourism sector.
The report further notes that increasingly frequent and severe natural disasters would pose a significant economic risk to Australia over the next 40 years.
Neville said existing climate-economic modelling could be understating the potential damage because it does not fully capture the complex and interconnected effects of climate change.
He pointed to Treasury modelling which estimates that a disorderly transition towards net zero emissions could result in a cumulative $2 trillion loss to the Australian economy by 2050.
He said current geopolitical developments suggested the world was facing challenges in achieving an orderly transition, while arguing that the economic consequences of climate change needed to be more fully integrated into Australia’s long-term planning.
Professor Sarah Wheeler, a water economics expert at Flinders University, also criticised the report for failing to give sufficient attention to water security.
She said climate change was expected to increase variability in water availability, raising the likelihood of more damaging floods and severe droughts.
According to Wheeler, failure to urgently address water security and climate risks could have major consequences for Australia’s productivity and the wellbeing of its population.
Climate activist Anjali Sharma also questioned the usefulness of a 40-year projection from a government that she said was not doing enough to address climate change.
Despite the criticism, the report highlights potential economic opportunities from Australia’s transition towards renewable energy.
Professor Frank Jotzo, director of the Centre for Climate and Energy Policy at the Australian National University, said the report appropriately recognised the economic benefits Australia could gain from renewable energy and emerging clean-energy export industries.
He identified green iron, green ammonia and carbon-neutral fuels among the potential export opportunities associated with Australia’s energy transition.
Francesca Muskovic, executive director of policy at the Investor Group on Climate Change, meanwhile, called for stronger alignment between Australia’s growing electricity demand and investment in new renewable energy capacity.
She warned that rapidly increasing demand from data centres without sufficient additional clean energy supply could place pressure on the existing electricity grid and contribute to higher energy costs for households and businesses.
The Australian government’s report therefore presents both significant climate-related risks and potential economic opportunities, while experts continue to call for stronger integration of climate impacts into the country’s long-term economic planning.
