It's how to hit climate targets that matters

The devastating summer bushfires have heightened community awareness of the dangers of a warming planet. This has now led to a significant shift in Australia’s climate change debate.

It began when the fires forced Scott Morrison to reposition the government’s rhetoric. But it is big business – which is often criticised for a lack of leadership – that has taken the lead in forcing Australia to face up to the pressure to reduce carbon emissions beyond the 2030 Paris Agreement target.

Ahead of both major parties, the Business Council of Australia has explicitly endorsed a net-zero emissions target by 2050. This is the level of CO2 abatement that the International Panel on Climate Change says must occur to prevent the planet warming by more than 2 degrees.

The BCA move picks up on the initiatives by companies such as Woodside Petroleum, BHP, Qantas and BP that are committed to cutting their carbon footprints to net zero by 2050. The BCA says its decision is based on practical, not ideological, reasons, because business needs policy stability after the past decade of climate war madness.

Business leadership could help to build a new political consensus on the 2050 target. The Morrison government says it will take a tech-led plan to November’s UN climate conference in Glasgow, and that it is awaiting a review before deciding on the 2050 target.

Labor, having abandoned the 45 per cent emissions reduction by 2030 target that Bill Shorten took to the 2019 election, is yet to detail any replacement policy.

But, while setting a destination is one thing, figuring out how to get there matters more, as the BCA’s chief executive Jennifer Westacott tells today’s AFR Weekend.

To reduce uncertainty about where Australia is headed on climate policy, the BCA backs the climate change bill of independent MP Zali Steggall. Ms Steggall’s bill would establish five-yearly emissions reduction plans across all sectors of the economy , which would be ticked off by a climate change commission on the way to net-zero emissions by 2050.

Anchoring expectations on where Australia is heading and nailing down a stable policy framework for getting there would help reduce regulatory risks for investing in less carbon-intensive production. That would reduce the very real costs of decarbonising a fossil fuel-intensive economy that earns billions from coal and LNG exports, and which still relies on coal to generate 70 per cent of its electricity. And it could firm up a political consensus that political extremes on the left and right would find harder to undermine.

The coherent approach to climate change is a stable, market-based policy framework.

This would have a far better chance of happening with an enduring market-based mechanism – such as an economy-wide revenue-neutral carbon tax – that would give business the incentive to invest in emissions-reducing technology such as carbon capture and storage.

A carbon price could have been embedded in the National Energy Guarantee to drive private sector investment in clean, reliable and lower-cost energy, including the gas-fired firming electricity generation required to shore up a national grid destabilised by the renewables boom.

This is the policy void that Mr Morrison is now trying to fill through the government’s direct action ‘‘technology road map’’. While technology ultimately will be the solution, this is still a second-best approach that exposes taxpayers to the inherent risks of governments trying to pick winners.

The Prime Minister is right, however, to back the development of gas as a crucial, cleaner transition fuel as growth in renewables gradually pushes out coal-fired power – a position supported this week by Australia’s Chief Scientist, Alan Finkel.

The decision by insurance giant IAG to no longer insure gas projects may have been made for valid business reasons, to reduce the financial risks associated with climate change. But blocking gas development could also make it harder for Australia to transition to clean energy and hit the 2050 target. It could even, counterproductively, give validity to the arguments of the rebel Nationals pushing for taxpayer funding for new coal-fired power plants.

The coherent approach to climate change is a stable, market-based policy framework that will incentivise business to invest, innovate and develop the solutions that will help Australia play its proper role in limiting the risk of global warming.