The analysis undertaken by consultancy Energetics for the Investor Group on Climate Change (IGCC) has compared an orderly transition scenario, in which Australia adopts a stronger 2030 emissions reduction target and a 2050 net-zero goal against a “hothouse” scenario marked by current emissions trajectories and policy approaches.
In a net-zero scenario, private investment was forecast to accelerate out to 2050, with hundreds of billions of dollars in opportunities created across renewable energy, green hydrogen, manufacturing, electrified transport and carbon sequestration.
Australia potentially would create $63 billion in fresh investment opportunities during the next five years if it strengthened climate targets and policies in line with reaching net-zero emissions by 2050.
However, if current climate targets and policy approaches are applied, significant private investment opportunities are tipped to be lost, worth $43 billion to 2025 and $265 billion out to 2050, when compared to a Paris-aligned emissions trajectory.
IGCC chief executive Emma Herd said Australia could not afford to ignore the investment opportunities identified under an orderly transition.
“Investors, companies and governments will need to work together to create a trajectory to achieve a resilient net zero emissions economy by 2050, including deeper emission reductions over this decade,” Ms Herd said.
“If we get this right, Australia could reap the benefits of $63 billion in fresh private investment over the next five years and over $1 trillion by mid-century, in domestic opportunities alone. If we continue as we are, we’ll leave billions of dollars in investment opportunities behind.”
In the net-zero scenario, renewable and other clean power generation is expected to become the largest investment opportunity, presenting $385 billion in potential investments during the next 30 years.
Manufacturing was forecast to present $15 billion in new investment opportunities over the next five years, while transport was calculated to give $6 billion. Other opportunities would be created across transport infrastructure ($104 billion), carbon sequestration ($102 billion) and electricity transmission and distribution ($98 billion).
A major new investment asset class in carbon sequestration would also emerge, with $33 billion in opportunities, as companies seek to meet tighter emissions goals.
Green hydrogen was also tipped to start slowly ($3 billion to 2025), reflecting its early stage of development – but it is expected to become the second-largest investment opportunity by 2050 ($350 billion).
“The billions of dollars in investment opportunities associated with an orderly transition to net zero would support the jobs, livelihood and wealth of millions of Australians for decades to come,” Ms Herd said.
“Many of these prospects are in regional Australia with multi-billion dollar opportunities in carbon farming, renewable energy, transport infrastructure and advanced manufacturing.”
Equities ($52 billion) and private debt finance ($322 billion) would be the largest investment opportunities by asset class to 2050 in a net-zero scenario, with government bonds ($115 billion) and corporate bonds ($101 billion) following.
The analysis did not include investments in assets geared towards export however, which the IGCC has said could make its estimates conservative compared to the real-world opportunities for exportable products like green hydrogen and green steel.
“Government will be more fiscally challenged in coming years after deploying immediate COVID-19 relief,” Ms Herd said.
“Mobilising private capital is therefore critical to economic recovery and unlocking net zero investment opportunities.”
The IGCC represents a number of Australian and New Zealand institutional investors, including super funds and asset managers.
It recently found 70 per cent of investors are increasingly adopting or considering portfolio-wide goals for net-zero emissions.
