Tue. Dec 7th, 2021

Australia faces an intensified risk of global investors divesting bonds or equity if we do not join other nations to commit to a 2050 zero issue, the Reserve Bank warns.

As Scott Morrison tries to persuade citizens to adopt new climate commitments ahead of Cop26 in Glasgow, RBA Deputy Governor Guy Debelle told an investment conference on Thursday that climate risk was raised in “most talks I have with foreign investors – this is a marked change from a couple of years ago ”.

Debelle said that “to date” there had been no marked shift in investor appetite for Australian bonds or equities “with only a few minor exceptions”. He noted that the Riksbank suspended its investment in bonds issued by government governments in Queensland and Western Australia “a few years ago”.

But the bank’s deputy mayor said the outlook was clear. “There is a risk that we will see more of these divestiture decisions sooner rather than later.”

“Governments in other jurisdictions are implementing net-zero policies,” Debelle said.

“Both of these effectively increase the cost of emissions-intensive activities in Australia.

“So whether we think these adjustments are appropriate or reasonable, they are happening and we need to take that into account. The material risk is that these forces will intensify from here. ”

Debelle has previously warned that climate change poses risks to financial stability and argued that warming should be seen by politicians and businesses as a trend and not a cyclical event.

Treasurer Josh Frydenberg drew on similar themes in a speech he recently gave on the economic issue for Australia of adopting a net zero target. He warned that Australia would have much to lose if global capital market participants felt that “we are not surpassing the rest of the world”.

The RBA’s deputy governor general said on Thursday that the transition to low emissions provided “plenty of opportunities for Australia”.

“As a reflection of our talent, Australia has been an energy exporter for many decades and there is no reason why this should change,” he said.

“Australia is also equipped with resources that have the potential for Australia to continue to be an exporter of energy — but renewable rather than emission-intensive fossil fuels.”

Debelle noted that the transition would incur costs in some regional communities. But he said the economic transformation currently underway in the South Australian city of Port Augusta demonstrated “the opportunities are potentially there for the same communities”.

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He said Australian states are moving forward with policies to drive the transition, including policies to address structural adjustment challenges in the regions. “In the same way, Australian companies are seeing the potential of the changing climate and investing in it.

“There are challenges ahead in managing the transition and in managing the financial risks,” he said. “But with risk comes great potential for reward.”

In addition to the pressure to commit to zero zero emissions before Cop26 in Glasgow, the Prime Minister has been under increasing pressure from investment and business to commit to reducing emissions by around 50% by 2030, in line with scientific advice and targets set of larger developed nations.

The Nationals are not yet on board with the 2050 commitment. The Cabinet on Wednesday discussed a political roadmap and modeling of the Treasury that supports the plan. No decision was made. National’s party venue meets on Sunday to consider the possibilities.

Some nationals are still unforgiving against adopting a net zero, and the junior coalition partner will demand new commitments to revitalize regional Australia and increase employment in return for supporting any change in climate policy.

Guardian Australia understands that Morrison has also told colleagues that he wants to increase Australia’s existing emissions reduction targets by 2030 before Glasgow. New emission projections, which will be released soon, are expected to predict that Australia will hit the current target of a 26-28% cut by 2030 compared to 2005 levels.

But with some nationals openly hostile to signing up for a mid-century net zero commitment, and others on the fence, it’s unclear whether Morrison will have the political capital to take the extra step and raise the target for 2030 .

Sources say Australia, with both the British and US governments, has raised the idea of ​​publicly declaring that it would “overtake” its 2030 target without formally increasing the target, but both allies have pressured Morrison to deliver the formal increase. for window decoration.

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