Climate change will hit economy harder than COVID-19 lockdowns

Climate change is set to have a greater impact on the economy than the COVID-19 lockdowns, according to a new report from Deloitte Access Economics.

The report, A new choice: Australia's climate for growth, found if climate change goes unchecked, Australia's economy will be 6% smaller and have 880,000 fewer jobs by 2070.

However, it also found that there would be a large financial gain if the country did act now to fight the effects of climate change.

"That's a $3.4 trillion lost opportunity over the next half a century. But there's a $680 billion dividend that's ours for the taking if we do rise to this challenge, along with 250,000 more jobs," it says.

The report found that over 30% of employed Australians, and over 30% of national income, is in industries exposed to economic disruption and risk from climate change.

However, in contrast, delivering net zero by 2050 and consistent with keeping global warming to 1.5 degrees Celsius, could add $680 billion and grow the economy by 2.6% in 2070.

Deloitte Australia chief economist Chris Richardson says climate change is a bigger threat to the economy than COVID-19.

"COVID shows the cost of overlooking catastrophic risks. So it's an urgent wake-up call for us to get ahead of that other big risk - climate change," Richardson says.

"The best and most effective way to tackle climate change is through market mechanisms. Australians need policy and regulatory reform that modernises our economy and unleashes business investment.

"The benefits of acting are huge. But we are fast running out of opportunity."

The principal report author, Deloitte Access Economics lead partner Pradeep Philip, says the costs of climate change are still rising each year, as are the costs associated with reducing the risks it presents.

"Climate change is no longer a possibility. It is a reality. Doing nothing is now a policy choice, and it is costly," Philip says.

"While there are a significant number of jobs and growth at risk - enough to drive future recessions - the good news is that the rest of our economy can help create the change we will need."

Philip says that doing nothing is set to be a costly choice and choosing net zero will be an "economic necessity".

"All of these numbers are sobering. By 2050 Australia will experience economic losses on par with COVID every single year if we don't address climate change. That would compromise the economic future of all future generations of Australians," Philip says.

"But taking a new and resilient economic path in response to climate change, actually presents unprecedented opportunity. It would see Australia's economy growing and the creation of jobs."

Philip says a great amount of damage has been done at the expense of the Australian economy, but decisions must be made now to prevent further harm.

"Whatever Australia does or doesn't do, the global warming which has already taken place will hurt our lives and livelihoods. This cost is locked in - it is the cost of delay," Philip says.

"This tells us that there isn't a 'no cost' option. So if we could take action today to prevent the next great recession from climate change, why wouldn't we?"

The report noted that policies aimed at strengthening economic growth can support low-emission pathways, and actions to stimulate investment in low-emission investments can strengthen economic growth job creation.

The report says it needs to be about high-growth industries such as mining new minerals for new technologies, investment in the upgrade and replacement of Australia's infrastructure, thinking about new energy structures, driving innovation in advanced manufacturing, and addressing emissions efficiency in traditional economic sectors.

"Yes, there'll be costs. And there'll be some losers. But we'll all be losers if we fail to act," Philip says.

"And there are far better paths for us to choose - the technologies and ideas to create a new growth economy in Australia that is resilient to risks are available today. Our climate does not care about borders, politics, or ideologies, so the ultimate solution to mitigating global warming risk still has to be coordinated global action."

This article first appeared on Financial Standard

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