Carbon baths and cleantech babies

Australia is now adjusting to life under the Coalition government and the actual and threatened demise of many of Labor's environment related schemes. Many in the industry are despairing but, in my view, the likely outcome is going to be little different. New governments always have to show that they are doing things differently and especially when they have made such a show of the difference prior to an election.  

What is becoming increasingly apparent is that most national governments are having little impact on the global transition to using resources more efficiently and profitably. The transition is being driven by multinational corporations, investors and communities that are increasingly moving towards the opportunities for increased wealth and improved quality of life.

The tinkering on the edges by governments can, however, have a big impact on how much local industry is created and how many of the products and services of the future will just be imported. It is, therefore, very important that the replacement measures implemented by the Coalition government support Australian industry and its associated jobs, investment and trade.

It is still unclear as what the Direct Action plan will include. At a high level there will be action to reduce emissions from those that produce lots and some action to help develop alternative technologies and business models. Labor's carbon tax was far from perfect. Its main weakness was the high level of compensation provided, resulting in little inducement to change behaviours. However, as part of the overall Labor program, the grants enabled industry to adopt more resource efficient solutions and developers of future technologies to make big strides towards commercialisation.

Hopefully, the Direct Action Plan will eventually include similar measures that will help Australian industry remain competitive on the global stage while also assisting our innovators and entrepreneurs in building the industries of the future.

The only certainty is that the outcome of the plan will not be as 'planned'. Maybe the carbon price will go – or maybe we will have a trading system with very moderate targets and low price. This would enable a future government of whatever colour to then have flexibility going forward. But, in my view, it doesn't really matter what mechanism Australia decides to use over the next few years. In the longer term, these externalities will be priced in some manner and the world – Australia included – will transition to emitting less carbon and to being more resource efficient.

Australia has suffered reputational damage internationally through its recent changes in environmental policy. The Prime Minister's comments on the consideration of the impact of climate change on the NSW bushfires received wide international coverage. Soundbites such as "that is complete hogwash" reported in The Korea Times on October 26 and 'she is talking out of her hat' reported widely do not help when trying to engage international investors, customer and partners for Australian companies operating in the sector. Luckily, Abbott business advisor Maurice Newman's absurd berating of the CSIRO for even employing climate scientists published in The Australian Financial Review on September 17 has not received any international press that I could find. But all of this is only transitory and has little lasting impact.

The real risk for Australia is that the industry support – for both old and new industry – will be thrown out with the whole concept of pricing carbon. This would be incredibly foolish and short sighted. Clearly, initiatives need to be reframed and renamed but the choices made over the next few months may have material impact on whether Australia has an advanced manufacturing sector – or not. Australia has huge potential in taking its smart technologies and innovative business models to the world. To deliver on this potential requires a strategy with three key elements:

1) Support for innovators to help bring their products to market;

2) Support for industry to become early adopters and enable both local companies achieve scale and the industrial customers to become more competitive; and

3) Enabling proactive links to global investors, customers and partners.

It doesn't matter what we call the program or the sector, but it is essential that these elements are included in the policy decisions that are now being made. These will ensure that the country grows in competitiveness, creates jobs, sources investment and diversifies its international trade.

The worst outcome for Australia's economic prosperity from our six-year debate on carbon pricing would be if all of Australia's cleantech babies were thrown out with the carbon bathwater. If this happens, Australian jobs, investment and trade will be the losers.

John O’Brien is managing director of Australian CleanTech, a research and broking firm that advises cleantech companies, investors and governments and works across Australia, China, Korea and Malaysia.