Swift action will reduce the environmental and economic impact of climate change

The State of the Environment 2021 report paints a grim picture of a “poor and deteriorating” outlook, but offers hope that rapid action to address threats such as climate change and habitat loss can turn things around.

We don’t have to look far to see the devastation. In the past few years Australia’s unique and vital environment has been battered by bushfires, floods, marine heatwaves, cyclones and droughts.

The 2019-2020 summer bushfires devastated large parts of south-eastern Australia.Credit:Rachel Mounsey

But the realities of climate change don’t just stop on our shores. Right now, temperature records are being smashed in the UK, Europe and the Middle East. Devastating fires are also burning across Europe, the United States and Africa. And this is simply a snapshot of the climate-driven extreme weather disasters of the past few weeks.

So what does this tell us? Well, when it comes to the numbers, according to Munich Re research, climate-related disasters are estimated to have caused global economic losses of $272 billion in 2020 alone.

But more than that, it shows that we are already paying a high and terrifying price for the world’s climate inaction and time-wasting. We are paying with our health, livelihoods, future prosperity and our own lives.

We still have time to avoid the worst of it, but we must immediately drop the false notion that economic and environmental interests act in opposition to each other. By looking at the costs of environmental policies without assessing the full range of benefits of action, we do ourselves a disservice.

Beachgoers flocked to Brighton Beach as Britain recorded its highest temperatures on record this week.Credit:AP

The reality is that a degraded environment is a massive economic risk on multiple fronts.

We need to look no further than our supermarket shelves to understand at least one dimension of the economic costs of catastrophic flooding, exacerbated by climate change, which has wiped out crops in many regions, with produce absent from shelves or with significantly higher prices.

These same floods are leading to rapidly rising insurance costs and a massive clean-up bill for individuals, business and governments. And that’s before we account for loss of life and the physical and mental health costs.

Jobs are also on the line. For example, the State of the Environment report is the latest in a series of alarm bells about the state of our coral reefs, including the Great Barrier Reef which supports 60,000 tourism jobs. Deloitte estimates climate inaction could cost us 880,000 jobs by 2070.

Catastrophic flooding has had a devastating impact on livelihoods, insurance premiums and food supplies.Credit:Oscar Colman

And the enormous cost of extreme weather and rising temperatures on mortality and our health systems are only just starting to be fully understood, with a price tag of more than a trillion dollars a year in the US, and likely many billions in Australia.

Efforts to properly understand the value of our environment and protect it will pay off manifold.

Modelling from the University of Melbourne shows that, while investing in decarbonisation has up-front costs, the benefits are some 20 to 30 times the required investment. The UN Environment Program has found that every dollar spent on nature restoration delivers at least $9 of economic benefit, while World Economic Forum research suggests nature-positive policies could generate US$10 trillion per annum and create nearly 400 million new jobs by 2030.

Modelling shows that while investing in decarbonisation is expensive, the long-term benefits are manifold.Credit:Getty Images

The new government’s move to have the Treasury model the impact of climate change on our economy and national budget – a practice abandoned under the previous government – is a big step in the right direction. Fortunately, others have kept this work up. One estimate puts the cost of damages from climate inaction at more than $5 trillion by 2100. And this figure doesn’t include loss of cultural values to First Nations Australians, the pain and anxiety many of us feel from species loss as well as the impact on water and air quality. These all add vastly to this looming bill.

Only when we understand the value of what we stand to lose – and gain – can we make sensible environmental policies. We are currently failing to do so.

For instance, while the NSW government has great initiatives for EVs, home energy efficiency and Renewable Energy Zones, it undermines these policies by continuing to approve new coal and gas projects. The guidelines for these approvals currently fail (as they do around the country) to accurately account for the economic and social cost of greenhouse gas emissions associated with these projects. This sacrifices the well-being of future generations for profit today, despite the explicit direction of the relevant Act to ensure intergenerational equity.

We need a radical rethink in our policy and planning processes to understand the reality that environmental protection, climate action, and a strong economy go hand in hand. Good economics, not vested interests, must guide our choices.

Australia has a huge economic opportunity in a zero-carbon world. Rapid, significant investment in expanding our renewable energy resources could make us a clean energy superpower.

As many lament the loss of Australia’s manufacturing potential in recent decades, cheap and clean renewable energy could be the key to reigniting this potential, for domestic and export markets.

Already, we are seeing parts of the private sector move in this direction, but we need every sector of our economy to get involved, with governments paving the way for more private sector co-investment. The critical minerals hub evolving in Western Australia and the South Australia hydrogen hub are shining examples of where we might go.

Australia must move quickly if we are to take full advantage of the export opportunities needed to replace current fossil fuel revenues. Global momentum for decarbonisation is well underway, and many countries are well ahead of us.

It’s time for us to understand, value and protect our precious environment and act swiftly to reduce emissions and ecosystem decline. It may not be easy, but it’s the only economically sensible thing to do.

Nicki Hutley is an independent economist and Climate Councillor

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