Australia’s Climate Wars Return to Investor Dismay

Division between the country’s main political parties has reopened, with a new fight emerging over 2030 emissions targets.

Investors have condemned an announcement by Australia’s opposition leader, Peter Dutton, that he would abandon the nation’s legally-binding 2030 emissions targets if he forms its next government.

The surprise move, which critics say would force Australia out of the Paris Agreement and stall investment in renewable energy, re-ignites a decades-old debate over the fossil fuel-rich nation’s position on climate policy.

In an interview with The Australian newspaper over the weekend, Dutton declared his centre-right Liberal National Coalition would drop the Labor government’s commitment to reduce emissions by 43% by 2030 if successful in a federal election due to be held next year.

“They [Labor] have no hope of achieving the targets and there’s no sense signing up to targets you don’t have any prospect of achieving,” he said, pitching Labor’s plan as a threat to the country’s agricultural and energy exports.

“We’re not going to destroy agriculture. We’re not going to stifle investment. We’re already seeing investment being withdrawn. We’re not going to create sovereign risk with our export partners, as Labor is doing with Japan and Korea,” he said, in a reference to concerns aired by foreign investors in coal and gas production in the country.

Dutton said he would keep the legally-binding 2050 net zero target, but would not go to the next election with a 2030 target – a move commentators said would violate obligations under the Paris Agreement and force Australia to withdraw from the treaty.

The comments come as a rightward tilt in European elections imperils the EU’s climate agenda, while a potential victory for Donald Trump in the US presidential election this November threatens to stall progress on climate in the world’s biggest economy. All this occurs while global emissions continue to rise and average temperatures race towards the 1.5°C threshold.

But Australian Prime Minister Anthony Albanese promised to stand firm, saying Dutton’s plan showed he “can’t be taken seriously”.

“It is just not a serious policy and if you don’t have a serious policy on energy and climate then you can’t be taken seriously as the alternative prime minister of Australia,” Albanese said in an interview with Guardian Australia.

Climate wars back on

Climate policy is a polarising issue in Australia, which is the world’s second biggest shipper of coal and a top exporter of liquefied natural gas. Its power sector remains heavily dependent on fossil fuels and it has among the highest per capita emissions in the world, on a level with Saudi Arabia.

Traditionally the centre-left Labor party has supported tougher climate action, while the centre-right Liberal-National Coalition has opposed it. During the coalition’s nine years in power between 2013 and 2022 it repealed a world-leading emissions trading scheme and committed to some of the weakest emissions targets in the developed world.

When Labor won power in 2022 it quickly changed the country’s direction, legislating a 2050 net zero target and committing to reducing emissions by 43% by 2030 below 2005 levels – low by comparable countries’ standards, but far above the coalition’s previous non-binding target of 26-28%. Labor also introduced an industrial sector emissions trading scheme and aimed to reach 83% renewables in the power sector by the end of this decade.

Following the Coalition’s loss, Dutton had – until now – avoided overtly anti-climate rhetoric, instead focusing on overturning a ban on nuclear power in the country.

Investors have welcomed Labor’s policies and the apparent easing of political divisions on climate. Many have now condemned Dutton’s surprise decision to wage war on Labor’s climate policy.

“Investors need long-term policy certainty,” Marilyne Crestias, Interim CEO of the Clean Energy Investor Group (CEIS), told ESG Investor in written response to questions.

“Targets serve as long-term benchmarks that signal the level of ambition required, and they provide clear guidance by helping investors align their strategies and resources with the anticipated trajectory of the market. A proposal to eliminate the current 2030 emissions target would significantly reduce investor confidence,” she said.

She added that such a reduction in investor confidence “could put more than A$120 billion (US$80 billion) of investment in clean energy at risk”. The CEIS represents some of Australia’s biggest investors in clean energy.

The Investor Group on Climate Change (IGCC), which represents Australian and New Zealand pension funds and asset managers on climate topics, also criticised Dutton’s move, saying investors had a legal obligation to “protect the retirement savings of millions of Australians” and this was only possible with “fast, fair and well-planned transition to net zero”.

“Investor confidence is only now starting to recover from decades of climate policy chaos. Investors urge all parliamentarians to stay the course and set emissions targets with the highest level of ambition,” Managing Director of Policy Erwin Jackson said in a public statement.

A recent IGCC member survey appeared to support the Labor government’s policies with only 40% of asset owners and managers citing policy uncertainty as a barrier to investment in climate solutions in Australia, versus 70% in 2021.

Polls suggest Dutton could win

Since coming to government Labor has maintained a lead over the Liberal-National Coalition. But a poll this week by News Corp found the parties were neck-and-neck for the first time since the 2022 election, suggesting next year’s election will be a close contest.

The coalition was defeated in the 2022 election, in part over its regressive climate policies, losing once-safe seats in wealthy inner city suburbs to pro-climate independent candidates known informally as ‘teals’ – a reference to the colour of their branding, which was a shade between conservative blue and environmentalist green. Dutton’s latest comments could boost their chances of holding those seats.

Tim Buckley, Director of Sydney-based think tank Climate Energy Finance, told ESG Investor Dutton’s effort to “reignite the climate wars” was a “myopically short-sighted stunt” designed to serve “the vested private interests of the fossil fuel industry”.

“Dutton’s division and disinformation is all about delay to enable continued reliance on fossil fuels, helping their social licence to operate,” he said.

“This will certainly undermine investors’ interest in investing in decarbonisation at the speed and scale required by the climate science, and the massive opportunities in front of Australia,” he said, pointing to the country’s vast amounts of sun, wind and land that could be mobilised for clean energy projects.

“The scale of investment required means we need investor confidence from the private $3.6 trillion pension capital,” Buckley added.

But he doubted Dutton’s policy would be a palatable to voters, predicting Labor would be re-elected on the back of its clean energy and industrial policies.

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