Australia could create $63 billion in new investment opportunities over the next five years by strengthening climate targets and policies to achieve net zero emissions by mid-century, according to new economic analysis.

The analysis also finds that, under this scenario, private investment will accelerate to 2050, with hundreds of trillion dollars in opportunities generated by renewable energy, green hydrogen, manufacturing, electrified transport and carbon sequestration.

However, if current climate goals and policy approaches persist in the coming decades, substantial private investment opportunities, worth $43 billion by 2025 and $265 billion by 2050, will be missed compared to the Paris-aligned emissions path.

Economic modeling – conducted by Energetics for the Investor Group on Climate Change (IGCC) –contrasted the ‘order transition’ scenario in which Australia adopts a stronger emission reduction plan for 2030 and a net zero plan for 2050, with a ‘hothouse’ scenario characterized by current emissions paths and policy approaches.

Some findings of the analysis:

• The orderly transition will generate substantial new investment opportunities in manufacturing ($15 billion) and transport ($6 billion) over the next five years. A big new investment asset class in carbon sequestration will also emerge ($33 billion) as businesses and governments aim to reach tighter emission targets.
  
• In orderly transformation, green hydrogen begins slowly as an investment opportunity ($3 billion to 2025) reflecting its early stage of growth. But commercial prospects are emerging from the start of the next decade , leading to green hydrogen being the second-largest investment opportunity by 2050 ($350 billion).
  
• Renewables and other renewable power production will become the largest investment opportunity ($385 billion) in the orderly transition from 2020 to 2050. Other significant opportunities for transport infrastructure ($104 billion), carbon sequestration ($102 billion) and electricity transmission and distribution ($98 billion) are also created.
  
• Equity ($525 billion) and private debt financing ($322 billion) are the largest investment opportunities by asset class in the orderly transition to 2050, followed by government ($115 billion) and corporate bonds ($101 billion).

The study did not involve investment in export-oriented properties. This means that the projections of the report are likely conservative relative to the real-world opportunities that may exist for exportable goods such as green hydrogen and green steel.

“Investors, companies and governments will need to work together to create a trajectory to achieve a resilient net zero emissions economy by 2050, including deeper emission reductions over this decade.

“If we get this right, Australia could reap the benefits of $63 billion in fresh private investment over the next five years, and over $1 trillion by mid-century, in domestic opportunities alone. If we continue as we are, we’ll leave billions of dollars in investment opportunities behind.

“The billions of dollars in investment opportunities associated with an orderly transition to net zero emissions would support the jobs, livelihoods and wealth of millions of Australians for decades to come.

“Many of these prospects are in regional Australia with multi-billion-dollar opportunities in carbon farming, renewable energy, transport infrastructure and advanced manufacturing.

“Governments will be more fiscally challenged in coming years after deploying immediate COVID-19 relief. Mobilizing private capital is therefore critical to economic recovery and unlocking net zero investment opportunities.”

Emma Herd, IGCC CEO.