Business has a key role to play if Australia is to reach net zero carbon emissions. Given that business produces 70% of Australia’s emissions, we cannot reach net zero carbon emissions without significant changes in business conduct. To do so, business needs guidance, incremental targets, incentives and regulation. Technologies will help, but business needs support developing and adopting them. The task ahead is colossal, and business needs all the help it can get, if we are to maintain a liveable climate.
Most businesses in Australia are in support of reaching net zero as soon as possible. The will is certainly there. While some businesses will act as leaders, for most businesses, the task ahead is so immense that they will need all the help they can get. Medium and small businesses that lack the resources to independently assess and adopt new technologies and practices, in particular, require guidance and incentives. While many businesses are leading the policy environment around climate change in the absence of a certain and robust regulatory framework in Australia, most would prefer to follow a more collective path if it were provided by the government. This leaves Australia in a precarious position in the move towards a carbon neutral future in line with the timelines of the Paris Agreement.
No-one wants more devastating bushfires of the scale seen in the summer of 2019-20.
We propose four key steps that the Australian federal government should take based on international models for regulating and incentivising business to reach net zero.
1. Working towards a national target of net zero by 2035
Given that Australia’s carbon budget has been largely ‘spent’ over recent years, we have to get cracking on reducing carbon emissions. Even if we don't have a formal target of reducing carbon emissions to zero in the next decade, business should be encouraged to transition to zero carbon emissions as soon as possible. We simply must do the heavy lifting early, rather than waiting till the last minute. Yes, folks, this is a race. We need a national task force, that brings together business leaders, climate scientists and experts, to guide and support business towards this goal.
2. Reintroduction of a carbon price mechanism
In order to meet the national target, a carbon price is agreed as the most effective mechanism. The Coalition government hates the idea of a carbon tax, having promised a 'no tax' route to a carbon neutral future. However, Australian businesses will be charged international carbon duties if Australia doesn't introduce a carbon tax, because carbon pricing is becoming the norm internationally. In this case, the revenue will be sent overseas as “carbon tariffs” levied by importing nations with stronger climate commitments. A carbon price in the form of an ETS will allow Australian exports to avoid attraction of international carbon duties, which would significantly impact the competitiveness of Australian exports.
3. Mandated corporate carbon reporting mechanisms
Providing accurate accounts of carbon emissions is essential to corporate governance and decision making. Mandatory reporting and standardised accounting ensure that market pressures are placed on companies in relation to their emissions and can act as alternatives or complementary mechanisms to market-based policies. Transparently reporting a companies’ emissions can provide accurate data to climate-related investment which form a kind of de-facto tax or pricing on carbon.
Carbon reporting mechanisms should include:
- Reporting on absolute emissions (calculations based on GHG Protocol)
- Mandatory reporting of Scope 3 emissions
- Audit and assurance of emissions reporting
Regulation should mandate a standard for all Australian reporting entities to use mechanisms for carbon management and reporting of emissions. This would mean reporting on absolute emissions calculated with the GHG Protocol as the basis.
Scope 3 emissions are not emitted by the company directly, but associated with activities such as purchased materials, and with products once they have been sold. For example for a coal mining company, their Scope 3 emissions would include emissions from their customers burning that coal.
Scope 3 emissions should be included in the management and reporting of total emissions, which should be externally audited by independent parties to ensure completeness and confidence.
4. Reform of carbon credit systems
Carbon credits are often considered as a necessary mechanism to reach net zero emissions, however current offsetting practices in Australia are not robust. Rather than being used to transition to carbon neutral operations or to ‘decarbonise’ the economy, there is a risk that carbon offsetting is used by big emitters to continue with ‘business as usual’. To reform carbon credit systems, we recommend:
- Robust oversight by an independent body
- Inclusion of Indigenous land management practices as a carbon credit method
Developing a more robust oversight mechanism of carbon credit systems that puts inclusion of Indigenous land management practices as a legitimate form of carbon credit calculation, based on Indigenous wisdoms and research, at its centre. Carbon credit systems should be assured by credible independent parties, and based on scientific evidence of overall reduction or absorption of carbon, in addition to existing levels (i.e. additionality). This assurance should be updated regularly according to advances in climate science. Traditional land management practices provide an effective and equitable process for reducing and absorbing carbon, and represent some of the best practice in carbon credit systems. Indigenous-led knowledges should be referred to in the first instance.
