Whither Green Investment, Australia?
The Keynesian stimulus spending taking place around the world has been seen as an opportunity to direct funding towards environmental goals.
There is evidence to suggest that some spending has been accordingly directed in long-term green investment – up to 15% of the aggregate stimulus spending of the G20, according to UNEP. This spending includes rail, smart grid, water and waste, building weatherisation programmes, renewable energy project deployment subsidy, and low carbon vehicle programmes, but also notes the persistence of $250bn in perverse fossil fuel subsidies.
In terms of the percentage of green stimulus as a percentage of total stimulus, the leaders are Korea, China, Australia, France, UK, Germany, US, South Africa, and Mexico. The US ranks second in terms of green stimulus per capita, with China providing the largest green stimulus in absolute terms.
Within this fray, China has made it increasingly clear that it intends to mandate a large domestic market for green technologies, and has aggressively pursued incentive policies to attract high-tech green companies to set up there. This is shown to be true by the UNEP stimulus analysis. This intention and commitment is what Thomas Friedman in the New York Times terms ‘The New Sputnik’ moment.
“ The investment generated from the Five- Year Plan has been fuelling the growth of China’s green industry. During the 11th Five-Year Plan period, annual growth in China’s green industry services is expected to be 15 per cent, reaching a gross output value of US$ 126-157 billion by 2010, and accounting for 3.4 per cent of GDP. Furthermore, the renewable energy sector alone is expected to generate an output value of at least US$ 118 billion. (….)Chinese experts estimate that for every US$ 100 billion of green investment, GDP would grow by US$ 143 billion, tax revenues by US$ 1 billion, and household consumption by US$ 60 billion. In addition, it is estimated that 600,000 new jobs would be created.” (UNEP)
Australia fares well in the UNEP G20 green stimulus analysis. Australia ranks #3 in the economic stimulus per capita (US$2000), ranks #2 in terms of green stimulus per capita (US$420) and as a share of the economic stimulus (21%), and #3 in terms of green fund percentage of the total GDP (0.87%).
Some notable components of this Australian investment from the budget are (AUD) $1.46bn for solar, $4.6 for urban public transport, and $2bn for CCS.
On the flip side, some obvious counter-productive subsidies persist, such as the fringe benefits tax concession on company cars. In addition, the Australian version of the US ‘cash for clunkers’ has been accused of not being green, due to the absence of any fuel efficiency standards as a requisite for eligibility.
Of the $6.2bn car industry package in November 2008, $1.3bn was included as a ‘green car fund’ as a co-finance mechanism. The Co-operative Research Centre for Advanced Automotive Technology recently set out a vision for transforming the Australian car industry to be a provider of value-add for a world in which the transport future will be substantially electric.
Further clarity around the budget announcement of up to $465m for an independent innovation investment body, ‘Renewables Australia’ would be welcome. This body would seem to have the role of a public/private VC facility, thus potentially leading to a rationalisation of the numerous State- and Federal incentive programmes.
There are, however, some important questions that need to be posed in terms of what Australian policy-makers are hoping to achieve with the various investments being made. Some of these are as follows:
Are these investments sufficient to drive long-term private investment and innovation in the Australian economy? What is the role of the Australian economy in a green future? In what context are the returns on investment to be understood? How are green stimulus investments, and the outcomes, being coordinated and evaluated? What are the implications of the revenue and investment scenarios of different emissions trading permit auction proposals under consideration?
These questions do not seem adequately addressed at this point in time, and seem to merit further examination.