How well does Australia’s intergenerational report address climate change?

The Government has released the sixth Intergenerational Report today – the first under Labor Prime Minister Anthony Albanese and Treasurer Jim Chalmers.

Intergenerational reports are an important forecast for Australia’s future, considering major economic, demographic and social trends over the next 40 years.

This long-term vision invites us to move beyond short-term politicking and consider transformative and radical shifts needed to address the big challenges and opportunities facing current and future generations.

What does the report reveal?

Intergenerational reports have historically focussed on Australia’s economic and demographic makeup – and this year’s release is no exception. Economic growth will slow down over the next four decades to an average of 2.2% annually (0.9% lower than the previous report estimated). Australia will grow to more than 40 million people by the 2060s, but will be a rapidly ageing population thanks to improved life expectancy, access to life-extending healthcare and declining birth rates.

Critically, this year's report increases emphasis on climate change as a defining challenge – and opportunity – for Australia over the next four decades.

Climate change and global climate action will have profound impacts on the economy, reshaping Australia’s industry mix and requiring effective mitigation and adaptation to manage the impacts of higher temperatures.

How will climate change shape Australia’s future over then next four decades?

According to the Intergovernmental Panel on Climate Change, global temperatures have already increased by 1.1°C above pre-Industrial levels and we are on track to exceed  2.0°C of warming by 2050.

Without significant investments to reduce greenhouse gas emissions and adapt to changing climate pressures, Australia’s future generations will face significant challenges. Hotter temperatures will increase the frequency and severity of heatwaves, droughts, extreme fire risks, unpredictable rainfall and flooding events, and degradation of marine, freshwater and land ecosystems. Sea levels will continue to rise, leading to erosion and inundation of low-lying coastal areas during storm surges.

Here we break down how climate change will influence the key Intergenerational Report trends.

Economy

The Intergenerational Report projects what Australia’s economy will look like over the next forty years. It considers both opportunities and risks related to climate change. This analysis is much needed to better understand climate change and its economic impact, after years of the government ‘flying blind’ on this issue.

The report highlights that the economy will be increasingly powered by renewable energy and exporting minerals critical to green energy transition such as lithium, cobalt and rare earth elements, which are key inputs to clean energy technologies. Electronic vehicles (EVs) will be increasingly common, but will impact revenue the government currently generates from fuel excise taxes. Legislating vehicle-to-grid charging would help smooth this transition and help decarbonise the national grid by enabling EVs to be batteries-on-wheels. A mandatory fuel efficiency standard – as called for by many EV advocates – could save Australians $11 billion in its first five years.

The report also explains how climate change will create economy-wide risks in Australia over the coming decades. It outlines a few key pathways that higher temperatures might lead to a drag on the economy. For example, the report talks about lost productivity from the labour force, particularly those who work outside. The report estimates that if global temperatures go up to 3 or 4 degrees there would be a direct loss in economic output of between $135 billion and $423 billion in today’s dollars.

There is good reason to think that the economic impacts projected will be greater than those outlined in the report. The report is open about the fact that it only considers a select number of economic transmission channels, such as labour productivity losses, and does not model the impact of other major costs on the economy such as biodiversity loss and other health impacts. The economic modelling also excludes so-called ‘tail risks’. These are low-probability but high-impact climate events. These ‘tail risks’ tend to be very significant in economic terms.

The risk analysis in the report is also built on a record of natural hazards that are held by a private sector firm (p 265). As such, they aren’t available for the public to view. It would be useful if the Treasury moved towards the approach taken in the US, where more climate data is made available to the public. It is important that communities understand the way in which climate impacts will affect them.

Health

The Intergenerational Report highlights the growing economic and societal pressures    of Australia’s ageing populations; the number of people over 65 will double and those over 85 will triple under current projections, increasing pressure on health, aged care and disability services. Less attention is given to the impacts of hotter temperatures and extreme weather on the health and wellbeing of future generations.

The elderly and people with existing health conditions are already at greater risk of physical and mental health impacts from hotter temperatures and extreme weather, including heatstroke and heat-exacerbated chronic conditions such as heart disease, diabetes, hypertension and mental health conditions. Bushfires and air pollution will exacerbate pre-existing heart and lung conditions.

These effects will not be distributed evenly: people living in the Northwest of Australia, such as Broome and Darwin, will experience more and longer periods of extreme heat. Food and water security will be threatened by declining rainfall trends, disproportionately impacting those in regional and rural agricultural hubs. Adaptation planning will need to rapidly accelerate to deal with projected impacts of climate change on health, and strengthen resilience and preparedness of health systems to cope with growing demand.

Migration

Overseas migration is projected to fall by 0 .6% by the 2060s, remaining fixed at 235,000 new arrivals each year. We know that climate change will increasingly play a role in migration patterns. Up to 1.2 billion people may be displaced by climate-related disasters by 2050.

Australia will likely face increasing pressure to support vulnerable communities in neighbouring Pacific Island countries, who are more vulnerable to the impacts of climate change. Voluntary and involuntary climate change-related migration will likely increase over coming decades. Climate-displaced migrants are at greater risk of adverse health outcomes – and may require additional support from health services in destination countries.

This has significant implications for Australia’s leadership and role in the Indo-Pacific region. Last week’s International Development policy embeds climate change as a cross-cutting priority – but will require a significant scale-up in foreign aid funding to match its ambition.

Intergenerational equity and climate injustice

Intergenerational Reports have historically lacked attention to broader social and environmental shifts like climate change, inequality and urbanisation.  While this report marks a significant improvement from previous iterations, the lived experiences of current and future populations risk being lost in the data. There is little to no reference to climate justice or just transitions. Over the next forty years, the rights of older populations will need to be balanced with younger people inheriting an ecologically degraded and insecure world.

Climate injustice often focuses upon how the wealthy have benefited from damaging the climate, while poorer populations live in more vulnerable conditions exposed to extreme climate events. For example, Oxfam have reported that the emissions of the richest 1% of the global population is more than double the emissions of the poorest 50%.

This injustice, however, will be compounded by the intergenerational effects of who will be left to pay for the clean-up. BHP have already asked for taxpayer assistance to help close down coal assets, which Minister Bowen rejected. As firms recognise the investment mistakes they have made in stranded fossil fuel assets, estimated to exceed US$1 trillion, it will increase the incentive to socialise their losses through the public purse. While these bad investments should usually be borne by shareholders, governments will be tempted to support the jobs and income losses and to speed up the economic transition through financial assistance measures.

Embedding climate in intergenerational perspectives

The next Intergenerational Report will be produced in three years.   Rather than producing a single long-term vision of the future, we should be thinking about different pathways and scenarios for change. Approaches used by climate change experts, including the IPCC, provide a model for mapping different scenarios (business as usual, policy interventions, etc.) to better understand possible future outcomes, investments and trade-offs.

Intergenerational equity and emphasis on perspectives of young people and future generations – who will be the driving force of political and economic action in 40 years – must be elevated in future reports.