Contributed by Joe Montero

A paper released by the Grattan Institute, suggests that Australia is on the threshold of a new industrial revolution characterised by decarbonised of industry. This is a reasonable assertion.

Although broadly supportive of the Albanese government’s approach to the matter, the paper does point out that there is still no real explanation on how the reduction of emissions by 5 million tons per year is going to be achieved. This is also reasonable.

Reality on the ground is that these emissions have risen by 25.5 percent since 2025. This figure comes from Government data released last week. And 80 percent of this has been caused by 213 big industrial facilities. This means that any meaningful action must deal with these polluters.

Australia must move away from carbon dependency

The Grattan Institute suggests that setting a limit on these industrial facilities. But this recommendation is conditioned by championing the continuation of carbon credits to minimise the impact on the polluters. This, the report suggests, will more likely build a consensus and is less likely to lead to political division.

Relying on carbon trading is already a proven failure. This is not the way forward. Carbon trading allows businesses to pay for polluting. The idea is that this is a disincentive. But the experience shows that it does not work. It costs are passed on to the consumer.

Furthermore, if the transition is to be just, ensuring that the cost is on the shoulders of the major polluters, change will not have the support of the population.

Carbon trading policy is turning to the market mechanism as the way to solve the problem of carbon emissions.

The implied solution offered is to bring about the support of big business.

The answer lies in a different approach. One that involves much more direct government intervention. Not for the sake of big government but because this is the only way to apply a macro solution. This means dealing with the whole economy and its interconnections, and nor just with a collection of individual enterprises.

Without this wholistic approach, there will be no meaningful action to shift away from a carbon reliant economy. Intervention must build new infrastructure and industries, to safeguard the population in terms of jobs and standards of living, minimising the impact of the costs on other industries, and building alternative energy on the required scale.

Photo by Ma Xiping/Xinhua/Getty: Solar thermal power plant at Dunhuang in China’s northwest Gansu Province

The paper supports the concept of the National Reconstruction Fund. This does, however, fall short of recommending a major increase in its size. Intervention to build the new economy is not possible without this. Intervention should also be more than just about providing business opportunities for big investors. The primary concern should be to meet the needs of the Australian people and the environment.

At least there is a recommendation that the practice of funding the private sector be ended unless this is strictly devoted to positive structural change. The paper is especially critical of subsidies to the fossil fuel industry, which work to increase the level of carbon emissions.

While there is a call to pay attention to the big polluters, there are no effective suggestions as to how this can be achieved, except to call for a tax on windfall profits for the fossil fuel industry. Much more is necessary.

There is a suggestion for an “industrial transformation future fund.” The problem is that is to shift the costs of private business transition to the public sector. This means the burden falls on the taxpayer. An element of this might be justifiable. But only when it is only a small part of the overall effort to move towards a net zero outcome.

Polluting industries must end when they are no longer profitable and to continuing to operate them moves towards illegality. There is no denying that a transition period is needed to minimise disruption and the wellbeing of communities and individuals. But this should never be used as an excuse to continue business as usual.

The major polluters must be dealt with. In addition, the ideas that some dirty industries with specific technologies can just be tweaked into cleanliness must be discarded. These industries must be phased out and replaced by new ones that meet the needs of the future. This draws us back towards the necessity of direct government intervention.

Australia is hoping that the Albanese government will make a shift in this direction.