The Clean Industrial Revolution

The Weekend Fin Review picks up my latest op-ed which shows companies from Google to Alcoa are looking for low carbon economies for there next multi-million dollar investments.  Since Australia has a carbon obese energy grid, we will fail to attract these new opportunities unless we cut carbon emissions…. and fast.

TEXT:

Is Australia’s Carbon Obesity Locking Out New Foreign Investment?

Before Iceland’s banks exposed themselves to the US sub-prime meltdown, this tiny Nordic country was attracting the attention of new energy-intensive industries from aluminium smelters to technology data-centers. Why was Iceland attracting these job creating billion dollar foreign investments?

Iceland has a stable supply of low carbon energy fuelled by greenhouse neutral geothermal and hydropower.  These forms of energy eradicate any future carbon costs for Icelandic-based manufacturing industries, making Iceland particularly attractive to any long-lived industrial asset.

We hear a lot of talk from politicians how reducing carbon emissions will ‘destroy’ jobs in energy-intensive industries like aluminum or steel and shift jobs offshore.  Those politicians however, never talk about the new investments from energy-intensive industries that will be needed over the coming decades.  Those foreign investments will be on the lookout for stable, low carbon energy hubs for their long-lived assets.

Currently, Australia is the most carbon obese developed nation in the world with 680kg of carbon dioxide emitted for every $1000 produced in the economy. That’s up to double the obesity of other developed economies whether it’s the US, New Zealand or Japan.

Australia’s carbon obesity leaves a huge long-term carbon cost exposure for energy-intensive investments. Some visionary companies are already making investment decisions on future carbon risk and sends an omninous warning sign to future low carbon investment in Australia.

Microsoft, IBM, Google and Yahoo all spend billions each year on new massive energy-intensive data-centers filled with racks of hard-drives and computer equipment. Each data-centre is worth upwards of $500 million and employ hundreds of skilled technologists for operation. With movies, music and sports being streamed online nowadays, the largest data-center empire means a competitive advantage for each of these firms as the world moves deeper into the digital age.

Google has done something that no large company is yet doing. It has quietly self-imposed a carbon price on their investments – well before a formal carbon price is mandated by the developed world. Why? By self-imposing a carbon price, Google is getting rid of the future economic liabilities from a carbon price, which is inevitable.

In Google’s own words ‘Pricing carbon is an important tool to reducing the financial risk that our energy investments face’. Google, like the other large IT corporations, are continually on the look out for Asian investments, as that is where their future customer base will come from.

Given Australia’s carbon obesity, Google’s self-imposed carbon price would rule out investment in coal addicted energy grids like NSW, QLD and Victoria. It’s no coincidence that the last two massive data-centers built by Google are sourced by low carbon hydro-power in the remote western area of the United States, along the Columbia River.

Like the outer reaches of Oregon, Tasmania has low carbon, stable sources of energy (hydro coupled with wind) and would be the perfect place for Google’s next $500 million data-center for Asia.

Forseeably however, any region or state in Australia could create its own low carbon hub so as to attract these new energy-intensive investments. The race is on for Australia’s ‘Low Carbon State’ – but Tasmania has a big lead on this front.

A global price on carbon is already here and is shifting investment within innovative corporations.  Those who continue to spout about job cuts if Australia reduces carbon emissions are missing the next big economic boom as the world moves away from carbon emissions.