Australia ‘risks climate tech exodus’ unless it follows US model

The Albanese government is being urged to reconsider its resistance to creating a Joe Biden-style Inflation Reduction Act, with local investors, executives and start-up founders warning of a potential exodus of climate tech companies if it fails to follow the US example.

The $US500 billion ($734 billion) Inflation Reduction Act, passed by US Congress in August 2022, has been a boon for the US renewable energy and climate tech sectors, offering tax credits, subsidies and grants for businesses involved in the nation’s transition to renewable energy. The act effectively ensures years of support for green technologies including wind, solar, hydrogen, carbon capture and storage.

Cicada Innovations boss Sally-Ann Williams.Credit: Alex Ellinghausen

While the Australian climate tech industry has grown by 23 per cent in the past year and has proven to be the sector most resilient to a decline in tech investments, local executives say that growth is at risk if the Australian government declines to follow the US model.

Sally-Ann Williams is the CEO of Cicada Innovations, described as Australia’s longest-standing deep-tech incubator. Deep tech, sometimes called hard tech, refers to technology start-ups whose business model is based on high-tech innovation in engineering and science.

“Climate tech is one of the greatest opportunities for multi-generational wealth creation. So what are we, as a nation, doing to create a sovereign climate tech industry that is embedded into our local economy and able to expand globally?” Williams said.

Mick Liubinskas, founder and CEO of Climate Salad.

“Most of the world’s leading nations and regions, including the EU, UK, US, and many Asian nations, are focused on building modern economies through policies that catalyse huge volumes of public and private investment in climate tech.”

The United States’ Inflation Reduction Act will likely pull Australian entrepreneurs offshore, according to Williams, at a time when the local technology sector is already grappling with a “brain drain” problem.

“These overseas programs are increasingly capable of luring Australian founders offshore, potentially causing an exodus of Australia’s most promising value-creating climate tech companies.”

Mick Liubinskas is the founder of climate tech community Climate Salad. Its most recent industry report found Australia is home to 228 climate tech companies that to date have removed 2 million tonnes of carbon dioxide from the atmosphere. The companies have a collective value of $4.12 billion.

“With Europe so far advanced and the Inflation Reduction Act in the USA driving so much investment, Australia risks missing out on playing a key role in this trillion-dollar industry,” Liubinskas said.

The comments were echoed by Clean Energy Council chief executive Kane Thornton, who told an industry round table recently that Australia’s ambition to lead the world as a renewable energy superpower was at risk amid a global arms race.

“Australia has a small window of time to stake our claim in the emerging green industries of the future, which can ultimately overtake our declining fossil fuel industries and revitalise and expand our local manufacturing base,” he said.

“There is no doubt that Australian governments have the necessary ambition … We now need to match that ambition with a cohesive strategy and policy framework that will stimulate the new wave of investment in clean energy and green manufacturing.”

The government is facing mounting pressure on the issue on multiple fronts: the mining industry is also calling for US-style legislation, given its potential impact on critical minerals and battery metals.

Federal Labor has so far resisted calls for its own version of the act, despite passing a motion at the party’s national conference in August backed by Climate Change and Energy Minister Chris Bowen to pursue it.

Chris Bowen says Australia is not performing “well enough” in terms of renewable energy.Credit: Alex Ellinghausen

“The Inflation Reduction Act is the most significant development for climate in our living memory, probably more consequential than the Paris Accord,” Bowen told attendees.

“But it’s our job to make sure the emissions reduction that comes about is additional [and] not distorting activity that otherwise would have happened here or elsewhere.”

The minister was contacted for further comment but is on leave.

Federal Treasurer Jim Chalmers, however, has said that Australia should not pursue an “Inflation Reduction Act Lite”.

“Along with this broad and deep policy agenda, there have been calls to do more, to pursue our own Australian version of the Inflation Reduction Act, and to mobilise more public capital into the industries that will help us realise our potential as a renewable energy superpower,” he said in a November speech.

“All of this is understandable, because there is no doubt about the IRA’s significance, or how imperative it is that Australia find its own place in the developing net zero global order.

“But let me be clear here. We need a set of prescriptions right for this transformation and right for this country.”

The federal government would “complement not copy” the priorities and plans of other nations, Chalmers said.

“We won’t realise Australia’s unique geographical, geological, geopolitical, intellectual and meteorological advantages by designing an Inflation Reduction Act Lite – looking only for big numbers but missing the bigger picture.

“Our plan will be ambitious, but uniquely Australian.”

All eyes will be on the 2024 federal budget in May, which Chalmers flagged would spell out further investment in sustainability and climate technologies. The 2023‑24 budget provided an additional $4 billion in clean energy investments and incentives.

Williams said however that more urgent action is needed.

“In Australia, the risk of doing nothing is that we will end up with nothing.

“It’s critical that governments decide if they want a competitive Australian climate tech sector by putting in place policies and pathways to support it.”

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