How can the net zero transition create a nature-positive advantage?

Repairing and restoring Australia’s precious natural capital has clear environmental benefits. But the economic benefits are also enormous.


In brief :

  • Taking decisive action to become a nature-positive economy could boost Australia’s national income by AU$47 billion by 2050.
  • EY Net Zero Centre analysis finds carbon markets can support nature restoration at scale, but new policies will be required to complement current settings and protect what cannot be replaced.
  • Business leaders who engage early and respond to nature-related risks will be well positioned to prosper in a nature-positive economy.

Protecting nature is an economic issue, as well as an environmental one.

More than four-fifths of Australia’s exports are highly dependent on nature. Agriculture, mining, energy, construction and real estate – sectors that rely on natural systems and nature-based inputs – employ around one in three of the Australian workforce.

Despite being home to some of the world’s best examples of natural heritage, from the Great Barrier Reef to the Tasmanian Wilderness, and from the Ningaloo Coast to Uluru–Kata Tjuta National Park, Australia is not valuing or protecting its natural assets.

More than 80% of Australian plants and mammals, and 45% of birds, are only found in Australia. But habitat loss and degradation, invasive species, resource extraction, pollution and climate change have had a cumulative impact.

Consequently, Australia has the highest known rates of recent species extinctions in the world, accounting for 35% of recorded mammal extinctions. One hundred ecological communities and more than 1,900 species are currently listed as vulnerable, endangered or critically endangered.

Australia’s biodiversity faces death by a thousand cuts. Once lost, our natural assets can never be recovered or replaced.

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The opportunity for synergistic sustainability

There is, however, a vast opportunity to protect and restore nature as we build a net zero economy. These two goals can, in fact, be mutually reinforcing.

Limiting global temperatures to well below 2°C is not possible without reversing nature loss and enhancing nature-based carbon sinks. Protecting and restoring nature is not possible without ambitious global and local action on climate change.

As a signatory to the Kunming-Montreal Global Biodiversity Framework, Australia has committed to strong action on biodiversity conservation, including protecting and conserving 30% of land and oceans by 2030.

Australia’s 10 largest trading partners are also committed to the Global Biodiversity Fund (GBF). More than half (55%) of Australian exports, totalling AU$226 billion in 2022, go to countries and markets that have or are developing sustainable finance taxonomies to drive trade and investment towards better environmental outcomes.

This suggests protecting and restoring nature could be an emerging source of economic advantage.

Shifting to a nature-positive approach could reduce risk and unlock new growth opportunities for Australia, particularly in industries that rely on nature to deliver value to customers and other stakeholders.

As part of our understanding of how Australia’s net zero goals could support a nature-positive economy, the EY Net Zero Centre modelled three scenarios:

  • Carbon focused, which represents current policy settings, and assumes no public or private sector biodiversity co-payments
  • Balanced approach, which uses a levy on all carbon sequestration to fund a top-up payment that incentivises restoration of habitat with high conservation values
  • Habitat focused, which assumes the carbon market only allows mixed species planting, without a biodiversity fund to drive prioritisation.

Australia’s ability to generate high-integrity land sector carbon credits gives it a distinctive competitive advantage in a world on track to net zero emissions. Few, if any, other advanced nations have this opportunity, which reflects Australia’s distinctive climate, soil and natural resources.

This analysis, featured in the EY Net Zero Centre’s latest report Creating a nature-positive advantage, finds Australia’s current carbon focused policies can drive large-scale land sector sequestration, but will deliver almost no habitat restoration.

The balanced approach delivers more than seven times more native habitat, but at an opportunity cost of 20% less carbon in 2050 when compared to the current carbon focused approach. This area of habitat restoration would reduce extinction risk by 8%, while still delivering substantial financial gains to landholders, and reducing the total extent of land use change.

The analysis also finds a balanced approach could achieve a 25% increase in native habitat in regions facing the most severe pressures from past habitat loss.

The habitat focused approach delivers around 10 times the area of habitat but reduces carbon sequestration by two-thirds.

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This analysis tells us that, while carbon markets are crucial and can support nature restoration at scale, they are unlikely to deliver significant nature repair under current settings.

Achieving a nature-positive pathway will require governments to establish a coherent set of policy tools that work together to protect what cannot be replaced, and to build on this to enhance and restore Australia’s natural systems.

Reward: AU$47 billion a year by 2050

Reversing nature loss and restoring native habitat could earn Australia a reputation as a global nature-positive leader, boosting demand for Australian food and fibre exports and inbound international tourism.

Creating a nature-positive advantage finds Australia's nature-positive opportunity includes a potential $12 billion increase in national income from tourism, and a 31% increase in agricultural profits (as measured by value-added). This is achievable while restoring more than 11 million hectares of native habitat and removing more than 130Mt of carbon emissions from the atmosphere.

This translates into a nature-positive economic dividend of AU$47 billion in national income a year by 2050.

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Business and government leaders have crucial and complementary roles to play.

Business will need to lean in and innovate to take advantage of new circumstances and opportunities. But neither business nor government can achieve this alone.

New government policies will be required to protect, enhance and restore Australia’s natural systems and assets. Achieving this will require a combination of policy instruments, including standards, regulations, market-based incentives and government grant funding. This includes urgent action to improve environmental protections provided through the Environment Protection and Biodiversity Conservation (EPBC) Act.

For business leaders, the message is clear: action on climate and nature can be mutually reinforcing, easing the effort and complexity of action, while accelerating and enhancing the benefits. Importantly, early movers report that they can draw on their climate experience to support nature. This includes:

  1. Integrating nature into existing governance, risk management and reporting structures
  2. Mapping nature-related risks across the same supply chains, operations and revenue channels as climate
  3. Using data systems and processes from emissions reporting to gather information on nature risks, impacts and dependencies.

The global shift towards net zero emissions offers a distinct and time-limited opportunity for Australia to establish a global leadership position on nature-positive action, including through harnessing land sector carbon credits to restore natural ecosystems at scale. Opportunity knocks. How will you respond?

Business leaders who engage early and respond to nature-related risks will be well positioned to prosper in a nature

  

Summary

Humanity can choose to shift to a global nature-positive economy – one that repairs and restores nature while delivering the goods, services, employment and income we want. It is really that simple, and that complex.

Talk to the EY Net Zero Centre team to help your company cut through the complexity, manage the uncertainty and create clear pathways to net zero emissions.

EY Net Zero Centre

 

The EY Net Zero Centre brings together EY’s intellectual property, strategic insight, expertise and deep knowledge in energy and climate change leadership to solve the big problems ahead as we move towards net zero emissions by 2050.

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