ICA: Accelerating climate action

Unchecked climate change could shrink Australia’s GDP by 6%  by 2070 – a more than $3 trillion loss in GDP in present value terms, according to a substantive new report by the Insurance Council of Australia.

The report, Accelerating Climate Action, says that with $20 trillion expected to be invested in Australia’s economy out to 2050, there is substantial new capital that can be leveraged to accelerate Australia’s transition. 

The ICA is advocating for: 

  • The Australian Federal Government to set a science-based emissions reduction target for 2035, that is Paris aligned and consistent with IPCC timeframes. The Paris agreement calls for holding the increase in temperature to well below 2°C above pre-industrial levels and pursing efforts to limit the temperature increase to 1.5°C. 
  •  The government to introduce a comprehensive set of policies that accelerate Australia’s transition to net-zero. 
  • The ICA says it welcomes the Climate Change Authority regularly reporting on Australia’s progress against national emissions reduction targets and the handing down of a science-based recommendation for Australia’s 2035 emissions reduction target. 
  • The ACCC to provide guidance to businesses and industry associations on collaboration and cooperation agreements in support of climate action across an industry. 
  • This guidance would assist insurers to better understand how competition law applies to such arrangements and specifically how to build and share best practice on emissions reduction across industry in order to achieve climate and sustainability goals. 

Accelerate Australia’s electric vehicle transition 

Transport is Australia’s third largest and fastest growing source of greenhouse gas emissions. According to the ICA, electrification of Australia’s transport sector, including the electrification of passenger and commercial vehicles, will play an important role in decarbonising the nation’s economy. 

It adds that insurers are looking to reduce emissions across their operations, investments, underwriting and supply chain, and a faster transition to electric vehicles in Australia will facilitate faster decarbonisation. The ICA suggests that insurers and governments can work together on a range of policies to accelerate this transition. 

The ICA is advocating for: 

  • Investment in electric vehicle charging infrastructure and improved national coordination. 
  • The federal and state governments should build on existing funding commitments to improve coordination of electric vehicle charging infrastructure investment. Where appropriate, co-investment in this infrastructure could occur alongside insurers. In addition, governments can explore with the private sector how to provide financial incentives to reduce the cost for home and commercial charging installation. National coordination is required to ensure infrastructure is built where it is most needed. 
  • Insurers, peak bodies, and state governments should collaborate to chart a path for insuring and encouraging the uptake of charging infrastructure in the home. This includes retrofitting charging infrastructure into existing housing and future-proofing new housing by ensuring all new builds are EV-ready. This includes improved compliance with existing standards on EV charging installation. 
  • Investment in upskilling existing technicians and training technicians of the future. 
  • Skill shortages in electric vehicle repair is one factor that can contribute to delays in fixing a vehicle after an accident, which can increase cost and inconvenience to the consumer. To address this skills gap, the ICA says that state governments should prioritise and fund micro-credentials in electric vehicle repair to assist in upskilling existing mechanics, as well as adding electric vehicle repair to state-based training programs for school leavers & subsiding this training:
  • Governments to support the Australian Battery Recycling initiative to expand the battery stewardship scheme to include electric vehicle batteries. 
  •  Safely and effectively recycling new energy technology, such as electric vehicle batteries, will be important to enable the responsible management of these assets through to end of life. 
  • Reform of the laws governing written off vehicles to enable more vehicles to be safely repaired instead of scrapped, including electric vehicles. For example, the NSW government should amend the written-off vehicle scheme. 
  • These reforms will be critical to strengthening the circular economy and will help to grow the second-hand electric vehicle market in Australia, contributing to an increase in supply. 
  • The Federal Government to introduce a scheme to incentivise the purchase of electric light and heavy commercial vehicles for business. 
  • Light and heavy commercial vehicles are used by insurers across their operations, especially for roadside assistance. Light commercial vehicles and rigid trucks also produce 17% and 9 % of Australia’s transport emissions respectively, yet the ICA says  there is no national policy to encourage electric vehicle purchases for businesses. 

As such, it adds, a rebate or taxation concession scheme would encourage Australian businesses to replace ageing commercial vehicles and trucks with more efficient electric alternatives, reducing long-term operating costs and emissions. This, it proposes, would help to overcome the currently high purchase price of these types of vehicles, which is a major barrier to stronger uptake, especially for smaller businesses with lower margins. 

To access the full ICA report, click here.

The federal and state governments should build on existing funding commitments to improve coordination of electric vehicle charging infrastructure investment. Where appropriate, co-investment in this infrastructure could occur alongside insurers. In addition, governments can explore with the private sector how to provide financial incentives to reduce the cost for home and commercial charging installation.

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