Communication for Sustainable Development

Aussie Sustainability Spend ‘to Hit $3bn’

The Australian sustainable business market is poised to grow to AU$2.9 billion (US$3.1 billion) in 2014, dependent on the outcome of the country’s hotly debated carbon tax, analyst firm Verdantix has projected. A Verdantix study predicts that the market will increase at a 13 percent compound annual growth rate (CAGR) from AU$1.6 billion in 2010. The report, Australian Sustainable Business Spending 2009-14, forecasts that sustainability spending will exceed AU$1.8bn in 2011, a nine percent rise over 2010 levels, before increasing by 13 percent to AU$2.1bn in 2012.

If the country’s recently proposed carbon price mechanism is implemented by 2013, Verdantix forecasts that the sustainability market will grow by 20 percent in both that year and 2014.
But the carbon tax, backed by prime minister Julia Gillard, has come under increasing attack. A poll of 1,400 Australians published yesterday found that 59 percent opposed the proposals, up three percentage points from a similar survey last month, Reuters reports.
Last week the Business Council of Australia – an association of the CEOs of 100 leading Australian corporations – warned that the proposal would hurt industry and send jobs offshore. In the last few hours, Gillard sent a letter to the council, stating her refusal to back down from the carbon tax, the Herald Sun reports.
“We believe putting a price on carbon is the cheapest and fairest way to cut pollution,” Gillard wrote.
The Verdantix report finds that spending on smart grids and electric vehicles will grow the fastest in the four years to 2014, out of 29 types of sustainable business initiatives. Spend on smart grid will grow at a 27 percent CAGR to reach AU$72 million in 2014 (see chart).
Electric vehicles and infrastructure will grow at a 22 percent CAGR to reach AU$58 million in the same year. Public-private partnerships such as the Smart Grid, Smart City demonstration project are encouraging utility investments in sustainability, Verdantix said.
The project aims to demonstrate Australia’s first commercial-scale smart grid, and is backed by $100 million in government funds. EnergyAustralia is leading commercial involvement in the initiative, which also includes IBM Australia, GE Energy Australia, AGL Energy, Sydney Water, Hunter Water Australia, and Newcastle City Council in New South Wales.
Verdantix based its forecast on an analysis of spending by 139 firms with Australian revenues of at least AU$900m, plus cross-industry research into over 1,000 Australian corporate sustainability initiatives.
“Many Australian business leaders perceive climate change and sustainability trends as a break on growth and a cost to business,” Verdantix analyst and report author Susan Clarke said. “But carbon regulations, rising energy prices and natural resource scarcity also create new market opportunities.
“Innovative firms like CarbonSystems, Energetics, Intelligent Pathways and WSP Environment & Energy already benefit from the market for energy efficiency and carbon management.
“A pure focus on blocking and tackling new energy and climate change regulations will protect margins in the short-term but misses out on big opportunities like bio-diesel refining,” Clarke added.
Energy-intensive industries will account for 43 percent of sustainable business spending in 2011, reflecting the structure of the Australian economy, Verdantix said. The study finds that the basic resources sector will invest AU$360 million, accounting for 20 percent of spend.
Oil and gas firms will account for 12 percent, travel and transport for six percent, and utilities for five percent of sustainability spending, Verdantix predicted. Service firms’ sustainability budgets are far smaller, despite strong commitments by some such as National Australia Bank, the report said.
“Australia is already experiencing a boom in commodities demand as the Asian economy gathers steam. Our forecast for a 13 percent CAGR between 2009 and 2014 assumes economic growth in Australia of 3 percent to 3.5 percent over the period,” Verdantix director David Metcalfe said.
“Spending on sustainability is positively correlated with global and national economic growth because they drive up the price of fossil fuels and other natural resources. As a result, spending on initiatives such as energy efficiency, sustainability communications, lobbying and renewable energy production will be higher if economic growth is above current forecasts,” Metcalfe added.

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