Research

Transition to a Zero Carbon economy can lead to significant wealth creation

New Macquarie University research reports how a zero waste and zero carbon policy can lead to an estimated $20 trillion in new wealth creation driven by the rise in cleantech patents, said Professor Martina Linnenluecke from Macquarie University’s Centre for Corporate Sustainability and Environmental Finance at the Centre’s inaugural “Target Zero” Conference in Sydney.

Professor Linnenluecke said market forces will drive the clean-energy momentum with investors, asset managers and representatives from pension funds motivated by the potential of this new wealth creation and keen for policy makers to facilitate a transition to clean technology.

“Our analysis estimated that the total wealth created by the development of cleantech patents ranges from US$10.16 to US$15.49 trillion dollars (13%–20% of the world GDP in 2017) and will involve an additional investment stimulus to the economy from US$2.93 to US$3.71 trillion (3.7%–4.7% of the world GDP in 2017).”

Professor Linnenluecke says there are significant opportunities for business to create wealth and drive GDP for decades to come.

“Our results show that in the past, countries with more stringent carbon policies, in the form of carbon taxes or emissions trading schemes, as well as greater investments into country-level public R&D and higher human capital had a greater level of cleantech patent intensity.

“The research also shows that green innovative firms are located in areas with stronger environmental regulations. While environmental policies can introduce additional costs for firms, a more stringent regulatory environment is seen as conducive to the development of environmentally friendly technologies, as it forces firms to innovate.

“The research shows for 66% clean energy penetration by 2050, there is a US$170 billion up-front investment at the beginning of the discovery stage and a further US$1.327 trillion investment at the beginning of the seven-year commercialization stage.”

Professor Linnenluecke says the research raises the question whether future investments be primarily equity-based because of the high risks of R&D development and the at times slow progress to positive cash flows. Or whether debt will be the primary financing mechanism so that the patent developers maintain full ownership of their proprietary intellectual capital.

“Cleantech is a fast-growing patent class, showing signs of becoming the next technological breakthrough. However, this wealth creation also comes with a significant amount of investment requirements and investment risk. Governments, policymakers and grass root support have got us to this stage in history, now it’s business that will drive the transition to a cleantech future,” Professor Linnenluecke said.

The Target Zero conference will bring together 150 industry attendees, leading scientists from Australian universities and research institutes, as well as student representatives eager for Australian policy-makers and corporations to make a difference. The conference output, a roadmap for Australia’s transition to “Target Zero” will be released on Monday December 10 2018.

Source: MQU

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