"I'm absolutely convinced that the science is right." - Q&A with John Hewson on the Climate Change battle

In the early 90s John Hewson's Environment Policy was overshadowed by the buzz of the GST, and he has since spent the last three decades being a champion for climate change awareness and fighting to make a difference. This week, he spoke with Industry Moves about why he thinks the current government's stance on climate change is "indefensible", told us of an upcoming project that could provide 24/7 power using sugarcane, and outlined what his priorities would be if he was Prime Minister today.

What initially lead you to lend your voice to the climate change debate?

It goes back to the 80s. At that stage climate scientists were saying things like: "We're going to see more extreme weather events that occur with greater frequency and intensity." That seemed to be a sensible and realistic assessment. In the 1993 election I took an environmental policy to the election calling for a 20% cut in emissions off a 1990 base by 2000, which nobody read because they were all distracted with the GST. My point is, that was years ahead of where we are today. In 2017 we're still waiting for a proper explanation of how we can get a 5% cut in emissions by 2020, which is a bipartisan objective. Neither side can provide an explanation of how we're going to get 26-28% by 2030, there's no transition strategy at all.

Bottom line, from a business point of view, is that we've lost about 30 years of opportunity in terms of developing solar, wind, battery, heat storage and other energy efficient technology.

In a recent interview you mentioned that there was a widening gap between science and the public. Why do you think this is, and what can we do to bridge this gap?

Right now I would see science as more useful and relevant than it's been in a very long time, yet the gap between the standing of science relative to public opinion has widened. There have been a lot of attacks on climate change science. I think there was a period in the Abbott era where there were reported death threats on climate scientists. There's been a pretty concerted effort in politics to dissuade people from the magnitude and urgency of the climate challenge. This has been compounded by the emergence of Trump and 'fake news'.

For once, climate scientists have done something that they haven't traditionally done, they've agreed on something. The nature of science is to disagree, that's how we move the frontiers forward as we prove or disprove a process and here they are coming together and agreeing, it's very unusual. That's why I'm absolutely convinced that the science is right.

What do you think of the Australian government's current stance when it comes to Climate Change?

It's indefensible.

I'm surprised that people have been able to play politics with the issue in Australia. Howard is a good example. At the end of 2013 he gave a speech to a climate deniers group in London, organised by the ex- Chancellor of the Exchequer, Nigel Lawson. Howard said: "When it suited me, I played politics. When it was a good idea politically, I supported the emissions trading scheme, when it was a bad idea I opposed it." And then he said, incredibly: "I am now an agnostic when it comes to climate [change] and I prefer to rely on my instincts." It's not a question of religion, it's a question of science, fact and process.

Since then you've had Abbott trying to close down the renewable energy industry, cut the money and abolish the renewable energy target and so on. He's on the record having said that on one extreme climate change is crap and on the other extreme it's quite an important issue. That's a really big problem.

Then we've got Turnbull, who one day will be talking renewables and the next day he'll be talking about coal. You're getting mixed messages and you get the impression that those messages are targeted towards particular groups. They're playing politics with it and that's why we don't have a clearly defined attitude.

The thing that is annoying to me is that these politicians say, "We're here for the benefit of my children and my grandchildren" and then they go and make decisions like this which are detrimental to future generations. Politics has become so short term, so negative, so populist. There are a lot of dimensions to this that have been left to drift and now we're a long way behind.

What does that mean for investments in the renewable energy space?

We've ended up with the worst case outcome because if people want to make a long term investment, say in solar or wind projects, they've got uncertainty because a subsidy might disappear or the government might try to close it down. There are a lot of projects that might otherwise be underway, that are instead just sitting on a shelf.

What was the most enlightening insight that you uncovered in the recent Asset Owners Disclosure Project (AODP)?

We got involved in AODP because we took the view that the governments will dick around with this issue, but in the end the transition will depend on how the money is being invested. If you can shift the investment market towards low carbon investments, you'll facilitate that transition focus. We just worked on disclosure. We surveyed, rated and ranked the top 500 asset owners of the world, which was around $40 trillion of assets. They're pension and superannuation funds, sovereign wealth funds, some university endowment funds and some insurance companies. Initially, of course, there was an enormous amount of push back, they certainly didn't like being ranked.

The most encouraging thing from the last survey was that more than half of those in the top 500 are identifying and trying to manage the risk. We weren't prescriptive of how to manage the risk. We recognise that divestment is an option, you can hedge it, you can go into the derivatives market, you can invest in low carbon intensive investments to offset your risks from the other end. There are many different ways to respond. We figured if we could get them to disclose the risk, then some member of the superannuation fund would say: "Hang on, you're meant to be maximising my return over my working life. Why are you taking that risk?" That will change their behaviour. I think we're moving very rapidly to a world of mandatory disclosure.

Will the Asset Owners Disclosure Project expand their research into the rates of returns from funds that have divested in comparison with those who haven't?

There's been a lot of information that's come out about that. Those funds that have divested have not done any worse and in most cases, they've done better. You don't even have to be concerned about climate change at all. You just need to be an astute investor. Look at what's happening with some of the major shares in the energy sector. You look at Peabody Coal, the share price just collapsed for several years and then Tesla listed at the end of 2012 at $20 and it went to $250-260. I would think there's a pretty clear portfolio choice there; you're not good in coal, you're going to do okay in renewables.

At the BetaShares media briefing last week, you mentioned that you were dismissed by the Future Fund, who said that they didn't have the resources to manage climate risk. Do you think the Future Fund has reviewed its position since then? If so, how?

Today they would say, 'of course we're managing climate risk', but are they? The Future Fund does not have a good track record on some of these social issues. For many years, governments of both persuasions were anti-smoking, but they were still investing in British Tobacco. It's not hard for them to manage it. The bottom line is that it costs you a lot more to be a polluter.

Can you tell us about your own personal projects that you're working on to help combat climate change?

We have a project that I think will probably go ahead this year called North Queensland BioEnergy. It's in its final stages of due diligence. It uses sugarcane extract to make electricity, ethanol, molasses and high protein feed. There are a lot of bi-products and they are all income streams for the growers. The biggest thing is that we can produce 24/7 power from sugarcane and when we don't have enough cane we can top it up with wood chips. It's a $650 million project in Ingham and it's ready to go.

We've set it up as a financial model. The growers pay two tolls out of their sugar income. The first toll is to run the mill and the second toll is to service and pay back the debt and equity over 25 years, at the end of that time the growers own the mill. The mill has a life of about 100 years, so they've got a legacy to leave to their families. It's a great project that ticks a lot of boxes.

If you were Prime Minister today, what would be your top three priorities?

I think the big issues are: restructuring the federation, climate change and budget repair. In there you've got smaller elements. We've got to do a lot in education and a lot in health, which are all elements of a national productivity strategy. We fall short on all of those unfortunately. The one thing that may come out of this budget is a proper approach to infrastructure financing, but you don't want it run by the government. You need an entity like the Reserve Bank that does all the infrastructure.

We saw recently that Barnaby Joyce and Malcolm Turnbull had come to an agreement. Turnbull is going to build Badgerys Creek airport and Barnaby is going to get his freight rail in from Melbourne to Brisbane. I'd ask, "have we got a good cost benefit analysis on both of those?" I'm not sure we should be doing either of those things just yet. Are they a priority compared to a metro in Sydney or Melbourne, or a host of other things: schools, hospitals, aged care, social infrastructure? You need someone to pull that assessment process out of Government, do it properly, transparently and independently.