The Federal Government should spend up to $2.5 billion a year generated from the carbon tax to foster innovation in clean technologies, according to climate change expert Ross Garnaut.
In November last year, Professor Garnaut was commissioned by the Government to provide an independent update to his 2008 Climate Change Review.
Garnaut’s final report, delivered earlier this week, is based on pricing carbon at $26 a tonne, which would raise $11.5 billion in the first year.
His suggestions include a breakdown of the proceeds from the carbon tax – 10% for innovation, 55% for households and 35% for industry.
Garnaut says while the Government is spending $5.1 billion over four years on its Clean Energy Initiative, this could be extended over the 10-year carbon revenue budget period.
Eventually, carbon revenue could be used to spend $2.5 billion a year on carbon innovation.
Garnaut says after the economy adjusts to the carbon price, possibly over 10 years, the Government could pull back from funding research and development in clean energy innovation and let the carbon price drive private investment in technology.
Get SmartCompany FREE to your inbox every weekday
He says while public funding is required in the short-term, a carbon price will eventually make it more profitable for companies and industries to invest in research, development and commercialisation of clean technologies.
“The advantage of a broad-based market instrument like a carbon price is that it will draw out the most prospective low-emissions innovation… The transition to a low-carbon economy will be a story of innovation,” Garnaut said in his report.
“The costs of the transition will depend on how effective we are in discovering and applying new technologies for producing goods and services with fewer emissions or in satisfying ways that produce fewer emissions.”
Professor Roy Green, of the University of Technology, also believes a carbon price could drive innovation.
“Carbon pricing is a major catalyst for investment in renewable energy sources and new technologies more broadly,” he says.
According to Green, investment in innovation to counter climate change is potentially as significant as defence spending in the US, which spurred innovation over decades during the Cold War.
Nick Boyd, of Australian clean energy start-up AquaGen Technologies, thinks Garnaut’s focus on investing in innovation is a good idea.
“Right now is when the big money is required. Large-scale early stage commercial projects cost a lot more [in the early stage] than they do once they’ve hit the cost curve,” he says.