Climate Change, Startup Analysis

The world is leaving coal behind, and it’s up to startups to pick up the economic slack

Stephanie Palmer-Derrien /

There’s change on the horizon. It may not happen quickly or dramatically, but the coal and mining industries are in decline, and if we’re not able to adapt, their absence could leave a $54 billion hole in the economy, and see hundreds of thousands of jobs lost.

It’s a climate-change issue, but even if you take the environmental argument out of it, the market is changing. It’s becoming gradually evident that we will not always be able to rely on international demand for fossil fuels.

According to the Minerals Council of Australia, coal is our second-largest export, after iron ore. In the financial year 2016-17, Australia exported 379 million tonnes of thermal and metallurgical coal, with a combined value of $54 billion.

In the same time period, the Minerals Council says the industry provided 47,000 direct jobs, and 120,000 indirect jobs, across the country.

Needless to say, if the industry is on the out, we’re going to need something to plug that economic gap.

According to Australian National University academics Frank Jotzo and Salim Mazouz, writing for The Conversation, renewable energy sources are “stealing the march over coal in Australia”.

Governments all over the world are under pressure to meet the Paris Agreement requirements, and at the same time, renewables are becoming cheaper to a point where they’re genuinely competitive with fossil fuels, Jotzo and Mazouz explain.

“It is no longer true that reducing emissions in the electricity sector necessarily means higher prices. These days, and in the future, having policy to guide the replacement of ageing coal capacity with cheap renewables is a win-win for consumers and the environment.”

This means coal production in Australia is “likely to be on a long-term declining trajectory”.

Speaking to StartupSmart, M8 Ventures partner and Aussie startup guru Alan Jones predicts as technology advances, “renewable sources of energy will continue to get cheaper and cheaper”.

While there may still be applications for things like liquified natural gas and coal, it will be “in the same way that if you want to buy an LP record you still can”, he says.

“Nothing ever truly goes away — it just needs to become a much smaller part of what we do.”

Zero emissions by 2050

A 2014 report from ClimateWorks Australia suggests the region can “decarbonise”, reaching zero carbon emissions by 2050, while maintaining economic prosperity.

Currently, Australia’s main exports are “highly emissions-intensive”, the report says.

“As such, if global arrangements intended to favour the trade of lower emissions-intensive commodities were introduced, Australian exports could become less competitive in global markets.”

The report recommends focusing on energy efficiency, making renewables cheaper to access, and reducing emissions from transport and industry. Making this happen should involve — among many other things — government and business investment in research and development into emerging technologies, it says.

Rob Kelly, program manager at ClimateWorks Australia and co-author of the report tells StartupSmart the organisation is currently working on follow-up research, which will use scenario analysis to try to better understand the potential pathways to achieving the Paris climate-change goals.

However, with regards to the 2014 report, “the overall findings are still relevant, although some technical aspects of the modelling will have changed”, he says.

Although some technology has progressed more quickly than expected, “particularly in regards to solar PV, batteries and electric vehicles”, there are other areas, such as carbon capture, that have lagged behind.

Nonetheless, Kelly says it’s still “technically achievable” for Australia to reach zero emissions by 2050.

“We will need a range of drivers to reach this goal, with technological innovation playing a key role.”

Untapped opportunities

Elsewhere, a McKinsey report published in 2017 suggests “untapped opportunities” in digital innovation could deliver up to $250 billion to the economy every year by 2025.

While these opportunities are not limited to tech companies or the startup space, the report notes startups will likely be called upon to help corporates make the shift to digital business.

In particular, it highlights those supporting the incumbent banking and insurance sectors, and helping businesses manage regulation.

However, the report pulls no punches in stating the importance of digital innovation — and the potential monetary benefits it will bring — to Australia’s future.

“These benefits will be critical to our continued competitiveness on the world stage, for the drivers of Australia’s recent economic success can not continue indefinitely,” it says.

“The commodity boom is long over, competition for new investment is fierce, and demography will become a liability, as an aging population weakens labour inputs and puts pressure on government resources.”

In startupland, investment manager at Uniseed Anthony Musumeci tells StartupSmart he’s seeing a continuing trend towards environmentally conscious startups. They’re evident in a way that they weren’t even four or five years ago, he says.

“Over the last two years, we’ve probably seen a bit of a resurgence in clean technology, or startups that are more conscious of the environmental impact of their products and services.”

But even if their business isn’t directly clean energy-related, startups are paying heed to their carbon footprint.

Of course, many do so out of passion and a concern for the world they live in (certainly, that’s what they’ll say).

But actually, for any modern business, there is pressure to take their environmental impact into account if they’re to attract investment, or even customers.

“If you are a startup, it will give you that edge in the marketplace if you have those green credentials, as well as having performance characteristics for whatever your product or service is,” Musumeci says.

“From a public-perception perspective, and even from the perspective of other businesses they may interact with, I really do think that’s a positive, and something more companies are using in their branding and marketing.”

If you want your business to last, consideration of the environment is “almost becoming a necessary element”, he adds.

A changing tide

But, at the same time, whether they build it into their business model or not, every startup has a part to play in supporting the economy in the future.

Speaking to StartupSmart last year, StartupAus chief executive Alex McCauley suggested it will be software and intellectual property that will make up the bulk of Australian exports in the future.

To a point, this is already happening, Jones says.

“Anybody that doesn’t have an election to fight in the next two months, who doesn’t have a vested interest in one industry or another, will tell you that buy and large software will continue to eat the world, and human jobs will be replaced by software and by hardware automation,” he argues.

“It’s the people that own the intellectual property behind those technologies that will be the oil barons and the media barons and the banking barons of the future,” he adds.

“It’s a question of the degree to which we participate and the pace at which it happens … we want to own some of the value that creates, rather than being a victim.”

That said, we have to be realistic here. Jones notes the tech sector in Australia is still relatively young. It hasn’t been through the natural cycles of relative economic importance that other industries have.

Trying to forecast how important something so fresh-out-the-box will be in the future is tricky, he says.

While Musumeci also predicts a shift away from fossil-fuel resources and the mining industry, he “can’t see it being a marginal industry in five or 10 years”, he says.

“I simply think that other industries in the tech space and startups will really just grow comparatively to that industry.”

Australia is strong in the medical technology sector, life sciences, fintech and agtech, Musumeci says.

“I really hope we are able to develop up and grow a number of highly successful startups in Australia to assist with employment across a range of technology sectors,” he adds.

Learning to lobby

Inevitably, the onus here falls on the government and policymakers.

Going forward, Musumeci says it will be important for the government to focus on “making sure they’re setting appropriate policies and regulatory frameworks to encourage the adoption of technologies, and encourage the use of companies deploying environmentally sustainable solutions”.

Currently, “there certainly doesn’t seem to be a major focus from either major political party on that”, he admits.

As far as Jones is concerned, the government will only be motivated to take the tech sector seriously as an economic player when the industry learns to lobby.

Until then, no government is going to do anything to boost startups, regardless of climate change or the economic conversation.

“We can’t continue as an industry thinking we can just hop on Twitter, work up a tweet storm and get politicians to do a better job for our industry,” he says.

“We have to look at how other industries lobby the government and, unfortunately, do it the way they do it … making parliamentarians scared they’re going to lose their seat.”

This lobbying will involve tech companies parting with some cash, supporting a campaign, and backing nationwide advertising to get the voting public up to speed on why the industry is so important.

“We have to reach our elected officials by what they care about,” Jones says.

“They care about what voters care about, and that’s up for grabs.”

Until that happens, tech companies, climate-change focused startups and their potential importance for the future Australian economy just won’t be taken seriously.

“We look a bit unshaven, we go around in jeans and a t-shirt, we spend more time on Twitter than we do in working men’s business clubs, and we are discounted as whining babies,” Jones observes.

“But the future always looks unrealistic when you look at it from the past.”

This article is part of our spotlight on climate change. You can view the full series here.

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Stephanie Palmer-Derrien

Stephanie Palmer-Derrien is the editor at StartupSmart. You can contact her at [email protected].

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