Australia faces postwar-style reconstruction to reach net zero target, says Combet

Australia faces a postwar-scale reconstruction costing hundreds of billions of dollars in private and public investment to reach net zero emissions by mid-century, the former Labor climate minister and incoming Future Fund chair, Greg Combet, says.

Speaking at the National Press Club, Combet said the Net Zero Economy Authority – a new government agency proposed to help manage the country’s transformation from a dirty to a clean economy – was putting together a “pipeline” of clean industrial projects and would be “figuring out how to help bring them to concrete investment decisions”.

Combet was speaking as the chair of the Net Zero Economy Agency, which was set up to design the authority and begin its work. Legislation to create the authority was tabled in parliament last week.

Related: Time running out to make prosperous transition to net zero emissions, Australia warned

A former union boss and cabinet minister in the Gillard government, Combet will leave the agency next month to succeed Peter Costello as the chair of the Future Fund, the country’s $212bn sovereign wealth fund.

He said the authority had been designed to play a coordinating role in helping Australia become a renewable energy “superpower”, initially focusing on emissions-intensive parts of the country that were home to ageing coal-fired power plants that were near the end of their life. A key part of its job would be ensuring workers and communities were supported through the change and shared in the benefits, he said.

“If we do this well, Australia has the opportunity to develop numerous new clean industrial projects, involving billions of investment dollars and providing thousands of jobs,” he said. “Neither government funding nor private capital alone can meet this challenge.”

Combet said the agency had been involved “in the policy discussion” ahead of next month’s budget, and the government had indicated it would “look to capitalise on Australia’s comparative advantage in minerals and renewable energy, aiming to encourage large-scale investment in green industrial production”.

He suggested the government and its funding bodies would need to look beyond grants and concessional loans, and should consider direct investments in “particularly large transformative projects” when necessary.

“Governments may need to consider being significant equity players, helping to de-risk projects and adopting a long-term view before recovering capital,” he said.

Albanese has indicated the government plans to respond to the US Inflation Reduction Act, which includes A$570bn in clean incentives, but acknowledged it cannot compete with it on dollar terms. The government promised $2bn for green hydrogen production in last year’s budget and last week announced $1bn for solar manufacturing.

Some economists have questioned whether these investments were well targeted given the scale of investment under way elsewhere, particularly China and the US, and suggested Australia should focus on industries in which it could have a natural advantage, such as green iron.

Combet said the US legislation had “changed the game”, and the European Union, Japan and Korea had followed with “unprecedented investments in their industrial base”. “The race is on to secure the industries of the future. Australia needs to respond, and we are,” he said.

He said the agency had begun work in Gladstone and the central Queensland region, which produces more than 40% of the state’s energy and is home to nearly half of the country’s coal mines. He said it was an example of a place that would feel the impact of what was coming, but where there could be new opportunities.

“It’s a major producer of key industrial products like cement, alumina, aluminium and ammonia, and it’s a major trade hub, with the Port of Gladstone facilitating tens of billions of dollars of trade every year in exports of coal, gas and aluminium to our trading partners,” he said.

“In my view, successfully transforming the region around Gladstone, and similar regions around the country, must be a key national endeavour.”

He said the authority legislation included a funded redeployment scheme. The body would support workers “to acquire skills, to access new employment if needed, to help create jobs in new businesses and industries”, he said.

“The touchstone will be how well we handle the closure of coal-fired power stations,” he said.