European Union and Ernst & Young warn not tackling climate change could financially hinder Australia

Ernst & Young and the European Union have warned Australia's out-of-step policies on climate action could pose an ongoing challenge to the nation's ability to attract capital and export goods to markets adopting carbon tariffs.

In an opinion piece that will be published in The Canberra Times on Wednesday, the EU's ambassador to Australia, Dr Michael Pulch, says there is no time left for climate inaction.

Meanwhile, EY partner Emma Herd on Monday claimed Australian businesses will find it challenging to attract foreign investment if emission targets are not agreed to, causing the cost of capital to shoot up.

The warnings by the global consulting group and the European trading bloc, which houses the majority of Australia's foreign capital access, coincide with pressure on the federal government to agree to a target of net zero emissions by 2050.

Prime Minister Scott Morrison quashed any prospect of bolder 2030 targets, despite a slew of environmental and business groups calling for emissions to be reduced by at least 45 per cent by the decade's end.

Dr Pulch said countries and exporters without ambitious emissions-reduction targets would have to pay the price. The EU has said it intends to introduce carbon tariffs on high-emitting imports.

"Putting a price on carbon is essential, one way or another," Dr Pulch said.

"We want to lead by example and engage with partners, but we are prepared to take more action, if necessary."

Ms Herd claimed a lack of co-ordination by both the corporate sector and the government would have reputational damage to the economy, which would translate to "dollars and cents" lost.

"For us, as an investment destination it becomes challenging if we are seen as being out of step with action," she said.

"Banks and investors have to source capital offshore from the various markets that are increasingly baking carbon into their risk pricing and investment decisions. So it begins to impact our ability to access capital offshore in a cost-efficient way."

Ms Herd also noted Australia's major export markets were already pricing in carbon, and business wants partnership from government to reduce uncertainty about how Australia's economy will transition to a lower-emissions model.

Nationals Senate leader Bridget McKenzie said the party had "no friends" due to its unwillingness to commit to net zero, claiming peak bodies had "deserted us".

"We are not ashamed to be standing up and saying 'hold the horses, let's not go galloping off to Glasgow'," she said.

"Let's make sure that what we are considering as a government has actually gone through the prism of how it will affect the poorest in this country."

The Coalition has pledged to reduce emissions by 26 to 28 per cent by 2030.

Nationals deputy leader David Littleproud claimed the party hadn't been briefed on any changes to the existing 2030 target on Monday afternoon, saying the discussion had solely been based on a commitment to net zero by 2050.

"We haven't been asked to make any consideration on [lifting the 2030 target], but what we can say is that we're going to not just meet it, we're going to beat it," he told the ABC.

Earlier on Monday, Deputy Prime Minister Barnaby Joyce flagged an agreement on the 2030 target was unlikely.

Around one-third of the party were strongly opposed to a 2050 net-zero target at a party room meeting on Monday, with others happy to agree to the plan so long as regional Australia emerged relatively unscathed.

Mr Morrison during question time said a decision on a net zero target ahead of the Glasgow COP26 summit would be made by the government in cabinet.

Dr Pulch also said the EU would not be able to curb the world's emissions alone, and working alongside the Australian government was necessary in order to keep the climate crisis under control.

"We have to inspire others - even the most reluctant partners - to join the path to climate neutrality," he said.

The Reserve Bank has warned the lack of commitment on emissions is increasing the risk that more capital outflows will occur than investment coming into the country.

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Labor finance spokeswoman Katy Gallagher said negative business conditions brought on by a lack of climate policy would further hurt the budget deficit.

"Businesses are crying out for certainty from the government so they can confidently participate in the global transition to reduce emission. If they are unable to do so due to failures of the Morrison government it will have an ongoing negative impact on the nation's budget,'" Senator Gallagher said.

"Even the Treasurer has acknowledged that a failure to adopt net zero by 2050 would weaken Australia's economy even further, and put Aussie business at a greater disadvantage to those who are actually in step with this global movement and are committed to climate action."

Former prime minister Malcolm Turnbull said he understood the impasse on climate action within the Coalition better than most, claiming the government had been held to ransom by a "strong group of climate denialists" who were "wedded to fossil fuels".

"It's hardly, you know, raving left-wing radical stuff," Mr Turnbull told the ABC.

"The planet's running out of time to address global warming, and the patience of other countries and other leaders, financiers, it's all running out.

"We are looking like a really helpless, hopeless laggard on climate."

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