A prominent economist says uncertainty over Australia’s climate change policy is a major impediment for business.

Former Reserve Bank board member Warwick McKibbin says Australia could have a credible carbon reduction policy, if politicians were prepared to compromise.

He says it is important for the country’s economic future and international standing that Australia pick a path to tackle climate change.

“We have to invest in all sorts of generation technologies over coming decades and until we have a clear and transparent framework in Australia,” he told The Business.

“It’s going to be costly for people doing business in this country. We need to solve the issue even if it turns out in the end that climate change is not as serious as many scientists think. The uncertainty is what’s damaging us at the moment.”