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New Australia PM begs to differ with those calling for coal mine ban, citing economic and job implications

27th November 2015

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

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Australia’s newest Prime Minister, Malcolm Turnbull, has taken a practical stance on Australia’s coal future, despite mounting turmoil in the sector as new mines face severe environmental resistance and producers are cutting output in an effort to fight rising costs and decreased prices.

In October, 61 prominent Australians, including scientists and economists, called on Turnbull and the Australian government to ban any new coal mines from being developed in the country and to put an international moratorium on the agenda for the Paris climate talks, which started on November 30 and end on December 11.

In response to the call for a moratorium, Turnbull, who assumed the top job in September, after unseating Tony Abbott in a Liberal Party spill, said a moratorium would not make ‘the blindest bit of difference’ to global emissions.

“If Australia stopped exporting coal, the countries to which we export [the commodity] would simply buy it from somewhere else. There is . . . a lot of coal around. One of the things that is not perhaps well enough under- stood is that China, which, by recollection, is the largest coal producer in the world, [with] well over 3.5-billion tons of coal itself, is likely to [very shortly] become, if not already, a net coal exporter.”

Turnbull has argued that, by halting Australian coal exports, global emissions are likely to increase, as customer nations will be forced to buy coal with a higher ash content from other producer countries.

“With great respect to the motivations and the big hearts and the idealism of the people that advocate that, that is actually not a sensible policy, either from an economic point of view, a jobs point of view or, frankly, from a global warming or global emissions point of view.”

Unsurprisingly, the Minerals Council of Australia (MCA) has agreed with Turnbull’s assessment, stating that thermal coal will remain a key player in the global energy mix.

“Calls for a global moratorium on coal mines ignore the scale of global demand for energy, the progress made in reducing the carbon footprint of coal by up to 50% and the adverse consequences for the world’s poorest people of eliminating the world’s most abundant, low-cost energy source,” comments MCA executive director for coal Greg Evans.

“The reality is that demand for coal remains strong, particularly in South-East Asia.”

A recent report by the International Energy Agency (IEA) forecast that coal would surpass oil as the most consumed fuel in the South-East Asia region by 2040, with demand growing at 4.6% a year.

Energy demand in South-East Asia is estimated to grow by some 80% by 2040, with coal expected to account for 40% of the growth in electricity generation. Coal’s share of the region’s electricity generation mix is expected to rise from the current 32% to 50%.

India has been tipped to seize the role of the world’s largest coal importer by 2020, over- taking Japan, the European Union and China. This is despite the nation already being the second-largest coal producer in the world.

In the IEA central scenario, Australia’s coal exports are forecast to grow by 36.7% by 2040, boosting the country’s share of global trade from 29% in 2013 to 33%. This is consistent with forecasts from the Department of Industry, Innovation and Science, which figures that Australia will regain its ranking as the world’s largest exporter of coal.


The Office of the Chief Economist has reported that Australia’s metallurgical coal production increased by 6% in 2014/15 to 193-million tons, as mining giant BHP Billiton and its alliance partner, Mitsubishi, completed development of the Caval Ridge mine.


In 2015/16, metallurgical coal production is expected to increase by a further 1.3% to 196-million tons, as expected production curtailments have been offset by increased production from existing operations and producer Whitehaven Coal’s Maules Creek mine coming on line.

Australia’s exports of metallurgical coal are expected to increase by 3.4% over the same period to 194-million tonnes, with the value of the exports expected to increase to A$22.2-billion as the increased volumes and the effect of a depreciating Australian dollar more than offset expected lower prices.


From 2016/17, metallurgical coal exports are set to increase at a yearly rate of 2.6% to 211-million tons by 2019/20, while export earnings over the same period are expected to increase at an average yearly rate of 2.9% to A$24.7-billion.

The story for the Australian thermal coal market will play out in much the same way, with the Office of the Chief Economist predicting that thermal coal production in 2015/16 will increase by 2% to 254-billion tonnes, underpinned by increased output from new projects.

From 2016/17, thermal coal production is expected to increase at an average yearly rate of 1.1% to 265-million tonnes in 2019/20.

Thermal coal exports during 2015/16 are forecast to increase by 0.8% to 206-million tons, while earnings are expected to decline by 2.3% to A$15.7-billion as forecast lower prices offset the higher volumes.

Thermal coal exports are estimated to continue to climb at an average yearly rate of 1.8% to 222-million tons by 2019/20, while the value of these exports should increase by 1% a year to about A$14.9-billion.

The coal industry is not only lining the pockets of the producers, but has also given the Australian government access to significant sums of cash.

Between 2007/8 and 2013/14, company tax and coal royalties raised A$38-billion, and between now and 2018/19 coal royalties are projected to reach A$15-billion.

Despite the optimism expressed by the Australian coal industry about the sector’s future, environmental groups are banding together, putting up severe roadblocks to any miner wishing to develop a new coal mine in the country.

Indian major Adani has faced several legal challenges to its proposed $16.5-billion Carmichael mine, in Queensland, despite having obtained federal environmental approval.

The mine, which will comprise opencut and underground operations and will produce an average of 60-million tonnes of thermal coal a year over a life-of-mine of about 90 years, might be stalled for up to two years as a result of the ongoing legal action, a spokesperson for the company says.

In October, Federal Environment Minister Greg Hunt approved the Carmichael project for development for the second time, after his original environmental approval was overturned by the Australian Federal Court on appeal by an environmental group on the grounds that Hunt had failed to consider conservation advice when taking his decision on the project.

However, the new environmental approval has encountered another round of legal action, this time from the Australian Conservation Foundation, which is arguing that the Minister failed to consider whether the impact of climate pollution, resulting from burning the mine’s coal, will be inconsistent with Australia’s international obligations to protect the World Heritage-listed Great Barrier Reef.

Despite the resistance and the expected delays in development, Adani has committed itself to developing the Carmichael project.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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