With government help, coal miners and exporters are fighting a rearguard action to keep their businesses afloat [3 June 2014 | Peter Boyer]
For the big wheels in Australian mining, the Great Hall of Parliament in Canberra was the place to be last Wednesday night.
“I want you to know that you are not in hostile territory; you are here amongst people who want you to flourish,” Tony Abbott told assembled luminaries at the mining industry’s post-budget dinner, now an annual event during the budget fortnight in Canberra.
What sets the modern world apart, said Abbott, is energy consumption, “and it is our destiny in this country to bring affordable energy to the world”. For this reason, “it’s particularly important that we do not demonise the coal industry.”
What’s happening here? Why should rich, powerful miners, who’ve lived with booms and busts all their lives, need prime ministerial assurance that they’re among friends? What do they have to fear?
As usual the prime minister made sure to bring the carbon tax into his narrative, attacking it for encouraging the belief that coal “should be left in the ground and not sold”. He added, “I can think of few things more damaging to our future.
But wouldn’t a destabilised climate threatening the viability of communities, economies and governments everywhere be more damaging? And if fossil carbon were to blame, wouldn’t that be good reason to leave it in the ground? Oh, I forget; he’s said before that this is all “absolute crap”.
Other leaders don’t agree with him, including those of Europe and the United States. This week US president Barak Obama announced plans to have electricity companies shut down their oldest, most polluting coal plants, invest in wind and solar energy, and upgrade the power grid in a sweeping national program expected to foster new state-based emissions trading schemes.
Incidentally Obama is known to be concerned that Australia, as host nation for November’s G20 summit in Brisbane, has left climate change off the agenda. Tony Abbott should expect some awkward moments when he meets him in Washington next week.
The large majority of countries around the world concerned about human impact on climate includes China, which has set up seven provincial carbon trading markets, expected to be fully under way next year, as a prelude to a national scheme to operate from 2018.
All this should be exercising the minds of Australian government and business. But what should really get their attention are a rapidly-changing Chinese economy and a rising global demand for clean energy. Together, these have stirred a perfect storm in the world energy market.
China’s economic health affects the whole world, but especially Australia, the world’s biggest coal exporter. Half the world’s coal consumption is in China, and Chinese coal and iron ore imports were the main reason Australia avoided recession in the 2008 financial crisis.
Signs of a downturn were already out there in June last year when a report by US financial analysts Alliance Bernstein asked the question, “is this the beginning of the end of coal?” Then in September Citibank released its own detailed analysis, The Unimaginable: Peak Coal in China.
Both reports found that changing consumer demands and rising protests over coal-fuelled air pollution point to a declining Chinese coal economy by 2020. The huge gas deal that president Xi Jinping concluded with Russia last week only increases that probability.
Add to this pressure from financial quarters. A month ago the world’s biggest investment manager, BlackRock, and the FTSE Group of London combined to launch a stock market index excluding fossil fuel companies, and last week AMP Capital announced fossil fuel divestment plans.
The world’s biggest oil companies, Shell and Exxon, once would have ignored such developments. Not any more; in separate statements both attacked the BlackRock-FTSE move. And AMP Capital was accused by the Minerals Council of Australia of acting against investors’ interests.
Coal is also facing challenges at home from successful wind-power operations and, most tellingly, a remarkable rise in deployment of rooftop solar. They now pose a serious threat to coal’s future, energy policy specialists Giles Parkinson and Paul Gilding told a Hobart public meeting last week.
Parkinson made special reference to the rapid rise in deployment of solar photovoltaic panels across Australia, following a global trend led by Germany, the United States and China.
No other power source, fossil fuel or renewable, comes anywhere near matching rooftop solar’s dramatic improvement in return on investment. Solar panels’ capital cost last year was a mere 74 cents per watt of output, less than one per cent of the 1977 cost of nearly $77 a watt.
Global energy trends show that favouring coal and gas generation over renewables is the expensive option. The cost trend of electricity from coal and gas is steadily rising, while renewable power is getting cheaper by the month. In Germany, rooftop solar and coal power now cost the same.
The transition to renewable energy sources isn’t going to be smooth. Huge, still-powerful industries facing terminal decline will never go quietly. Working with budgets measured in the hundreds of millions, coal, oil and gas lobbyists know how to make politicians feel vulnerable.
Fear is what drives the fossil-fuel campaign: the industry’s fear of oblivion which in turn stokes a wider fear that without our fossil-fuel blanket we’ll all be out in the cold. There will be many false leads, promises and threats along this bumpy ride.
But there will be only one ending. Continuing to pretend otherwise, which is what virtually all Australian governments are now doing, will only make the transition that much more difficult.
• Professor Ross Garnaut will talk about Australia’s economic and social future after the resources boom, celebrating the launch of the Institute for the Study of Social Change, on Thursday from 5.30pm (UTAS Stanley Burbury Theatre, Sandy Bay). For more information call 62262521.