Australia’s worrying reliance on China for coal exports
It is one of Australia’s biggest industries, with exports to China driving a lot of it. But we could be in for a rude shock.
Climate Change
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For years Australians have been reassured about the future of the coal and gas industries but one expert says there’s one important reason this is “dishonest and cruel” to workers.
Despite what some may believe, the future of Australia’s coal industry in particular is not largely under the control of our government but will instead rely on decisions being made outside the country.
Leading energy analyst Honorary Associate Professor Hugh Saddler of the Australian National University told news.com.au that very little of the coal produced in Australia is used domestically.
“Apart from the black coal produced in the Latrobe Valley (which is used to produce electricity in Victoria), about 80 per cent of the coal produced in other areas goes overseas,” Dr Saddler said.
“The future for exports will depend on countries that are currently buying our coal and gas (such as) China, Japan, South Korea and Taiwan,” he said.
The future of these exports is already looking shaky.
Time Is Now is part of news.com.au’s partnership with the Monash Climate Change Communication Research Hub, looking at the impacts of climate change across Australia by 2050
China, Japan and South Korea have all set net zero emission reduction targets, making it necessary for them to reduce their coal-fired power to almost nothing within 30 to 40 years.
Japan and South Korea are aiming to do this by 2050, while China hopes to get emissions down by 2060.
Research has also highlighted that to reach these goals, changes need to happen in the next 10 years.
“It may be a big shock to coal miners but the policies are not going to be made by the Australian Government, they’ll be made by the Asian countries that import the coal,” Dr Saddler said.
“I think it’s shortsighted, dishonest and cruel to coal miners and their dependants to not tell them the truth about that.
“At some point in time countries will say they will not buy any more coal, and we should plan … to look after those industries for the time that happens.”
The world moves to zero
United Nations Secretary General, António Guterres, has said OECD countries like Australia should aim to phase out coal by 2030.
During an address to the Crawford Leadership Forum, Special Advisor to the UN Secretary-General on Climate Action, Selwin Hart, said mining only accounts for about 2 per cent of overall jobs in Australia.
“It’s essential to have a broader, more honest and rational conversation about what is in Australia’s interests, because the bottom line is clear,” he told the Australian National University conference on September 6.
He said Australia was among the hardest hit land areas, with temperatures already 1.4 degrees hotter than a century ago, and sea levels rising faster than the global average.
“This will result in more flooding, placing the lives and livelihoods of coastal communities at greater risk,” he said.
“A prerequisite of keeping the 1.5C goal within reach is the urgent global phase-out of coal.
“If adopted, this timetable would leave nearly a decade for Australia to ensure a just transition for its coal workers and others affected.”
Earlier this year, a report from the International Energy Agency, a global authority on energy investment and policy decisions, said the electricity sector would need to get to net zero emissions by 2040 if the world wanted to keep warming to 1.5C.
This would require a massive change to electricity networks around the world within 20 years.
The IEA said the least-efficient coal-fired power plants should be phased out by 2030 and all coal by 2040.
It also said there could be no new investment in fossil fuel supply projects, no further final investment decisions for new coal plants, and no new sales of internal combustion engine passenger cars by 2035.
Ahead of the Glasgow Climate Change Conference later this year, more and more countries are committing to net zero by 2050 including the United States, United Kingdom and the European Union.
These countries have also set more ambitious goals for the next 10 to 15 years.
The US has also said it would cut emissions by 50-52 per cent compared to 2005 levels within 10 years.
In the same time period, Australia’s target is around half of that. It has only announced a reduction of 26 to 28 per cent below 2005 levels by 2030.
Meanwhile the UK will also cut emissions by 78 per cent compared to 1990 levels by 2035, and the EU intends to cut emissions by 55 per cent below 1990 levels by 2030.
ClimateWorks Australia country lead Anna Malos said Australia’s trading partners were not only setting ambitious emissions targets but were starting to introduce policies that would get them to that goal.
She said the European Union had already flagged its intention to introduce an import levy on products made overseas from countries with lower environmental standards including electricity, fertiliser, steel, aluminium and cement.
“Other countries including the US are talking about something similar,” she said.
“Australia’s exports are going to have to operate in this new world and most businesses would rather the Australian Government get ahead of the world and negotiate polices that work best in Australia, rather than being subject to a range of other policies from our trading partners.”
Dr Saddler said there would be more certainty around emissions reduction targets in other countries after the Glasgow Climate Change Conference starting on October 31, and this should prompt Australia to consider its future.
“I think reassessment will be an essential part of what Australia needs to do at the beginning of next year, particularly for companies,” he said.
Australia also moving away from coal-fired power
Even domestically, the outlook for coal is not looking positive.
Currently the majority of coal produced for use domestically is used to generate electricity in Queensland, Victoria and NSW.
But these states all have policies to transition away from coal, with every state and territory in Australia adopting the net zero by 2050 target, even though the policy has not been agreed to nationally.
Many of Australia’s existing coal-fired power stations are also getting old and are expected to be retired in the next 20 years.
For example, all five of NSW’s coal-fired power stations are due to shut down by 2043.
Environment Victoria believes stations should close even earlier, particularly for inefficient power plants such as the Loy Yang stations in the Latrobe Valley.
“The International Energy Agency recently called for all ‘subcritical’ coal power stations in rich countries to close by 2030, which means it’s time to start planning for much earlier closures at the two Loy Yang power stations in the Latrobe Valley,” Environment Victoria campaigns manager Dr Nicholas Aberle said.
“AGL’s plan to keep Loy Yang power station polluting until 2048 is a complete fantasy and wildly out-of-step with international agreements to keep warming under 2 degrees, let alone under 1.5 degrees.”
As the power stations age, they are also becoming more unreliable.
For example, an explosion at the Callide Power Station in central Queensland in May this year, cut power to 470,000 properties, and the station won’t be operational again until December next year.
The Australian Energy Market Operator (AEMO) is also concerned about possible power shortages this summer due to problems at the Yallourn power station in Victoria. Recent flooding created cracks in the mine wall, putting it at rick of more future flooding.
Ms Malos said Climateworks had modelled several different scenarios on how Australia could reach net zero by 2050 and all of these required a big change to the country’s electricity sector.
Electricity generation is still the largest source of emissions in Australia, accounting for 33.6 per cent of emissions in the year to December 2020. Coal-fired power contributes almost 90 per cent of these emissions.
Ms Malos said getting coal out of the electricity sector quickly would also help Australia to reduce emissions in other sectors, such as transport.
Emissions from transport, which accounts for 17.6 per cent of Australia’s emissions, have increased by 43 per cent since 1990 despite the recent disruption caused by the coronavirus pandemic.
What about gas?
To some extent, the gas sector will be more resilient because many big LNG plant investments are backed by long-term supply contracts.
“Even just for commercial reasons, they will keep going for a while,” Dr Saddler said.
However, gas will also have to phased out in order to reach net zero emissions.
Ms Malos said the production of gas had already seen emissions increase in Northern Territory and Western Australia.
“Our research and others’, show that we can’t have an expansion in those industries,” she said.
“Those already running will also have to close to get to net zero.”
Ms Malos said gas was not the only option when it came to ensuring the reliability of the electricity system. While gas peaking plants can be turned on and ramped up quickly to provide capacity during busy times, this was an expensive option to ensure supply for just a few days a year.
“Gas peaking plants are an expensive way of firming the electricity sector and are only expected to be used 5 per cent of the time,” she said.
“We see a higher benefit from other firming technologies, for example demand management and energy efficiency.”
Authorities are already finding ways to reduce demand during peak times, such as asking businesses like aluminium smelters to power down during heatwaves.
Ms Malos believes greater energy efficiency could also play an important role.
Encouraging businesses and households to buy more energy efficient fridges, washing machines and other appliances, to better insulate their properties, and to encourage them to charge devices such as electric vehicles or solar hot water heaters during times of low demand, would help the environment and could also save people money.
“That way we don’t need to use these peaking plants and that’s just cheaper for all of us,” she said.
Dr Saddler is also sceptical about the need for gas and believes that projects such as the construction of the Federal Government-funded $600 million plant announced for Kurri Kurri in NSW is unnecessary.
He believes there are already lots of gas-fired power stations that could meet peak demand and other investments including in hydro that can perform the same function.
Dr Saddler said the technologies were already available to allow Australia to move away from gas, particularly in the residential sector, but also in the manufacturing sector.
“I think Australia needs to decarbonise as fast as possible,” he said.
Australia’s resource sector could still be very strong
Ms Malos said Australia had the right type of minerals that could see it play a continuing role in the new clean energy future. This includes green hydrogen and ammonia for energy, and lithium used to make electronics including batteries.
“Our resource sector could still be very strong. We would just be mining for different things and our big resource companies already recognise that,” she said.
Mining giant BHP has already announced plans to sell off all its thermal coal mines, with the Mt Arthur mine in NSW’s Hunter Valley the only one left in its portfolio. It announced in August it would also sell its oil and petroleum assets to Woodside.
Rio Tinto has also sold off all its coal assets.
Ms Malos said Australia was reliant on things like coal mining and gas exports for jobs and to help drive the economy, and this was why the government and businesses needed to act now so new industries could be created while older ones began the process of shutting down, rather than jobs “falling off a cliff” when the sectors were forced to close.
“If it doesn’t start now, a lot of change will be imposed from the outside and will be far worse for the industry,” she said.
Climateworks is currently conducting research to provide insight into when and how sectors such as iron, steel, metals, chemicals and LNG can change, as some will find it harder than others to adapt.
Meanwhile some investment managers have described climate change as the “biggest investment opportunity since the internet”.
Munro Partners portfolio manager James Tsinidis told the Australian Financial Review climate change was the next “mega trend” and the world was just at the beginning of a “massive and sustainable decades-long growth trend”.
Macquarie Group reports that 54 per cent of companies on the S&P/ASX 100 now have a net zero emissions target.
Renewables are already playing a significant role in Australia’s electricity system, providing about 20 per cent of its power and this is set to increase.
A final report from Australia’s Energy Security Board looking at energy security post-2025 noted that 28GW of large and small-scale renewables was expected to be built by 2030.
Over that same time period, coal capacity was expected to almost halve from about 23GW now, to around 12 GW.
“On current performance the transition is likely to occur at an even faster rate than the modelled step change scenario,” the report said.
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