Abolish our coal industry? Tell ’em they’re dreaming

A coal train travels through NSW’s Hunter Valley.

The demand by a senior UN official that Australia should abolish its coal industry by 2030 shows how absurd and ridiculous the world body often is.

If any Australian government were foolish enough to follow this advice there would be a net increase in global greenhouse emissions and Australia would be very substantially poorer.

The Morrison government should reject this call much more publicly and explicitly than it has so far.

The UN’s assurance that no coal community should be left behind, and that alternative jobs should be found for them, is evidence of the fairies at the bottom of the garden thinking that the UN so often gives expression to, and that continues to characterise so much of the global waffle on climate change.

There is nothing inconsistent with Australia maintaining and expanding its coal industry, and still making a proportionate and reasonable contribution to reducing greenhouse gas emissions, meeting and exceeding our Paris targets and further reducing emissions in years to come.

The sheer illogicality of the UN’s position is evident in the fact it would certainly drive up greenhouse gas emissions. This is based on the simple but intractable realities of coal.

Australia is typically the second biggest exporter of coal. But we are not the dominant producer of coal. Australia produces only about 6 per cent of the world’s coal. China produces about 50 per cent of coal globally.

Most nations that use coal have some coal of their own. Australia, with such a small population of 26 million, exports most of its coal. Our biggest coal export competitors are Indonesia, Russia, Colombia and South Africa.

In the event that we were self-destructive enough to abolish our coal industry, global coal use would not decline. Our export markets would be taken by Indonesia, Russia and so on. Countries such as China and India would be forced to use more of their own coal.

But Australian coal has a significantly higher calorific value than Indonesian, Chinese or Russian coal. This means it produces more energy per tonne. You burn less coal to produce a kilowatt-hour of energy. Coal-fired power stations using Australian coal produce fewer greenhouse gas emissions per unit of energy than those using Indonesian, Chinese or most other coal.

This is simply geological happenstance. But it’s also reality. Therefore if we follow the UN’s diktat we increase carbon emissions globally and impoverish ourselves.

Between thermal coal and metallurgical coal we typically earn well over $40bn in coal export income every year. We derive billions upon billions of dollars in royalties and in the tax payments of the companies and their 40,000-odd employees. The idea that anything substitutes for this in the short term is nuts. In abolishing the coal industry we would slice a huge chunk out of our national wealth, making it much harder to pay for the National Disability Insurance Scheme, Medicare, pensions, the massive debt we are accruing.

Our thermal coal goes to coal-fired power plants and our metallurgical coal is used to make steel. Both produce greenhouse emissions. The UN apparently wants us to abolish the lot.

None of the other big coal producers such as Indonesia, China and Russia will be influenced by the UN’s nonsense.

The idea that coal is on the way out globally just doesn’t square with any of the facts. Demand has certainly declined in North America and Europe. But as this column has frequently pointed out, China has commissioned more new coal-fired power than the entirety of the coal power sector in the US.

India, Indonesia and a swag of other developing countries throughout Asia and Africa have commissioned and are building hundreds of new coal-fired power stations. It’s not only developing nations. Japan, too, is producing new coal-fired power stations.

The Minerals Council of Australia and the advisory group Commodities Insights produce a useful publication, Commodity Demand Outlook 2030. Its analysis is based on the straightforward factors of what is the demand today and what is the approved capacity and most likely demand going forward. Its forecast is that the demand for imported coal will increase by just under a quarter between 2019 and 2030.

That’s right – increase by a quarter between 2019 and 2030.

That’s not inconsistent with the International Energy Agency’s prediction that overall global thermal coal use could decline a bit by 2040. If coal were really on the way out, as so many ABC commentators relentlessly proclaim, there would be no need to pressure Australia to abolish the industry by government diktat.

Similarly, if renewable energy were really remotely competitive in price terms there would be no need to subsidise it and force its use through regulatory compulsion. Similarly, the reluctance of Western banks to finance coal has not stopped profitable coal projects finding their capital from other sources.

There are hundreds of new coal-fired power plants under construction or approved in many different parts of the world. Developing countries, as well as nations such as Russia and China, are not going to take the slightest bit of notice of UN blather on these subjects. If you favour lower greenhouse gas emissions you should favour Australian coal.

The Morrison government did not answer the UN’s ridiculous demands. I think the Morrison government is trying to be too clever by half here, trying to finesse saying one thing to Joe Biden and Europe’s climate warriors and another thing to Australian coal communities.

This week was the eighth anniversary of Tony Abbott winning for the Coalition its biggest electoral victory since John Howard in 1996, and without which victory there would never have been Turnbull or Morrison governments. Abbott won that election by taking very strong positions. Why hasn’t the Morrison government forced Labor to choose either the UN or the Australian coal industry? The government can’t hide in the shadows on coal.

Former resources minister Matt Canavan tells me: “There is no climate rationale to shut down the highest quality coal in the world. We should be publicly pushing back against this crazy agenda. By being silent we are giving it implicit credibility.”

Modern coal-fired power stations, so-called critical and super critical stations, are much less carbon intensive than old coal-fired stations. They are getting close to gas. The Morrison government lost, and then gave up, the argument for coal stations in Australia. That means we have higher electricity prices than we should.

Worse, losing one argument just prepares you to lose the next argument. Handicapping our industry by not building smart hi-tech coal-fired power stations, as Malcolm Turnbull once proposed, is one thing. To lose the immense chunk of our national income tied up in our coal export industry is a whole new level of craziness.

But here’s the thing. You seldom win a battle if you won’t fight.