KATE FINLAYSON and TIM BUCKLEY. Queensland government about to make poor economic decision on Adani mine.

Following the Labor party’s defeat in May’s general election, the Queensland Labor government seems keen to approve the development of the Adani thermal coal mine as quickly as possible. However, a report released this week by the Institute for Energy Economics and Financial Analysis (IEEFA) exposes the Queensland government’s poor economic analysis and failure to recognise the accelerating global trend from coal to renewables in energy generation, and the difference between thermal and coking coal.

When a product is becoming obsolete, you don’t buy it. You look for alternative products that do the same job, or new innovations that help you stay relevant, up-to-date and competitive in a fast-changing world. Think fluoro to LED lighting, desktop to laptop computers, petrol to electric cars.

Thermal coal and renewables – both used to generate electricity – are another case in point. Thermal coal peaked back in 2014 and is on the way out, while renewables are the fastest growing industry in the world. Opening up the world’s biggest new thermal coal basin when thermal coal has already entered terminal decline – and is forecast by the International Energy Agency to be completely phased out globally by 2050 (assuming the world delivers on the Paris Agreement) – is not a good investment.

In proposing to approve Adani’s Carmichael thermal coal mine, the Queensland government is showing extremely poor business acumen for the sake of a handful of jobs and few royalties. If approved, Adani’s thermal coal mine would likely provide Queenslanders with only a limited number of ongoing jobs. Queensland’s burgeoning renewable energy industry already provides much, much more regional employment.

Given a three-year construction timeline and the proposed seven-year royalty holiday gifted by the Queensland government, the often-touted benefit of additional royalties from the Carmichael thermal coal mine proposal ignores that zero royalties are likely to be paid in the coming decade. In fact, Queensland Treasury forecasts point to penalties for speeding and red-light camera being likely to contribute more to the Queensland budget than thermal coal this decade.

Another Queensland product – coking coal used for steel manufacturing – brings seven times more to Queensland’s annual budget than thermal coal, estimated at $3,626m versus just $538m from export thermal coal in 2018. Put another way, a tonne of coking coal in Queensland pays five times the export royalties and is worth four times as much as low energy, high ash Carmichael thermal coal.

Thermal coal, one of the biggest causes of global warming, is on the way out. It is technologically obsolete, a bit like Telstra’s fixed line phone network a decade ago.

Rising up to the trend, governments around the world are transitioning their economies to low cost deflationary renewables. They are backed by 113 (and counting) of the biggest global financial institutions exiting thermal coal. Australia’s biggest thermal coal export markets including China, Japan, Taiwan, South Korea and India are also forging ahead to renewable energy generation.

This is a race towards zero carbon emissions that is accelerating as renewables breach grid parity and beyond. Meanwhile, Australia is being left behind.

Grid parity happens when the use of alternative energies – like solar and wind – costs less than the heavily subsidised traditional fossil fuel electricity source. Both the U.S. and India reached grid parity in 2017, and China will reach its target of grid parity for both wind and solar by 2020. And in regional and rural communities around the globe, people are leapfrogging technological advances and installing local renewable energy solutions such as mini-grids, solar and batteries.

And Australia? It’s back to the future and the Queensland government is about to approve the opening up of the biggest thermal coal basin in the world. Adani and the Queensland government, supported by Federal Resource Minister Matt Canavan, the Minerals Council of Australia and the Queensland Resources Council, have failed to calculate that current higher thermal coal prices are actually working against them by fostering a faster technological disruption. High coal prices accelerate the arrival of grid parity for renewables.

Our government representatives and fossil fuel lobby groups are also deliberately confusing people by combining coking and thermal coal – two different products supplying two different industries and providing completely different value propositions to the people of Queensland. Adani and the Queensland government are failing to provide a complete picture.

I (TB) spoke to my 21 year old daughter yesterday who was born in Cairns Base Hospital and asked her what she thinks about most. Climate change, she said, all the time. At this rate, no-one will be here in 80 years.

Our role as parents is to give the message of hope, when our children bum out on an exam, break up from their first relationship, discover an early career choice does not suit them. But the task of giving hope when the vision of the world is no more than her lifetime, is harder.

But I do, because I know a low carbon world is possible, with the right financial backing by banks, insurers and credit agencies, and the right technology investments by industry, and the right policy settings and vision by governments.

With its target of 50% renewables by 2030, the Queensland government has set the state on the path towards a cleaner, much cheaper, more sustainable future. Queensland already has several world-leading renewable projects like Genex Power’s 250 megawatt (MW) pumped hydro storage and solar, Sun Metals’ integrated 125MW solar powered zinc refinery, Northern Oil’s Gladstone hydrogen power plant pilot, Ratch’s A$380m 180MW Mount Emerald Wind Farm, and AGL’s 453MW Coopers Gap Wind Farm.

At some level, the Queensland government knows there is an urgent need to invest in the fastest growing industry in the world – the sustainable renewable energy industry – rather than the structurally challenged, high emitting, outrageously expensive and non-sustainable thermal coal industry – the stranded assets costs of which we all have to bear.

As the Queensland government knows through its existing investments, low cost renewable energy technologies are increasingly and necessarily providing both Australia’s and the world’s energy supply, and further rapid growth is inevitable. The Queensland government also knows that thermal coal is rapidly approaching technological obsolesce. Adani has shown new thermal coal basins are un-bankable and of marginal viability.

Bending over backwards for the thermal coal lobby and federal government influencers for a handful of jobs and royalties delayed for ten years is not doing Queenslanders any favours. Nor is fostering a scare campaign largely irrelevant to Queensland given 85% of Queensland’s coal workers are employed in coking coal mines that are not technologically challenged.

Exploiting the Galilee Basin for thermal coal is a dud bet, a very poor investment decision. The people of Queensland need to know this truth.

Read the latest IEEFA report Conflating Queensland’s Coking and Thermal Coal Industries: Thermal coal adds little to Queensland’s state budget

Kate Finlayson is Senior Communications Strategist at the Institute for Energy Economics and Financial Analysis (IEEFA). Tim Buckley is Director of Energy Finance Studies, IEEFA.

print

This entry was posted in Economy, Environment and climate, Politics. Bookmark the permalink.

6 Responses to KATE FINLAYSON and TIM BUCKLEY. Queensland government about to make poor economic decision on Adani mine.

  1. Bill Soko says:

    Big projects with billion dollar budgets are the object of dreams for those being fed. Huge amounts of dollars slouching around with lots of leakage, spread world wide to safe havens is mana from heaven. Building a mega project is the objective, what it is and rather its economic or responsible is irrelevant. Old technology is great, use it up before it expires. Cash is king, all the better from the public purse.

  2. paul walter says:

    I am glad for
    Ken Dyer’s comment, the big hole in some otherwise good writing was the ignoring of the federal government, its ideologies and role in the creating of the current mess that puts the QLD government in such an invidious mess.

    The change should have come a month ago but the myopic forces of reaction across Queensland and Australia put paid to hopes for a more considered approach to coal in Queensland, as Clive Palmer bought and sold democracy up the creek for nakedly selfish reasons.

  3. Kevan Daly says:

    Investment is always driven by a vision of the future. Adani have put up with harassment from a variety of sources for 9 years now so they must be very confident that their view is correct. In addition, they’re putting up the money, unlike Finlayson/ Buckley and the Queensland Government.

    Just a straw in the wind; over the last year or two Indonesia has emerged as the dominant player in the seaborne trade for thermal coal, heading for 500 mtpa while Australia is stuck at 200 mtpa. Their major trading partner is India and their coal is the low energy variety that occurs in the Galilee Basin.

  4. Felix MacNeill says:

    The saddest thing was that, recognising these facts, both Labor and the Greens proposed decent transition strategies for coal workers and alternative industries with far brighter employment and economic prospects, but were roundly abused and insulted for their trouble. I take no pleasure in this, but those who did the rejecting and abusing will have to understand their error through bitter experience.

  5. Ken Dyer says:

    The Adani mine has always been a creature of the Liberal Party. In 1999, Deputy PM Tim Fischer signed an Economic Agreement with India which, although cancelled in 2017 by India, committed Australia to the agreement until 2032.

    The agreement clause reads as follows: “the Agreement shall continue to be effective for a further period of fifteen years from the date of its termination in respect of investments made or acquired before the date of termination of this Agreement. “ (Source: DFAT)

    In August 2010, Adani bought the Carmichael mining rights from Linc Energy, now defunct, whose founder and Managing Director, Peter Bond, was a major Liberal Party donor. The deal was passed very quickly through the Foreign Investment Review Board. In 2014, the Adani mining proposal was approved by Environment Minister Greg Hunt, and the project got underway.

    That approval was subsequently overturned by the Federal Court, then upheld. That faulty approval was endorsed by another faulty approval by Environment Minister Price, who has now passed the buck to the Queensland Labor Government.

    In a nutshell, the whole sorry affair is a concoction of corrupt businessmen and LNP politicians. Adani is part of the LNP’s DNA, and the LNP has weaponised this environmentally destructive and economically indefensible project.

    Labor’s position is impossible. If the Adani mine is approved, it will provide a few jobs, about a 100 according to a federal MP back in 2017, contribute to global emissions, trash indigenous rights, use precious water and provide very little in royalties.

    If it is terminated, the environment will remain, not provide a precedent for others to mine the Carmichael, but with Australian taxpayers held to ransom by Adani.

    The Adani mine is a time bomb, squarely placed under the ALP. It worked for the Federal election, and now the LNP want it to work for the State Election in 2020. Premier Palaszczuk only hope is to defuse it as an issue for the State.

    Even if it is approved, and Adani subsequently make the decision not to start the mine, or they start the mine then close it down, I have no doubt that Adani will tie the governments up in courts for years to come in a bid to obtain reimbursement for what is after all has never been an economically and environmentally sound proposition since the day Adani bought the lease from the discredited MD of Linc Energy.

Comments are closed.