When environmental activist, Jonathon Moylan, sent a hoax email concerning Whitehaven Coal to the ANZ in January this year, there was outrage and tut-tutting by business journalists about his action.
A few months later, it is becoming clear that the future of new thermal coal mines is doubtful. Australian resource companies have let over-optimism skew their investment decisions.
Would any sensible investor take not only the political risk but also the financial risk of investing in new thermal coal mines in Australia?
The case for continuing investment in coking coal for steel making remains strong, but not for coal to produce electricity. The case against thermal coal is growing.
- The Australian Climate Commission this month reported that ‘levels of greenhouse gasses from the combustion of fossil fuels have increased almost 40% since the beginning of the industrial revolution, causing the earth’s surface to warm significantly. … All weather events are now occurring in a global climate system that is warming and moister than it was 50 years ago. This has loaded the dice towards more frequent and more severe extreme weather events’.
- Professor Ross Garnaut warned recently that China was moving away from coal electricity generation to a new, less resource intensive phase of growth which would trigger a plunge in Australian mining investment. Last year, China bought 20% of Australia’s thermal coal exports worth $3 billion.
- European consumption of coal has fallen to below 2007 levels and will fall further when new air pollution requirements apply from 2016.
- The US Energy Information Administration shows that coal output in 2016 is likely to be lower than in 1990. Many US power companies using thermal coal have been shut down since 2009.
- Bloomberg reported in February that Australia is unlikely to build new coal-fired power stations because of tumbling prices for renewable energy and the rising cost of finance for emission intensive fuels.
- As a result of the Fukashima disaster Japan will need more thermal coal in the short term. But the Abe Government will progressively restart its nuclear reactors which have been closed since the disaster. These restarts will result in reduced output from coal-fired generators. Before the disaster about 25% of Japan’s power production was from nuclear energy.
- The Climate and Health Alliance in Australia, in referring to a review by health experts at the University of Illinois said ‘the review adds to a suite of papers that point to the effects on human health of electricity generation from coal’
Belatedly, we should acknowledge that Jonathon Moylan was telling us something about the future. The canary in the mine was more on the ball than those business economists who criticised him for his irresponsible behaviour.