Truth about Australia’s coal industry and climate policy
If Malcolm Turnbull or freshly appointed Environment and Energy Minister Josh Frydenberg stood on Queensland’s coast and saw a coal-fired power station float past, they’d notice, right? If more than half a million new cars drove past, they’d surely raise an eyebrow. Or would they? Each day, more than a million tonnes of Australian coal sails up that coast, past the Great Barrier Reef, to power stations or steel mills elsewhere, quietly fuelling climate change and bleaching the reef. Once used, the coal exported daily generates about as much carbon pollution as a 500-megawatt coal-fired power station, or 570,000 cars, in a year.
Yet for 30 years, Australia has quarantined the CO2 exported in our coal from climate policy attention. Governments get the link between fossil fuel use, climate change and coral bleaching, but the link between the bleaching and “our” coal eludes them still. Their capacity to mentally detach the bleaching below the surface from the coal ships above knows no bounds.
The recent election campaign provided a perfect example. Malcolm Turnbull held a press conference in Townsville to announce a $1 billion Reef Fund “for projects that will both reduce emissions, use clean energy and, of course, protect the reef”. Farmers living near the reef could get loans from the Clean Energy Finance Corporation for solar-powered or energy-efficient projects to reduce agricultural runoff. Solar could “substitute for diesel”, drive water-efficient irrigation, or power electric fences to keep cattle out of creeks.
Turnbull didn’t say how much CO2 would be saved by the undoubtedly worthwhile projects supported by the Reef Fund. Progress to date with the government’s Emissions Reduction Fund suggests eight million tonnes a year might be achievable. Pretty impressive, except that the carbon pollution exported in our coal negates that saving every three days. We’re meant to ignore such facts, but take the environmental commitment seriously.
It’s the same with approval processes for new coalmines and export terminals, all subject, as Turnbull’s government says each time, to the “strictest conditions in Australian history”. From protecting endangered species and water quality, to requiring dredging spoil to be disposed on land, we’re assured no stone is unturned. When then environment minister Greg Hunt approved the largest coalmine in Australian history, he said the conditions would ensure “that all impacts, including cumulative impacts, are avoided, mitigated or offset”. Except one, which happens to be the biggest by far: the emissions that occur when the coal is eventually used.
Ignoring the carbon exports in coal is only possible because the globally agreed carbon accounting system counts emissions where they occur. It enables fossil fuel exporters to focus on emissions produced within their own borders, and disown exported emissions. It has been a very convenient arrangement for the export-oriented Australian coal industry, but will it last?
This year, Australia will export about one billion tonnes of carbon dioxide in coal. Yet the emissions being produced domestically are roughly what they were in 1990 – about 560 million tonnes. They’d be much higher without all the policy attention, but our domestic contribution to climate change hasn’t changed much. What’s changed is the nearly fourfold increase in coal exports.
When local emissions comprised most of our contribution to climate change, a focus on domestic policy made sense, particularly given the global carbon accounting rules. Now, we export nearly twice the emissions produced domestically, but the policy debates haven’t kept pace. Factor in the 280 per cent increase in coal exports, and Australia’s yearly contribution to climate change has nearly doubled in 25 years. All that effort to cut emissions, billions of dollars invested by government and business, millions of Australians doing their bit with solar panels on the roof, all those years spent arguing over carbon taxes, emissions trading and Direct Action – all quietly negated by our coal exports.
Today, as well as our domestic emissions, one in every 35 tonnes of CO2 emitted worldwide comes from exported Australian coal. It ends up counting in someone else’s domestic tally, but it’s facilitated by Australia. By peddling coal on a grand scale, and targeting poorer countries with modest emission commitments, we’re keeping the dirtiest power generation and steelmaking options cheaper for longer. In this, we’re now surprisingly isolated.
Among developed countries whose fossil fuel-based industrialisation caused the problem, none has expanded coal exports on remotely the same scale. Indeed, Australia exports three times as much coal as all other OECD countries combined. Canada has done something similar with oil exports in recent years, but it involves less than half the carbon exported in Australian coal, and Canada’s domestic emissions still eclipse their carbon exports. The only country approaching the coal example of Australia is Indonesia, which briefly rivalled us as the largest coal exporter before cutting production. The big difference is that Indonesia’s domestic emissions are close to 2.5 billion tonnes, primarily because of deforestation. So their carbon exports in coal are less than half as significant as their domestic emissions.
China and India have dramatically increased coal production, too, but the coal is used locally, so the emissions aren’t being disowned. The same goes for the gas boom in the United States, which remains a net importer. Even in Russia, which has sought to increase coal and oil exports, domestic emissions remain more significant than exported emissions, notwithstanding a 50 per cent decline since the fall of the Soviet Union.
By contrast, 80 per cent of Australia’s contribution to climate change could soon come from carbon exports not covered by our international commitments. Over the next five years, our annual carbon exports in coal could even overtake Saudi Arabian oil exports. By 2030, we might export nearly four times the carbon pollution we produce. As domestic emissions become less significant, so, too, does our domestic response.
On current projections, if Australia meets the commitment made in Paris to reduce domestic emissions by 26-28 per cent by 2030, coal exports will erase the saving nearly seven times over. The Adani coalmine proposed in Queensland’s Galilee Basin on its own would add three-and-a-half times as much carbon pollution between 2020 and 2030 as the government hopes to save through the Emissions Reduction Fund. Coal exports would even negate Labor’s commitment to “net zero” emissions by 2050. “Net zero” counts cheap imported carbon credits, but there’s no indication that Labor would count carbon in coal exports, in which it says, “Australia will continue to have a competitive advantage”. Factor that in, and Australia could still contribute more emissions in 2050 than today.
Somehow, both major parties remain convinced that expanding coal exports for decades to come, and disowning the emissions, is consistent with an effective global response. Underpinning their delusion is a steadfast faith that Australia’s interests and the coal industry’s interests are inseparable. Coal is presumed an indispensable contributor to gross domestic product, exports and employment. The funding required for roads, schools, hospitals, police and much else are presumed to depend on the taxes and royalties raised from coal.
There’s just one very big problem – the economy is leaving coal behind. What was a $54 billion export industry looks like being worth $31.5 billion this financial year. What was worth nearly 5 per cent of GDP is about 2 per cent and falling. Coalmining jobs have shrunk nearly 30 per cent. Coal royalties are providing 58 per cent less revenue in Queensland than in 2009, and 37 per cent less in New South Wales. Federally, the tax the industry claims to pay accounts for 0.63 per cent of total revenue. The significance of the industry to the economy is in freefall, and it has happened in spite of huge increases in coal export volumes as the investment and construction phase of the boom gives way to a production boom. We’re left with an industry of much less value doing far more harm.
Some dismiss this as a transient downturn from which the industry will bounce back. Once an oversupplied global coal market shakes out less competitive producers, it is assumed prices will rise, and profits and royalties will start flowing. But this misses the broader economic transformation under way – the very one Malcolm Turnbull keeps talking up, as Australia diversifies away from reliance on resources.
While the value of coal exports has shrunk by nearly a third, GDP has grown by a third. Coal shed nearly 20,000 jobs, but the broader economy has added more than 1.1 million. Total exports grew, too, so where coal used to account for 22 per cent of exports, this year it could fall below 10 per cent. Other sectors have filled the vacuum left by coal many times over. The myth that coal is indispensable is being utterly shattered, time and again, in spite of government policy.
It’s great news for Australia, a cue to move on. Yet government policy is stuck in a different world: where domestic emissions are our main contribution to climate change; where coal is indispensable to Australia; where it makes expedient sense to keep green-lighting new coalmines, railways and terminals; and where the global community forever lets us ignore the consequences. It’s a la-la land in which we’re “overachievers” at reducing emissions, where lending farmers money to erect solar-powered electric fences is a big deal, but exporting a coal-fired power station worth of emissions each day goes routinely unnoticed.
If the reef could speak, it would scream, “Snap out of it.” But you wonder whether they’d notice that either.
This article was first published in the print edition of The Saturday Paper on Jul 23, 2016 as "In the coal light of day". Subscribe here.