Coal’s fragile economics
When Malcolm Turnbull was dumped last week from New South Wales’ Net Zero Emissions and Clean Economy advisory board as quickly as he was appointed, the move shocked many people.
Turnbull was dropped by his own protégé, the state’s Environment minister, Matt Kean, and by a government in NSW that had previously seemed receptive to his brand of liberalism.
But the former prime minister broke what remains a cardinal rule of debate in Australia: he challenged the environmental and economic rationale for new coalmines.
Specifically, Turnbull suggested the NSW government should pause the approval of new coalmines in the state’s Hunter Valley until a plan for the future of coalmining in the region was developed. Truly radical stuff.
Turnbull referred to research showing there are 23 new coal proposals in NSW, with 11 in the Hunter Valley. This research was conducted by me and Rod Campbell and Eliza Littleton, my colleagues at The Australia Institute.
What we found is stark. The new coal proposals in NSW have a combined output of 155 million tonnes a year. That’s equivalent to 15 Carmichael coalmines, Adani’s Queensland project that has been the subject of so much controversy.
Every year, the spoils of these proposed NSW mines would be enough to fill a coal train that stretched from Sydney to London.
Surely few Australians – knowing what we do about the threat of climate change – would think this necessary, or rational.
If shutting down all of Australia’s coalmines tomorrow is the “extreme left” position, and building 23 new mines is the “extreme right” position, then surely Turnbull’s suggestion of a moratorium on new mines while existing mines continue would be the sensible centre? No, not in the culture wars of the Australian media, it seems.
I’ve spent a decade pointing out the facts about coal in Australia: that the industry receives billions of dollars in subsidies and yet employs fewer people than McDonald’s. Or, most “controversially” of all, that building new coalmines is bad news for those already employed by the industry – even though Adani’s own economic expert admitted exactly that, under oath, in Queensland’s Land Court.
For doing my job as an economist, I’ve been called a lot of unprintable things. Just this week, former Labor leader turned One Nation MP Mark Latham called me an “economic fairy” over the call for a moratorium on new coalmines in NSW. An elected official once warned me against giving a talk about coal in the Hunter Valley, saying my safety couldn’t be assured. Homophobic slurs and death threats are simply the price you pay for doing this kind of research in Australia.
Given how often politicians in Australia talk about coal, you would think it’d be easy to find accurate, up-to-date information about new mine proposals. But you’d be wrong.
For the NSW mines research, my colleagues and I spent hours combing through data from governments at the state and Commonwealth level to confirm the scale and status of each new mining project proposal.
Once we finally grasped the enormity of the proposed new mines – 15 Carmichael coalmines – we turned to identifying the limitations of the NSW planning process and the consequences of approving so many new mines in such a small area of the state.
The biggest problem with the so-called planning process in NSW is that it doesn’t involve much planning.
Imagine if there were a town of 900 people, with a sewer system built to handle 1000 people. If a property developer came along and proposed building 10,000 new homes, it would make sense for the planning department to make the approval contingent on the infrastructure being in place. But that’s not how it works in NSW.
If all of the 23 mines seeking approval go ahead, there would be a glut of coal coming out of the Hunter – it couldn’t possibly all fit into the existing railway lines, nor could it get loaded onto ships through the Port of Newcastle. There simply isn’t enough infrastructure in place.
But in NSW, each coalmine is considered and approved in isolation from all the other proposals. The owners of each new mine can claim theirs will only lead to a little bit more air pollution, a little more road damage, a small additional demand of infrastructure. The cumulative effect is ignored. If all of these new mines were considered together, their disastrous impacts – on community, infrastructure and the environment – would be plain for all to see. Which is, presumably, why they are evaluated separately.
The most likely outcome of building these new coalmines is even more layoffs in the Hunter Valley’s existing mines. Already there is about 100 million tonnes of spare capacity sitting idle in these mines. It’s a simple observation that increasing supply will not solve the issue of demand that plagues the Hunter’s coal industry. Mark Latham has taken to calling this the “Dick Denniss Doctrine”, but really it’s economics 101.
Some, or even most of these mines, won’t be built. As countries around the world decarbonise their economies, it won’t be worth it for the companies now seeking approvals. But the real issue at hand is that the act of approving these mines crushes efforts to further diversify industry in the Hunter.
Coal is a big employer in the Upper Hunter. But, still, 93 per cent of people in that electorate do not work in coalmining. Latham and others like to mock those who make wine, grow food or cater to tourists. But just because a bottle of shiraz from the Hunter can sell for hundreds of dollars, this doesn’t mean the people who make it earn nearly as much as a shock jock or media adviser. And, increasingly, these good, working-class jobs are the lifeblood of the region’s economy.
The longer we pretend coal has a rosy future, the slower the creation of new jobs outside the coal industry will be. No one is going to build a new hotel on a ridge that overlooks a potential coalmine. No one is going to invest in the growth of their farm, vineyard or horse stud while coal smog clogs the air.
The only thing that approving 11 new coalmines in the Hunter will certainly deliver is uncertainty for the rest of the community.
Approving new coalmines has become a symbolic act that allows politicians to “show their support” for the coal industry. Dressing up in hard hats and high-vis vests generates a good photo opportunity for politicians, but such cosplay simply can’t generate new jobs for anyone except media advisers.
If the world wanted more of Australia’s coal, then the Hunter’s existing coalmines wouldn’t be operating so far below capacity. If the world wanted more coal, then the Port of Newcastle wouldn’t have ditched its plans to expand its export capacity. And if there are investors out there who are desperate to invest in a coalmine, then why don’t they buy one of the many existing coalmines currently for sale?
But as Malcolm Turnbull discovered last week, to ask simple questions about the Australian coal industry is to declare war. The fragility of the industry’s economics is concealed behind the ferocity of its powerful friends, in our parliaments and our press galleries.
The day The Australia Institute’s analysis of the NSW coalmine boom was released, the former prime minister was asked by the ABC’s Fran Kelly whether he supported a pause on building new coalmines while a plan for the Hunter coal industry was developed. “Absolutely,” he replied. Mine approvals in NSW, he said, were “out of control”.
That was that. Having dared utter such radical rhetoric, The Daily Telegraph, Sky News, the NSW Nationals and, ultimately, Matt Kean concluded that Turnbull must go.
None of the former PM’s detractors sought to explain how building new coalmines would help existing coal workers, nor did they explain why new mines were needed when so much spare capacity existed. Why explain when you can exclaim?
Labor’s Joel Fitzgibbon accused Turnbull of wanting to “make the Upper Hunter a coalmine-free zone”. The NSW Minerals Council suggested 12,000 jobs were at risk. Senator Matt Canavan, a former Productivity Commission economist, thoughtfully but irrelevantly pointed out that “stopping our coal going to poor countries is an inhumane policy to keep people in poverty”.
To verbal someone means to attribute damaging statements or admissions to them. It was a favourite trick of corrupt cops and it’s become stock-in-trade for the Australian coal industry. I’ve been verballed by the coal industry too many times to count. But in placing such absurd claims in Turnbull’s mouth, and sacking him for the public reaction to things he never said, the pro-coal commentariat has likely gone too far.
A state byelection will soon be held in the seat of Upper Hunter, after the sitting National Party MP, Michael Johnsen, stepped down after being accused of rape and admitting to texting a sex worker during parliamentary question time to solicit her services. A poll of the electorate this week found that 57 per cent of voters support a pause on building new coalmines until a plan for the region can be developed. Significantly, 54 per cent of National Party voters and 56 per cent of Shooters, Fishers and Farmers Party voters share the sentiment.
While it’s not yet clear whether the Nationals will retain their seat – despite their own voters’ antipathy towards building new mines – what is clear is that independents in NSW, including Zali Steggall, must be counting their lucky stars. Every time the Nationals drag the Liberals further to the right on climate change, the fear among Liberal moderates grows.
Democracy is slow, but in the long run truth will win out. If only the climate had time to wait for democracy.
This article was first published in the print edition of The Saturday Paper on Apr 17, 2021 as "Understanding the Dick Denniss doctrine".
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