Australia’s thermal coal industry and its colossal carbon emissions are increasingly looking like an unwanted guest in a global economy that can’t wait for it to leave.
New Japanese Prime Minister Yoshihide Suga’s pledge this week for Japan to reach net zero carbon emissions by 2050 is another signal that Australia’s climate denialist government, and the fossil fuel industries it is committed to backing, are out of touch with its major trading partners as well as basic science.
But the commitment was only a continuation of a retreat from fossil fuels by Japan that belies the argument of coal advocates in recent years that its withdrawal from nuclear power will mean it needs more Australian coal.
In 2018 the Japanese government said it would reduce its dependence on coal to meet its Paris agreement targets, partly by replacing older, inefficient coal-fired power plants.
But the details of the commitment were vague — until July this year when it committed to reducing coal’s 33% share of its energy production to 26% by 2030. That is of more immediate relevance that Suga’s 2050 pledge to Australian coal exporters: they provide 70% of Japan’s thermal coal. That was worth about $9.6 billion in 2019-20, the Department of Industry, Innovation and Science says.
The local coal industry is already under pressure from sagging demand as a result of the pandemic, with major companies abandoning thermal coal and Glencore suspending operations at its Hunter Valley mines and in Queensland.
The mining and tax avoidance giant again shut down its coalmines in late September.
It isn’t merely climate action that threatens coal exporters; it’s old-fashioned protectionism.
Recent stories that China was restricting imports of Australian coal to ‘‘punish” Australia are nonsense. The restrictions are real enough, but they’re a result of China responding to pressure from well-connected Chinese coal companies and their local political mates to restrict imports of more efficient Australian coal which can be mined, shipped and landed in China at a per tonne cost/energy efficiency cheaper than can be mined from northern China’s ageing coalmines.
As the department warned in its September outlook: “The Chinese coalmining industry is encouraging the government to tighten import controls, with seaborne coal prices growing increasingly attractive relative to domestic prices, and local demand continuing to outpace supply.”
China runs an unofficial total annual quota for coal imports of 300 million tonnes for thermal and coking coal. Because of a surge in cheaper imports in the first six months of 2020, China has been slowing the pace of imports: data for September showed coal imports fell nearly 10% to 18.68 million tonnes in September from 20.66 million tonnes in August.
That saw coal imports for the first nine months of this year total 239 million tonnes, down 4.4% on the same period of 2019. That’s only 61 million tonnes under the unofficial 300 million tonne annual quota, meaning imports will remain about 20 million tonnes or less a month for the next three months to the end of December.
Typically, the coal sector is turning to its Coalition friends for help. In an extraordinary statement last week Whitehaven Coal chair and former National Party leader Mark Vaile demanded that the government force banks to lend to coalminers.
Vaile told The Australian Financial Review: “There is a taxpayer guarantee underpinning the activity of those banks and that was highlighted during the GFC. There ought to be an unwritten, but semi-moral obligation by the major banks in Australia to support those major Australian industries” — meaning coalmining.
Forcing major banks to lend to an increasingly unviable industry would expose shareholders to losses as mines were shut or sold at a loss, and increase the level of systemic risk to the financial system.
It would also override the growing number of major institutional investors who have supported divestment from fossil fuels and the withdrawal of major lenders from thermal coal projects.
Whitehaven is a major Coalition donor, having given the Liberal Party just under $125,000 between 2013 and 2019. Since mid-2018 its share price has fallen 80%.