(EnergyAsia, June 21 2012, Thursday) — The Australian coal industry has identified “extremist” environmental groups, the rising cost of operations, the shortage of skilled labour and the imposition of a new national carbon tax on July 1 as its biggest foreseeable challenges.
Nikki Williams, chief executive of the Australian Coal Association, presented this list at the recent Coaltrans Asia conference as she recounted how the industry has risen to become a world player, the country’s second largest export earner and a vital supporter of Asia’s fast-growing economies.
“Coal is projected to remain Australia’s most important energy export and second largest export industry,” she told delegates at the Coaltrans Asia conference in Bali in Indonesia.
Citing official research, she presented a picture of coal’s increasingly vital importance to the health of the Australian economy, including its contribution to export earnings, employment, government revenues, and development of infrastructure.
According to the Bureau of Resources and Energy Economics (BREE), Australia’s exports of metallurgical coal are expected to increase at an average annual rate of eight per cent to reach 218 million tonnes in 2017 and contribute A$40 billion in earnings. (US$1=A$0.99).
The country’s thermal coal exports are expected to surge by 10% to 162 million tonnes in 2012 after growing by four per cent last year to reach 148 million tonnes. From 2013 to 2017, it will grow by an annual average 11% to reach 271 million tonnes.
Dr Williams said the coal industry has been a growing source of government revenues as strong prices have enabled royalties to nearly triple from A$1.5 billion to A$4.4 billion between 2006 and last year.
“Direct employment has almost doubled, from 27,000 in 2006, to 48,000 in 2010. The real story though is the increase in indirect employment to some 250,000 jobs,” she said.
Today, Australia has invested a total of A$73.1 billion in various coal mining projects and infrastructure that will boost annual production capacity by more than 74 million tonnes by 2014, said Dr Williams.
But she warned the golden goose is losing its competitiveness and badly needs protection now from a combination of mostly domestic threats and the emergence of new suppliers in other countries.
She said that in March this year, the Australian media exposed a proposal by Greenpeace and a coalition of environmental and political activist groups to fund a campaign to stop coal exports.
The campaign, “Stopping the Australian Coal Export Boom”, aimed to inflict maximum damage on the coal industry by manipulating community groups, distorting legal processes and undermining public policy development, said Dr Williams.
As the campaign could harm not only the industry, but also the economy, she said the Australian government led by the Prime Minister together with the Treasurer, and the Ministers for Energy and Resources, Trade as well as the Environment publicly condemned the plan.
“We saw the campaign as a threat that reaches well beyond the coal industry and well beyond Australian shores. We were particularly disturbed by the apparent role of overseas groups as it represents a strategy to materially impact the Australian economy,” she said.
Responding to environmental critics targeting the industry, she said there simply is no way for the world to avoid using coal.
Citing the International Energy Agency (IEA), she said global coal consumption will rise by a third between 2009 and 2035, and that coal will remain the main fuel for electricity generation.
“Faster rates of growth in the population and output of emerging economies will continue to drive world coal demand upwards. The IEA has demonstrated that irrespective of any future decisions by governments around the world to alter their domestic energy mixes, the share of world coal demand from non-OECD economies will rise from 70% in 2009 to approximately 80% by 2035,” she said.
“No matter what the policy scenario, China, India and Indonesia account for over 80% of this projected increase in coal demand – with China and India accounting for one-third each.”
BREE has forecast that the world trade in metallurgical coal will rise by an average annual rate of five per cent, from 271 million tonnes in 2011 to 345 million tonnes in 2017. Over the same period, the seaborne thermal coal trade will grow by four percent a year to reach 1.04 billion tonnes.
Dr Williams said Australia’s coal industry has taken the responsible position of becoming a world leader in researching and developing low emissions coal technologies such as carbon capture and storage (CCS) to help reduce greenhouse gas emissions. Last year, the ACA established a new company, ACA Low Emissions Technologies (ACALET) under Dr Williams to develop and deploy CCS technologies.
Last November, the Australian Parliament passed legislation to introduce a A$23 per tonne carbon tax from July 1. In formulating this climate policy after a protracted five-year debate, the Australian government set a strong example by leading the world in reducing greenhouse gas emissions.
Dr Williams said that while the industry strongly supports the objective of emissions reduction, it is also needs to stay competitive especially with the recent strong emergence of new competitors in Mongolia, Indonesia and Mozambique whose coal companies do not face the same tough environmental and regulatory restrictions.
The ACA said that Australia is losing market share in the world thermal coal trade although it is has maintained its position in the metallurgical coal trade.
The ACA wants Canberra to make two “straightforward changes” to the carbon tax by phasing in the auctioning of emissions permits for trade-exposed industries. This will be followed by the inclusion of “coal mine fugitives” in step with Australia’s competitors over a timeframe that will allow the development of fugitive abatement technologies from their current experimental stages to safe, reliable, deployable equipment and processes at commercial scale.
By so doing, the ACA said the Australian coal industry would be able to meet the government’s aims while maintaining its cost competitiveness at the same time.
While affirming Australia’s strong position to meeting Asia’s economic rise, she said there is an “urgent need “to restore the country’s reputation as a low sovereign risk investment destination with a predictable and sensible policy making regime.”