QUARTERLY ESSAY 78 The Coal Curse

 

Correspondence

Andy Lloyd

Professor Brett’s dismay at the recent bushfires and lack of action on climate change is well founded. As a firefighter, I share her concerns. But Brett has been very selective in citing the activities of a few individuals in the mining industry on native title and climate policy, and accordingly she provides a very narrow view.

I am reluctant to defend the coalmining industry, because it should have done more itself to address its poor reputation. However, having worked in the industry for several decades and represented Rio Tinto in numerous industry associations in Australia and internationally, I wish to offer a very different perspective.

Professor Brett describes the negative response of much of the mining industry to the Native Title Act 1993, which at the time was highly contentious. In 1995, Leon Davis, the managing director of CRA, the Australian arm of Rio Tinto, made a landmark speech supporting native title and recognising the advantages of working in partnership with Aboriginal people. For mining companies, this would result in improved access to Aboriginal land, increased local employment options and greater security of tenure for mining projects, in addition to the obvious benefits for Aboriginal people. Professor Brett says the companies “could afford to be generous once they had won,” but the reality is they were driven by the social and commercial imperative to do business in a manner that delivered effective outcomes for themselves and affected Aboriginal groups alike. The outcomes for Aboriginal people since then have been positive where agreements negotiated for development on Aboriginal land have aligned the interests of Aboriginal communities and mining companies by sharing the proceeds of development through royalties, employment, business development and other benefits, while protecting Aboriginal rights and interests in land, environment and cultural heritage.

Mining companies recognised emerging climate concerns by the late 1990s, and since then have sought to reduce greenhouse gas emissions despite the lack of clear government policy. While there has been vigorous debate and disagreement on exactly what to do, mining companies have responded to the emerging imperatives of climate change. On no occasion within the Australian coal industry can I recall climate science, as distinct from policy, being seriously debated, let alone dismissed. Rather, the starting point for these discussions was always that climate change was a significant problem that needed to be addressed. One that posed a challenge not just for the mining industry, but for every industry with high-energy inputs.

The idea of an all-powerful fossil-fuel lobby stalking the corridors of power, casting doubt on climate science and sabotaging national efforts to reduce emissions, is hilarious to most people inside these companies. It would also be news to politicians who have been directly involved in climate policy over this period and who have allegedly been “captured” by this lobby. Rather, Australian domestic climate policy over the past two decades can be explained almost entirely by a single question: what impact will this policy measure have on the cost and reliability of energy for domestic and business consumers? A closely linked question is: what impact will it have on Australian competitiveness?

Professor Brett uses the term “fossil-fuel lobby” in a way that implies everyone involved in the production of fossil fuels (the coal, gas and oil industries) rejects climate science and has worked to undermine emissions policy. This is patently false. All of the major public companies in these sectors long ago acknowledged the problem and have in place programs to reduce their own emissions. Many, including coal producers, have been working for decades on strategies to reduce emissions from the use of their products. For example, the black coal industry contributed over 20 per cent of the abatement achieved under the voluntary Greenhouse Challenge Program initiated in 1995 by the Keating government.

If there is an anti–climate science, pro–fossil-fuel lobby in Australia, it comprises a small number of politicians and commentators, not companies actually involved in the fossil-fuel industry. If these politicians have been “captured” by so-called fossil-fuel interests, then those interests do not include major producers.

If indeed there has been a sinister lobby working behind the scenes, sowing the seeds of climate denial and sabotaging emission reduction efforts in Australia, then it has been spectacularly unsuccessful. This is particularly true when it comes to coal. As Brett herself notes, ten coal plants have closed in Australia in the past ten years. No new ones have been commissioned for over a decade, and Australia is installing renewable energy (solar photovoltaics and wind) faster per capita than almost any other country. Our deployment rate is four to five times faster than in the European Union, United States, Japan and China.

The black coal industry recognised the challenges facing coal in the late 1990s, when it joined the Greenhouse Challenge Program and began to invest in abatement projects. By 2001, these challenges were made even clearer from its dialogue with the International Energy Agency. In 2006, the black coalmining industry in Australia agreed to create the COAL21 Fund to develop low-emission technologies, and all Australian black coal producers agreed to contribute to this fund. To date, the fund has invested nearly $400 million in emerging low-emission technologies. Numerous major technical research and demonstration projects have been undertaken, including oxy-firing of a conventional coal power station, pre-and post-combustion capture, in conjunction with work by the Cooperative Research Centre for Greenhouse Gas Technologies on carbon capture and storage (CCS).

The International Energy Agency itself has highlighted the importance of CCS in reducing emissions, and the Intergovernmental Panel on Climate Change, the organisation that reviews and distils the research of thousands of climate scientists, has consistently and repeatedly identified CCS as one of the critical technologies necessary to address climate change.

In about 2002, Rio Tinto joined with numerous other coal and oil and gas companies in the CO2CRC, which was established under the Australian government’s Cooperative Research Centres (CRC) program. Its aim was to research and demonstrate CCS as a major industrial emissions-reduction technology. In 2012, Rio Tinto further expanded its contributions to the CO2CRC, providing $3 million over three years as part of the formation of the Peter Cook Centre for CCS Research. At the conclusion of CRC funding in 2014, CO2CRC Limited was established as a private, not-for-profit research organisation and to this day it owns and operates a major carbon storage research facility with more than $100 million invested in understanding how carbon dioxide behaves underground. In 2009, Prime Minister Rudd committed over $100 million to support the creation of the Global CCS Institute, which has carried forward this work internationally.

The efforts of the Australian coal industry to develop CCS are often incorrectly characterised as a failure. Further, many describe those efforts as a cynical external-relations tactic to cultivate the promise of future low-emission coal use while allowing business as usual for as long as possible. Any informed analysis exposes both notions as erroneous.

The knowledge developed by those early projects has supported the development of this technology elsewhere by nations and companies with budgets far larger than Australia’s. In reality, the ambition of the Australian coal industry was a decade too early. The cost of capturing carbon dioxide from coal-fired power stations has halved since the COAL21 fund was launched in 2006. Two coal plants with CCS are operating (since 2014 and 2017) and in the past few months six more have commenced feasibility or FEED studies in the United States. These are not academic exercises. These are real projects with the intent of putting steel in the ground. If the coal industry was truly just conducting an external-relations exercise, or just continuing business as usual, it would not have spent hundreds of millions of dollars through the COAL21 Fund trying to support the development of a technology well beyond its core competencies. Nor would individual coal companies have spent tens of millions of additional dollars on their own CCS programs. Rather, the coal industry would have saved its money and instead focused its messaging on local efforts to reduce its own emissions and on its contribution to the community and economy, safe in the knowledge that the export coal market will be robust for decades.

The industry’s actions were and are motivated by a desire to make a material contribution towards defeating climate change, while recognising the realities of the ongoing demand for coal, especially in rapidly growing Asia. Without CCS, it is, at best, twice as expensive to meet climate targets, and at that cost it is practically impossible. The actions of the industry are well removed from the climate denialism depicted by Professor Brett.

Around half of Australia’s coal exports is metallurgical coal used for steel-making. The other half is thermal coal used in power plants, with a small portion used to make cement, alumina, synthetic rutile and manganese. If it is true (and it is) that countries that import our thermal coal could readily source the same quantity elsewhere, why do they prefer the Australian product? The answer is that it generally has a higher energy content and a lower ash content, meaning it is more efficient and also lower in other important pollutants, such as sulphur and mercury. For India and China, which are determined to electrify their economies by whatever means available, and which already have an air pollution problem, this is an important consideration. Using Australian coal results in lower carbon emissions per unit of energy and fewer pollutants of other kinds. This does not make Australian coal “clean,” just cleaner.

While the idea that support for Australian coal exports can only be logically explained by politicians being somehow “captured” by climate-denying fossil-fuel interests might make for a ripping yarn, the reality is far more prosaic. Most people understand the economic and environmental reasons why countries prefer to use Australian coal. And all understand the jobs, investment and national wealth to be foregone if Australia were simply to cede these markets to eager global competitors with no environmental benefit.

Apart from this, critics like Brett need to ask: if we want to be consistent and stop our emission-intensive exports, where do we draw the line? Cattle cause methane emissions, so Australia shouldn’t export beef or dairy products? Aluminium production is responsible for emissions, so we shouldn’t export bauxite? International tourism causes airline-related greenhouse gas emissions, so Australia should tell travellers to go elsewhere? The answer is to reduce greenhouse gas emissions across all sectors of the economy, including, of course, the more intensive emitters such as coal-fired power, both in Australia and internationally.

We need to demand that our politicians embrace the target of net zero emissions by 2050 and take effective action to meet that target. Certainly, we should be demanding greater efforts from the emission-intensive polluters, including the coalmining and coal-consuming industries, to invest in the development and deployment of low-emission technologies. We must demand action domestically, and we should also use our trading relationships to ensure that sales of Australian products come with commitments to invest similarly to reduce emissions.

New technology needs significantly more investment and Australia should play its part in an international effort. Developers of these technologies assume a significant financial risk, which is made more difficult in the absence of an economically efficient mechanism to reward cuts in emissions. The success of renewables is commendable, but we need as many emission-reduction options as possible, so that we can choose the most cost-effective options across all sectors of the economy.

As a firefighter, I share Professor Brett’s dismay about climate change and the inadequate response to date. However, emergency management principles require that we remove emotion from our decision-making. If we believe in the climate crisis, it is hard-headed science and economics that we need to bring to bear. Even if we don’t (yet) believe there is a climate crisis, we should act regardless, as the long life of polluting assets and the long lead times for new technologies mean that turning around our emissions will take decades. Demonising any one product or process distracts from this wider imperative.

 

Andy Lloyd worked for Rio Tinto for twenty-three years, mostly in coal and uranium mining. He was Rio Tinto’s representative on the board of the World Coal Institute from 2000 to 2006, and on the Australian Coal Association from 2004 to 2007. He is a past chair of IEA Environmental Projects, the implementing agent for the IEA Clean Coal Centre, and a past chair of the Energy Policy Institute of Australia.

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This correspondence discusses Quarterly Essay 78, The Coal Curse. To read the full essay, subscribe or buy the book.

This correspondence featured in Quarterly Essay 79, The End of Certainty.


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