QUARTERLY ESSAY 78 The Coal Curse

 

Correspondence

Peter Christoff

In The Coal Curse, Judith Brett eloquently describes how policy failures related to globalisation in the 1980s and 1990s enhanced our current dependence on fossil fuels. But she perhaps underestimates the role of the mining industry in hindering economic diversification and accentuating the dilemmas now faced by Australian governments grappling with climate change.

The mining industry learnt early on to promote and defend itself. In 1967, it formed the Australian Mining Industry Council (later the Minerals Council of Australia) to champion its interests. It resisted attempts under Whitlam to govern foreign investment through a Petroleum and Minerals Authority and, as Brett notes, undermined successive legislative iterations of land rights in the 1970s – and then again in the 1990s, following Mabo and Wik. It crushed Kevin Rudd’s attempt to establish a resource super-profits tax in 2010.

The disciplinary effect of these successes cannot be overstated. But moments of direct challenge were relatively rare because there was a deep consonance of views, values and interests among politicians, bureaucrats and industry executives about the economic role of the mining sector. Brett, following Guy Pearse, notes how the Australian Industry Greenhouse Network – the self-named “greenhouse mafia,” representing coal and aluminium interests – scripted climate and energy policy-making in the 1990s. But “state capture” as blatant as this was rare and perhaps an anomaly. Instead, corporate influence over mining policy was both subtler and more deep-seated. Influential elite networks helped align state and national policy and mining sector interests in ways favourable to the latter – especially in the major mining states of Queensland and Western Australia. Senior bureaucrats and politicians moved – and continue to move – from government to positions of influence in the mining sector, and vice versa. Mining professionals were appointed to bodies such as the Foreign Investment Review Board (Sir William Pettingell in the 1970s). Senior bureaucrats accepted positions of high influence in the minerals sector (Sir Donald James Hibberd). Politicians became industry lobbyists (former Minister for Resources and Energy Martin Ferguson, who advised the Australian Petroleum Production and Exploration Association after leaving federal parliament in 2013).

In Treasury, Foreign Affairs and Trade, and other departments with responsibility for minerals and energy, a common culture prevailed, greatly enhanced by the neoliberal turn under Hawke and Keating. It was allergic to economic nationalism, fixated on international competitiveness, and favoured minimal regulation. As a consequence, successive Australian governments failed to extract significant value from mineral resource exports through taxes or royalties. Substantial potential public revenue was lost, often repatriated to overseas shareholders. Meanwhile, governments provided considerable subsidies and assistance in the form of tax concessions and access to state-owned infrastructure. (In 1974, the Fitzgerald report suggested the latter contribution far outweighed the value of mining taxes.)

Australia’s taxpayer-funded fossil-fuel subsidies currently total more than $12 billion each year despite G20 leaders (including Australia) committing, in 2009, to “phase out and rationalize, over the medium term, inefficient fossil-fuel subsidies.” Australian governments also provide regulatory relief by fast-tracking approvals, minimising environmental regulatory constraints, sometimes constructing roads, rail and ports, and reducing royalty requirements, as is being considered for Adani’s Carmichael coalmine.

The failure of resource governance in Australia has served us poorly. Consider the small country of Norway, which ensured its share of North Sea oil was fully state-owned and state-developed. To this day, Norway retains a majority interest in that resource, and its rigorous economic nationalism underpins a massive sovereign wealth fund, which now sustains and insulates its high standard of living and supports a significant foreign aid program as well.

By limiting our budgetary capacity to foster national economic diversity and resilience in a globalised world, the mining sector’s rent-seeking has diminished Australian development perhaps as much as, or more than, the resource curse. And it now makes attempts to stop being a fossil-fuel republic that much more expensive.

As gamblers know, even a long streak of luck eventually gives out. Climate change will inexorably bring the recent boom in coal and gas exports to an end. The UNEP Production Gap Report 2019 highlighted the chasm between the current volume of fossil fuels produced and what is required to meet Paris Agreement climate targets. This gap is largest for coal, and growing. By 2030, countries plan to produce 150 per cent more coal than is consistent with a 2°C pathway, and 280 per cent more than is consistent with a 1.5°C pathway. The gap is also substantial for oil and gas. Countries are projected to produce 43 per cent more oil and 47 per cent more gas by 2040 than is consistent with a 2°C pathway.

At the Clean Energy Council’s 2020 summit in July this year, Fatih Birol, executive director of the International Energy Agency, commented that: “if [existing coal plants] operate for their normal economic lifetime . . . an average coal plant has a lifetime of forty years or so . . . it is impossible to reach our climate targets, even the modest ones.”

Almost total decarbonisation of the global power sector must occur in less than two decades if global average warming is to be held to below 2°C, and much faster for 1.5°C. When this occurs – and it is a “when” – the transition will necessarily be accompanied by closure of the “production gap” through a profound decline in demand for fossil fuels, and markets for Australian coal and gas. Long-term investments will become stranded assets at every point in the chain of production to consumption. The longer this transition is delayed, the greater the likelihood of collapse rather than orderly exit, and that governments will need to pay for structural adjustment. The bigger they are, the harder they fall. Australia’s export energy sector is now a behemoth rushing towards the precipice.

Since the 1990s, Australia has adopted deeply contradictory policies on energy and climate change. Australia’s domestic uptake of rooftop solar is among the highest in the world and construction of large-scale solar and wind plants has accelerated, despite a still turbulent investment environment. Australian power generation using black coal has fallen since 2015, as have emissions from the power sector – a trend that will only accelerate.

However, Australian fossil-fuel exports have – until very recently – been completely siloed from both domestic energy and climate policies. Their entirely contradictory trajectory has been granted immunity from questioning, their unbridled growth supported equally by both the Coalition and Labor. It is here that Brett perhaps understates the political tensions and challenges now facing Australian governments.

Conservatives have argued that, based on its domestic emissions, Australia is an insignificant contributor to the global emissions problem. While this line is wrong in its own right – Australia emits 1.2 per cent of total global emissions, is ranked fourteenth among 196 emitting nations, and is one of the world’s highest per-capita emitters – this defence fails utterly when our total contribution to global warming is considered. Australia’s total carbon footprint – domestic and exported emissions combined – is around 3.6 per cent of total global emissions. Australia is the world’s sixth-largest producer of CO2 emissions overall. Its embodied emissions, exported in coal and gas, are at least two and half times its domestic emissions. Moreover, projected growth in Australian gas and coal exports – if realised – will see Australia’s total (extraction-based) emissions nearly double by 2030 compared to 2005. The current size and projected increase in Australia’s exported emissions overwhelms the ecological benefit of domestic action. It is clearly of global importance.

So far, the responses from the Coalition and Labor have been rigidly defensive. Some deny that an “export problem” exists, pointing out that only domestic emissions count toward the UN Framework Convention on Climate Change’s accounting requirements. Imported emissions are the responsibility of the importing country; it is not the supplier’s duty to mitigate emissions. Others argue that banning sales of Australian coal and gas will merely lead to supply substitution from elsewhere. Or that there is an ecological benefit: Australian coal is “cleaner” than that from other sources. Or that it is morally wrong to deprive developing countries of this vital energy resource. Or that governments shouldn’t intervene, as markets will resolve the issue.

There are strong counterarguments to each claim. For instance, it is arguable that in fostering fossil-fuel exports Australia is in breach of the UNFCCC, which outlines clear responsibilities for parties to “anticipate, prevent and minimise the causes of climate change,” and declares states have a responsibility to “ensure activities within their jurisdiction or control do not cause damage to the environment of other States or areas beyond the limits of national jurisdiction.”

The cynicism of arguments that “if we won’t sell it, others will” and “it’s all the buyer’s responsibility” is clear. Australians and shareholders benefit materially from export of a recognised harmful substance, and therefore are linked to the destruction these commodities cause (think of alternative, morally repugnant examples: asbestos, or toxic waste). But such political responses belie the depth of paralysis on this issue within the Coalition and Labor.

The Coalition is still riven by the battle between climate believers and denialists. By contrast, Labor is caught between its need to appease urban and regional electorates with apparently divergent interests; to deal with internal tensions generated by the CFMEU, the mega-industrial union that covers mining; to manage its neoliberal inheritance; and to reply to the challenge from the Greens. Brett rightly highlights how Bill Shorten’s equivocation over the Adani mine was read by voters in the Galilee Basin as a sign of duplicity. Labor believes the 2019 election was lost in Queensland and New South Wales on the issue of coal and climate. Yet Anthony Albanese has continued this pattern of fence-sitting. Adani remains a dilemma and the current crisis for the ALP is reminiscent of the uranium mining debate that contributed to the formation of the Greens. The fossil-fuel export problem is as urgent, and its deadly outcomes more certain.

An integrated view of Australia’s climate responsibilities demands coherence between its domestic and export-oriented energy policies and practices. The climate crisis leaves no place for new coalmines or gas fields, or for maintaining the existing ones. It urgently requires a clearly articulated industry adjustment plan for winding down fossil-fuel exports. We have very limited time for implementation, even if we begin now. The political and economic impediments to doing so remain considerable and we face the danger that an informal conspiracy of silence will continue to blanket this larger concern. But the longer-term burdens of inaction – political, social, economic and ecological – will far outweigh the costs of breaching that silence.

 

Peter Christoff is the author, with Robyn Eckersley, of Globalization and the Environment, and editor of Four Degrees of Warming: Australia in a Hot World. He teaches climate policy at the University of Melbourne.

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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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