ideas: on government

Gutless politics of protecting coal

The way I see it – and I’m no Alan Kohler – Australia was for years riding quite high on the back of one of those mining monster trucks. Asia, particularly, couldn’t get enough of what we were digging up from our rich earth, stoking the coals (mmm…) of our nicely simmering economy. But the insatiable demand has dissipated. Asia’s awaking giants have dozed off again. And our economy, like those of every other industrialised nation, is, well, a bit stuffed.

Queensland got through the last Recession We Had To Have virtually unscathed thanks to booming coal exports. The State is now broke, $1.6 billion in deficit, the first to lose its AAA credit rating, and largely because coal exports have collapsed.

The Australian’s Michael Stutchbury reports with the dramatic downturn of the Japanese economy exports to our biggest trading partner – and the lucrative royalties that flow into State coffers – will dry up to an alarming rate. He writes:

“Queensland’s budget update suggests the Japanese contract re-negotiations to apply from April could cut coking coal and thermal coal prices by 40-50 percent. Japan’s recession will further cut the amount of coal it buys from Queensland. And that will crunch Queensland’s coal royalties from $3.2 billion this year to an estimated $1.7 billion next year.”

Naturally, the Bligh Government has now realised betting the State’s economy on the peaks and troughs of coal demand is folly, not to mention environmental vandalism. As scientists insist burning coal is dangerously tipping the balance in our ecosystems, Queensland is transforming its economy and transitioning workers from fossil fuel industries into greener alternatives to protect jobs, the economy and the environment.

Not. And the Liberal-National hybrid Opposition, which will make its most concerted run at government in a matter of weeks, barely has a plan for health and education yet alone how to turn the economy upside down.

Yet, nobody is panicking about coal. China will come back, economists say; the coal will flow again. Indeed, state governments are ramping up export capacity to feed a hunger that, while suppressed for now, will remain famished into the near future.

Let me share some of the reporting I’ve done on port capacity and coal exports. The figures are instructive.

At Newcastle Port, coal exports are booming. It shipped 47.05 million tonnes in the half-year to December, including a record monthly total of 8.55 million tonnes in December, despite the downturn. That figure saw Newcastle surpass Queensland’s Hay Point as the world’s largest coal exporter.

See, there are two types of coal: coking coal, used to make steel, and thermal coal, used for electricity generation. Slowing economies have cut demand for coking coal, but the market for the thermal variety the Hunter Valley coal chain specialises in remains buoyant. That is, more coal is being burnt for power than ever before.

And the New South Wales Government couldn’t be prouder. Says the thoroughly slimy Ports and Waterways Minister Joe Tripodi:

“Demand for thermal coal, which is used for electricity generation, is holding up much better than coking coal, so Newcastle’s domination over Queensland’s terminals is set to continue.”

Yeah! Take that, banana-benders. We’re MUCH more environmentally irresponsible than you are, says Joe.

(Yes, I’m proudly, as the deniers like to call us, a ‘climate change alarmist’. I happen to believe in science, not in Bolt, Ackerman or Albrechtsen.)

Indeed, the Australian Bureau of Agriculture and Resource Economics predicts coal exports will increase by 7 percent this year, on top of the 3 percent increase in 2007/08.

Queensland stands ready to meet the challenge. It is expanding its Abbot Point coal port to more than double capacity by 2011, while another expansion at Gladstone will send millions more tonnes of coal overseas. There’s a proposal for a new $5.3 billion port between Rockhampton and Mackay. Meanwhile, the State Government is pumping more than a billion dollars into supply chain infrastructure to get more of the black gold to port.

More capacity, more delusion

Announcing the new port proposal mid-last year, Premier Anna Bligh talked of a “quantum leap” for the State’s coal industry. She said excitedly:

“These projects could see this State fully harness the opportunities the resources boom can offer by delivering a 40 percent increase in our coal exporting capacity.”

That’s 40 percent. The economic crisis may delay that promise, but will hardly put an end to it. Too much money has now been spent on infrastructure to move coal overseas; too many jobs wrapped up in coal mining (and its powerful lobby organisation) are at stake.

Don’t get her wrong: Anna is very much about saving the environment. Fully behind Kevin Rudd’s plan for an emissions trading scheme; likes to talk about the need for alternative energy and the development of so-called ‘clean coal’ technology. Anything that doesn’t block a single slate of coal leaving the State.

This is the great, immovable dichotomy of the climate change debate: governments in this country support emissions reduction AND the coal industry. The two are clearly opposed. Bligh and Rudd and others have bet the entire debate – our entire environment – on a miracle cure for making coal power clean. Yet, unlike human-generated climate change, the science on clean coal is far from proven.

Meanwhile, Rudd talks of the need for countries like China to cut their own emissions – while Australian coal stokes the fires of existing Chinese power plants and is earmarked for the hundreds more planned. The hypocrisy would be laughable if it were not so frightening for the future of the planet.

That the Federal Government is now under intense pressure to amend the timetable for delivering an emissions trading scheme – which only proposes minuscule cuts and gives favours to coal producers – is not surprising. That he will fold to the demands and delay the introduction is almost inevitable.

What is really bad economics, political short-termism, what is truly gutless, is when governments continue to prop up dirty, redundant industries for fear of having job losses and economic ruin on their watch (see any parallels with the automotive industry…?). Rather than help shift these workforces to an industry that must quickly become as big – renewable energy – we go on shipping hundreds of millions of tonnes of coal overseas. Nothing will stop these ships: certainly not infrastructure bottlenecks, not the need for an alternative to a finite resource, not the scientific fact of climate change, not even, it would seem, slowing Asian demand and a massive State budget deficit. Despite various reports telling us the cost of not acting on climate change far exceeds the economics of taking action.

Forget the doom and gloom: the Australian coal market, at least, is doing just fine. Booming, in fact – for the foreseeable future. Governments are simply politically blinded from the alarming consequences. A budget mired in the red is not the half of it.

© 2009 importance of ideas….