Newman's unintended carbon curb
Premier Campbell Newman's coal royalties hike may reduce Australia's greenhouse emissions - by accident.
By hiking royalties on coal, the Queensland government may do more to stop global warming in one fell swoop, than the federal Government plans to do with its carbon tax, renewable energy target and the rest of the Clean Energy Future package combined.
The royalties increase, unveiled by the state government yesterday, will cost Queensland coal miners in excess of ten times more per tonne than the carbon tax. For instance, if the coal is sold at about $150 a tonne, the levy will generate $18.75 in royalties versus just $1.50 in carbon tax.
More to the point, the tax grab covers coal exports, something which the carbon tax doesn't.
With the coal industry already shelving planned new projects, yesterday's decision may prompt miners to place more ventures on hold.
The royalty increase, therefore, could delay or prevent millions and millions of tonnes of carbon dioxide - a key greenhouse gas - being emitted both here and overseas where the coal would be burned. That assessment, though, assumes other coal producing nations don't step in to fill the the breach.
No doubt, any C02 curb would be completely unintentional. For one thing, Queensland's environment minister Andrew Powell is not convinced humans are having an impact on climate change - a view Premier Campbell Newman described as "refreshing" earlier this year.
When UNESCO investigated the impact of coal expansion on the Great Barrier Reef, Newman made sure everybody knew world heritage issues weren't going to get in the industry's way, declaring: "we're in the coal business!"
Deputy Premier Jeff Seeney, meanwhile, was at pains last night to reinforce that Queensland was "the world's largest coal exporter and the coal industry is critically important to this state".
But the royalties grab comes at an difficult juncture for the coal industry.
The Queensland Resources Council chief Michael Roche yesterday said the move was at the "worst imaginable time". Falling coal prices, rising costs and competition from cheap gas and renewables are combining to threaten a planned doubling (or even tripling) of the state's coal exports.
Already this year miners have closed five coal mines, with the loss of more than 2000 jobs.
The BHP Billiton Mitsubishi Alliance and Xstrata Coal announced fresh cuts this week and are reviewing their costs and expansion plans. The operators of the planned T4-T9 port expansion at Abbott Point shelved the project earlier this year. Both Xstrata and Rio Tinto say some of their coal mines are losing money right now.
It wasn't long ago the QRC's Resources Sector Growth outlook study predicted a 'full growth scenario' would see the state's annual coal production more than triple from about 210-22 million tonnes in 2011, to just under 700 million tonnes in 2020 – most of that for export.
As of July this year, the Bureau of Resources and Energy Economics expected Queensland's coal exports would grow from 191 million tonnes in 2012 to 301 million tonnes in 2020, on a middling scenario.
A low-growth scenario, which now seems more likely given the slump in prices in the months since July, would limit that growth to 288 million tonnes - a 51 per cent increase.
Saudi Arabia of coal
Academic Guy Pearse, author of Quarry Vision, likens Queensland to the Saudi Arabia of coal, saying both are on track to export about a billion tonnes of CO2 each year to the rest of the world.
In a speech given at the end of 2011 Pearce revealed some calculation that put Australia's modest 5 per cent emissions reduction target in context.
To start with, Australia's exported emissions from its coal production are about 750 million tonnes a year, higher than all of the nation's domestic emissions of about 600 million tonnes.
The government expects annual domestic emissions will swell to 679 million tonnes by 2020. That's before the carbon tax, renewable energy target and other abatement programs, will in concert will reduce those emissions by 159 million tonnes.
Tallying up Australia's planned and mooted coal projects adding about 650 million tonnes of production capacity, Pearce estimated the increase in resulting emissions would outweigh the savings from the Labor government's Clean Energy Future package by approximately 11 fold.
More modestly, and using the same conversion rate of 2.7 tonnes of CO2 equivalent per tonne of coal burned, yesterday's royalty price hike only has to result in the effective cancellation of 59 million tonnes worth of annual production increase in Queensland – roughly 60 per cent of the export capacity increase factored into BREE's low-growth forecast to 2020 – and it has done more for the climate than the entire Clean Energy Future package.
With mega-projects like Xstrata's Wandoan mine in the Surat Basin undergoing a drawn-out feasibility process, GVK/Hancock's Alpha mine and rail project in the Galilee Basin reportedly struggling to attract finance, and Clive Palmer's China First coal mine on ice for now, such an outcome is a very real prospect.