The decision by BHP to decommission NSW's largest coal mine, Mt Arthur, 15 years early has significance well beyond the Hunter valley, local residents, employees, and the company itself.
This mine closure is a test of whether governments and the fossil fuel industry can deal with this type of stranded asset without burdensome costs to taxpayers.
While BHP's decision has been lauded as good for the climate, we need to put this in perspective.
It is true that phasing down its production over eight years (why not sooner?) will remove 15 years of coal production. But it will still continue to generate global emissions from the coal being exported.
To date, BHP's plan for Mt Arthur does not include sufficient resources to address the harms caused by the large emissions from its coal exports.
In the period 2012-2020 the emissions from the coal produced at Mt Arthur were around 292 megatons CO2-E. That is more than half Australia's total annual emissions - just from this mine.
If that rate of production, or close to it, continues for the next eight years BHP will still generate a huge climate impact just as the world enters its critical decade for climate action - to stay below 2 degrees of warming.
These emissions need to be accounted for and paid for if BHP is serious about its climate commitments. While it cannot be responsible for all of those scope three emissions, the time for saying it has no responsibility is surely past.
Australia has just under 100 active coal mines. As more of these mines follow Mt Arthur, we urgently need a national approach to phase out of the industry. If we do not, there is a risk not only of damage to local communities but a huge transfer of cost and risk from the private sector to the taxpayer.
A new report from Carbon Tracker has estimated that there might be up to $US1 trillion worth of stranded assets globally.
To avoid this risk several things need to happen.
First, we should insist that coal mines cannot be sold but are instead decommissioned by their current owners, as BHP is doing. This will avoid a huge cost to the taxpayer.
A report commissioned by the oil industry peak body, the Australian Petroleum Production and Exploration Association, found that decommissioning Australia's 65 offshore oil platforms could reach $60 billion over the next 30 years. That does not include onshore gas, Australia's huge coal mines, and export terminals.
Second, we need to establish a national inventory of liabilities of environmental damage and climate harms so that costs can be accurately calculated. There is a risk of governments and taxpayers being left with future environmental time bombs if companies are not forced to take responsibility for remediating the mines they have profited from.
Third, a truly independent body ought to be established and funded specifically to manage and monitor the safety of old mine and well sites. Mine remediation is too important to be left to the companies themselves. The mines must be decommissioned in an orderly way, not just because a buyer can't be found.
Indeed a disorderly exit by hundreds of coal and gas companies is a massive risk. The Bank for International Settlements (known as the "bankers' bank") in 2020 released a report arguing that central banks, like the Reserve Bank of Australia, ought to be prepared to buy up the stranded assets of fossil fuel companies to avoid a "Green Swan" event.
The report notes that just as the failure in mortgage lending led to the Global Financial Crisis, the collapse in asset prices of the fossil fuel industry could trigger a similar financial collapse.
What is at stake along with the future of the fossil fuel industry is of course the chance of a safe climate. But given the sums involved and the potential economic risks in a phase out, it is important the public are not left with the bill as the industry winds down.
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