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IEEFA Australia: Coal lobbyists claim commitment to Paris Agreement targets, five years after their members did

June 22, 2020
Tim Buckley

Coal lobbyists from the Minerals Council of Australia (MCA) have released their new Paris Agreement Alignment policy. This is their latest figleaf to reference climate science even as they continue to advocate for delay and obfuscation.

Worker layoffs and coal mine closure plans are accelerating

In their support, the Queensland Resources Council’s (QRC) coal lobbyists continue to trumpet Queensland coal as the ‘cleanest’ in the world – which selectively refers to its higher energy but also much higher ash content to coal from Indonesia, for instance – despite it being 100% more emissions-intensive than renewable energy and entirely unaligned with investor demands to accelerate the phase-out of thermal coal use globally.

MCA’s new policy advocates for the development of “emissions-friendly automation” which in plain English means computerised systems and job losses, even as Adani builds what it claims will be the world’s most labour-intensive new HALE thermal coal mine. [NB: HALE stands for High Ash Low Energy coal, as opposed to the slightly less emissions-intensive HELE coal-fired power plant technologies that are 100% more emissions and water intensive than renewable energy].

Recent press reports note worker layoffs and coal mine closure plans are accelerating, a clear reflection of the 25% fall in seaborne thermal coal prices in 2020, even as liquefied natural gas (LNG) prices have slumped more than 60% in the same period.

CHINA HAS SEEN A 20% DECLINE IN COAL IMPORTS IN MAY 2020, an early reflection of the move towards far greater domestic self-reliance as the progressive commissioning of new, high-voltage, direct current grid upgrades allows the development of ‘coal by wire’, as coal power generation and renewables progressively relocate to western China.

Meanwhile, Indian coal imports also dropped 20% year-on-year in May 2020 as India’s Coal Minister continues to ramp up policies to progressively phase down reliance on thermal coal imports in favour of ever-lower-cost renewable energy and domestic coal mining.

This month has seen chairman Gautam Adani highlight that while fossil fuels will co-exist with renewable energy with “both supplementing each other in the near future”, the pendulum will swing “decidedly in favour of renewables in the long-term.” Adani bases this very optimistic view on the fact that: “The price of solar modules has dropped 99% over the past 40 years. Given what I see, I expect prices to drop by an additional 99% over the next 40 years – probably reducing the marginal cost of electricity to zero.”

THE MCA IS UNDER INCREASING PRESSURE TO ALIGN ITS LOBBYING EFFORTS WITH ITS MINING CONSTITUENTS, rather than predominantly working on behalf of the loud, but increasingly obsolete, thermal coal sector. Global mining and energy companies such as BP have already exited MCA membership, while firms such as BHP and Rio Tinto are under increasing investor pressure to align their actions and lobbyist funding with their green rhetoric.

The price of solar modules has dropped 99% over the past 40 years

Global capital is increasingly divesting from the coal-fired power sector. Some 136 globally significant financial institutions now have formal divestment policies. Following on from BlackRock’s landmark statement highlighting “A Fundamental Reshaping of Finance”, in the year-to-date in 2020, IEEFA has tracked 38 new or enhanced coal exit policy announcements, almost double the rate seen last year.

LAST WEEK SUNCORP JOINED THE RE100, marking the latest Australian financial major to join this global group committed to the Paris Climate Agreement and net zero emission targets. Suncorp updated its new formal coal exclusion policy in July 2019, the same time it announced a 45% profit slump due to the financial costs of climate change.

Meanwhile, the Taskforce for Climate-Related Disclosures (TCFD) has moved from a voluntary commitment to a virtually compulsory base requirement for global corporates even as the Global Investors Coalition, representing over US$37 trillion of assets under management, continues to call for the entire phase out of unabated thermal coal use in power generation in Organisation for Economic Co-operation and Development (OECD) countries by 2030.

A record 12 enhanced coal exit policies were announced in April 2020, highlighting that momentum is accelerating and global capital is fleeing this increasingly technologically obsolete sector, just as it has with land mine manufacturers, tobacco and asbestos companies.

IN MAY 2020, THERE WERE SIX NEW OR UPDATED COAL EXIT POLICIES from globally significant banks, insurers and asset managers/owners. Global fund manager BlackRock also confirmed it had completed its divestment of all debt and equity exposures to thermal coal mining firms across its US$1.8 trillion of actively managed funds.

The MCA continues to suggest thermal coal has a viable future if coal carbon capture and storage (CCS) technologies can be commercialised. However, the MCA has resisted all calls for an Australian price on carbon, the very market signal that would underpin CCS. IEEFA notes that for all the CCS rhetoric, there is only one coal CCS pilot in operation in the U.S., at Petra Nova in Texas, and it requires a US$50/t (A$72/t) carbon price subsidy from the U.S. Government.

Given Australian wholesale electricity prices are now below A$50/MWh thanks to the surge in new low- cost renewable energy infrastructure projects and declining electricity demand, adding CCS to a coal- fired power plant would more than double the cost of coal-fuelled electricity generation.

IT IS ENTIRELY OVERDUE THAT THE INTERNATIONAL ENERGY AGENCY (IEA) PROVIDE A CENTRAL ROADMAP to a Paris Climate Agreement outcome, showing what is required for the world to collectively deliver on a 1.5°C outcome.

The MCA has resisted all calls for an Australian price on carbon

IEEFA notes that Total is the latest global energy major to move its objective from a 2.0°C to a 1.5°C alignment. Total has announced more than 5 gigawatts (GW) of new renewable energy project investments in 2020 to-date as part of its wider commitment to have 25GW of renewables by 2025.

Another European energy major, ENI last week committed to the ‘irreversible path’ of going green with a target of 15GW by 2030 and a staggering 55GW of renewable energy infrastructure assets by 2050.

And BP has been forced to undertake a US$12bn hybrid equity raising this week after having written down its oil and gas stranded assets by US$17.5bn last week, as it too starts to align with the Paris Climate Agreement, restating its commitment to “Net Zero by 2050, or sooner”.

THESE SHIFTS FROM FOSSIL FUELS TO ZERO EMISSION ALTERNATIVES ARE INCREASINGLY FREQUENT, with EDF of France in June 2020 committing to double to 50GW of renewables by 2030, while TEPCO of Japan has committed to invest US$18bn in zero emissions renewables by 2030.

It is beyond time that all leading Australian companies accept the climate science and align with global financial institutions to invest in increasingly low-cost technology solutions offered by industries of the future. The Australian Government should similarly commit to an orderly transition plan for affected workers and communities while accelerating investment in zero emissions growth industries of the future.

Tim Buckley is IEEFA’s director of energy finance studies, Australia/South Asia.

Related articles:

Renewables continue to break records despite COVID-19

Why are corporate giants pulling out of thermal coal?

Investing in carbon capture and storage and relying on voluntary actions on emissions is like revisiting the olden days

Asian financial institutions also beginning to exit coal financing

Coal finance is heading to its logical terminal conclusion

Tim Buckley

Former Director Energy Finance Studies, Australasia, Tim Buckley has 25 years of financial markets experience, specializing in equity valuation, including as a top-rated analyst and as co-founder and managing director of Arkx Investment Management.

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