How did we find ourselves here?
While Australian politics has been looking elsewhere, assuming that old certainties will continue unimpeded, the coal industry has entered a phase of terminal and rapid decline.
Whoever wins the coming Federal Election will have no choice but to deal with the beginning of the end of coal, with power stations and mines closing and companies walking away or going bankrupt. Yet the issue is barely on the political agenda.
According to the Institute for Energy Economics and Financial Analysis (IEEFA), the world passed peak coal in 2013/14. And this isn’t a gentle curve. IEEFA projects a 25% drop in global demand for thermal coal by the end of the decade – a crash of a quarter in the next four years!
Let’s dig into this, with some key facts and figures extracted from the Green Institute’s new paper, The End of Coal: How Should the Next Government Respond?
The USA has closed or will close over 100GW (twice Australia’s total grid) of coal plants this decade. The collapse of both domestic and export demand has led to all of the USA’s major listed coal companies filing for bankruptcy.
China, long treated by Australia as an endless excuse for inaction, is shifting rapidly to efficiency and renewables, driven largely by air pollution concerns, but also by climate change. China’s coal use dropped 2.9% in 2014, 4% in 2015 and 6.8% to this point in 2016.
India’s new government is taking huge steps, partly driven by environmental and social concerns, but largely by the simple economic fact that domestic solar already outcompetes imported coal on price alone. Despite the protestations of Australian coal spin-doctors, it is now irrefutably cheaper to lift people out of poverty in India with solar power than with imported coal. The Indian government’s goal to cease all coal imports in three years is well on its way to being achieved, with a 15% drop in 2015/16 alone.
Here in Australia, coal plants are being mothballed or closed from South Australia to Queensland, with Victoria’s Hazelwood the latest to face open talk of closure. Meanwhile, the massive expansion of export coal mining planned for Queensland is stalled because the global markets are simply not there.
This did not happen by accident. It is thanks to a combination of the sudden affordability of renewable energy, massive public and private investments in energy efficiency, and market forces and political decisions in India, the USA and China. All these forces have themselves being driven by invigorated civil society demands for action across the globe, from widespread adoption of green technologies through the fossil fuel divestment movement to the increasing civil disobedience campaigns in the USA, Australia, Europe, India and South East Asia. It is impossible to ignore the conclusion that coal has lost its social licence.
The Paris Climate Agreement, while flawed, locks in the end of coal. Its promise to reach zero net emissions in the second half of the century is impossible to achieve without closing the coal sector. A strategic reading of Paris is that such a geopolitical agreement could not have been reached in the absence of the growing civil society and market signals that coal’s demise was already happening.
It is a harsh indictment on our politics that this has taken Australia by surprise.
For years, experts from former Australian Coal Association chair Ian Dunlop to former Greens Leader Christine Milne to energy analyst Tim Buckley have been pointing towards the beginnings of structural decline for coal. Because governments, business leaders and commentators have ignored the warnings, the price crash, stranded assets and bankruptcies of major coal companies such as Peabody are still being treated as an aberration. The attitude of governments has been at worst to deny that there is a problem and at best to conclude that this will be a slow, steady decline over decades. Either way, the response has been to attempt to hold back the tide with subsidies and support packages to keep the industry afloat.
But we can see the implications of such action in sectors like car manufacturing in Australia and coal in the USA. By keeping industries on life support, handing out ever more subsidies to continue business-as-usual, governments are laying the groundwork for workers, landholders and indigenous people being left on the scrap heap by corporations when they eventually close shop and skip town, as well as a mess of unrehabilitated sites and worse climate change.
Governments – and oppositions – enabling this behaviour to continue while claiming that they are supporting workers are either delusional or dishonest.
In fact, the most honest approach, and the one that will be best for people and the planet, is to immediately prepare for a staged transition, facilitate a dignified exit from the coal industry for workers and communities, and ensure that the corporations which have caused this mess cover the costs.
There is no simple answer to the question “how should the next government respond to the end of coal”. What we need is a systemic shift in our politics in order to truly face up to the challenge.
Fundamentally, we need governments to commit to a climate target in line with the science, which requires us to phase out coal power and mining as soon as feasible and no later than 2030-35. Delivering that will require us to remove coal’s stranglehold on our politics, through donations reform, ending fossil fuel subsidies and closing the revolving door between staffers, politicians and industry.
But, critically, we also need to ensure that coal companies pay for rehabilitation of sites and just transitions plans for communities, as well as contribute towards loss and damage, before they relocate or go bankrupt, and engage communities thoroughly and honestly in questions about their future, through properly funded consultations beginning immediately. Ideally, we would also enable them to walk into the future with confidence through a mechanism such as a localised trial of a guaranteed adequate income.
The end of coal doesn’t need to fill us with fear. We can embrace it as an exciting opportunity. But, frankly, regardless of how we approach it, we’d better get used to the fact that it is now upon us. After wasted years ignoring the signs that it was coming, it’s about time we made the end of coal work for all of us.
Tim Hollo is the Director of The Green Institute. https://www.greeninstitute.org.au