Declining coal industry to leave $1.7bn hole in NSW budget

The Greens have called out the New South Wales government’s “courageous” forecasts for coal royalties, after the 2016 budget revealed that the industry would contribute $1.7 billion less than predicted just a year ago.

According to NSW budget papers, coal royalty income totalled $1.161 billion, rather than the $1.431 billion expected this time last year, and in the four years to 2018-19 were now expected to be around $1.7 billion less than forecast in the 2015-16 Budget.

NSW Treasury attributes the fall in coal royalty income to “weaker US dollar coal prices and slower growth in exports, partly offset by a lower Australian US dollar exchange rate.”

But the Greens said that the NSW government is ignoring the structural decline in the industry. Indeed, its recent intergenerational report had even assumed an increase in royalties rather than a fall.

This graph below illustrates some of the major assumptions that the NSW has made about coal royalties, and the actual result (shown in red, with the trend line in solid grey).

Greens NSW mining and energy spokesperson, Jeremy Buckingham said the Baird government should increase the royalty rate on coal in order to fund a transition plan to renewable energy and to help workers and regions adjust to the structural decline of coal.

“Treasury’s courageous forecasts for coal royalties have again been proved wrong as the coal industry continues to decline in the face of global action on climate change and challenges from gasand renewable energy,” said Buckingham.

“The government needs to acknowledge the structural decline of coal and draft a transition plan to assist affected workers and regional economies. It is negligent to maintain the fantasy that coal will continue to expand into the future.

“The Greens want to see a levy of an additional 2% on existing royalties on coal and 1% extra on minerals royalties to provide for funding (approximately than $1 billion over the four year forward estimates period) to stimulate and transition the regional NSW economy in a sustainable and focused way.

“The Intergeneration Report forecasts an incredible increase in coal royalties of 4.2% annually out to 2056, yet coal royalties have stagnated over the last six years and the future for coal is dismal.

Buckingham also said that the $23 million the Coalition government was spending on researching discredited ‘clean coal’ through its Coal Innovation Fund was a waste of money and should be redirected to supplement the renewable energy and energy efficiency programs.