High Court coal mine ruling factors in exported emissions. Why isn’t federal Labor doing the same?

Last week, in a landmark ruling the High Court upheld the NSW Court of Appeal’s invalidation of approval for extension of MACH Energy’s Mount Pleasant coal mine in the NSW Hunter Valley.

This extension would have doubled the mine’s production to 21 million tonnes per annum, producing a total 870 million tonnes of carbon dioxide equivalent emissions, roughly twice Australia’s annual emissions. Yet another massive Australian-supplied climate bomb.

A 3-2 majority found that the NSW Independent Planning Commission (IPC) failed to consider imposing conditions to minimise, to the greatest extent practicable, all of the project’s greenhouse gas emissions, including Scope 3 emissions released when the coal is burned overseas.

These make up the overwhelming majority of the project’s total emissions, some 98%. The IPC had treated them as dealt with because importing countries account for them under their Paris Agreement obligations.

The decision is significant. It is the High Court’s first climate change judgment. As the litigants’ lawyer Elaine Johnson observes, NSW planning authorities must now consider how to limit emissions from coal burned overseas. The judgment also notes the statutory responsibility on MACH, as the development proponent, to propose conditions to mitigate the project’s adverse environmental effects.

Since Australia is the world’s second-largest coal exporter, this is consequential: courts and communities elsewhere will look to what our highest court has said about the extent of domestic responsibility to reduce exported emissions. 

The ruling does have limits. The Court was applying existing NSW planning law, it did not decide whether the Mount Pleasant expansion should be approved, and it did not rule out approving coal mine extensions.

While the ruling may influence planning decisions in other jurisdictions, its direct legal effect is confined to NSW. The 2022 approval has been found invalid, and any fresh approval would need to address the failure identified by the Court to consider conditions to minimise Scope 3 emissions.

The key test in our view should be the cost-benefit analysis that planning approvals rely on. These analyses count the benefits of a mine (royalties, tax, wages and supplier spending) but almost none of the cost of the emissions pollution the coal causes.

Scope 3 emissions are either omitted by convention or scaled down to an irrelevant share of their global cost, on the grounds that they occur overseas; an accounting convention that entirely ignores that there is one atmosphere, irrespective of where our coal production is burned. 

In a cost-benefit analysis that would price emissions at levels set in established carbon markets, such as the Australian Carbon Credit Unit (ACCU) price or better still the EU emissions trading scheme (ETS) price, the negative carbon liability vastly outweighs the localised royalty and wage benefits. Applying the EU ETS pricing of €85/tonne, or even ACCUs at $A38/tonne, almost no new coal mine proposal would pass that test.

Predictably, the coal lobby is up in arms, spreading disinformation that the High Court ruling undermines investment certainty. The uncertainty is a product of an approval that did not meet the legal test.

MACH Energy has no valid consent for its extension. The ruling gives proponents a defined test to design to, because decisionmakers must consider conditions that minimise Scope 3 emissions.

The investment risk for coal investors is flagging demand in a transitioning global marketplace where our key trading partners are moving to economy-wide decarbonisation, and will depend less on our coal exports. 

For example, last week South Korea announced its Korean Green Transformation plan, committing about $US747 billion over 2026-35. It targets 100 gigawatts (GW) of renewable capacity by 2030, a high-capacity grid overhaul, and decarbonisation of the five highest-emitting industries including steel.

Korea plans to develop a roadmap to phase out its 60 coal-fired power plants by 2040. Ember estimates Korea’s 100GW renewables target would avoid a further US$12 billion a year in fossil fuel imports. 

This is an opportunity for what Professor Elizabeth Thurbon terms Australian Green Energy Statecraft, for example, a Korea-Australia bilateral agreement for green value-adding of Australian commodities, sold to Korean corporate majors under assured long-term offtake.

Australia has the renewable resources, critical minerals and industrial base to supply green iron and steel to Korea. In return, Australia would commit to offtake of Korean-manufactured products, as Mission Possible Partnership’s James Boyle argues. 

Unlocking this green industrial growth potential – and reducing emissions – requires domestic policy architecture that addresses systemic carbon market and pricing failures, and ensures that polluters pay.

The federal Safeguard Mechanism covers Scope 1 emissions at large industrial facilities, that is, emissions generated by the operation of those facilities, and puts a price on these – a critical lever to drive industrial decarbonisation.

In CEF’s September submission to the current federal Safeguard Mechanism review, we recommended lowering the coverage threshold for facilities to capture more of them, and extending the mechanism to electricity sector emissions. In other words, more polluters would pay, incentivising them to slash emissions. 

CEF also proposes an Asian carbon border adjustment mechanism (CBAM), developed jointly by Australia, China, South Korea, Singapore and Japan, starting with steel, aluminium and cement, which together account for about 15% of global emissions.

A rising carbon price in real terms in regional trade would reward lower-emission producers such as Australian green aluminium, iron and steel, reduce the subsidies otherwise needed to bridge the grey cost discount (where commodities produced using fossil fuel energy enjoy an artificial cost advantage over low-carbon alternatives), and raise revenue for further industrial decarbonisation.

There remains the elephant in the room. The Albanese federal government has approved dozens of new, expanded or extended coal, oil and gas projects since it came to office.

A week before the High Court ruled, the NSW IPC approved Hunter Valley Operations coal mine extension to 2045, the largest coal mine extension in NSW history. This now requires federal environmental approval to proceed. 

This is the fatal dissonance at the heart of the Albanese government’s climate and energy policy – great strides on clean energy, egregious ongoing betrayal of future generations on fossil fuel approvals.

The climate science is clear: there is zero room for new coal and gas, and an urgent imperative to accelerate their phase-out. It’s more fossil fuels or a liveable planet, we can’t have both. The government needs to decide which side of history it is on. This High Court decision should give them pause.