Minerals Council still dangerously wrong on coal and climate

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The Minerals Council report on market demand for Australian coal not only defies economic logic, it ignores climate risk and its impact on MCA’s business, and the business of its members.

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After 30 years of inaction, the focus on climate risk is accelerating as the physical impact of climate change worsens and the transition risks to a low-carbon world intensify.

Despite effusive official rhetoric, nothing has been done to seriously address climate change, notwithstanding increasingly urgent warnings.

To prevent temperatures rising above the upper 20C limit of the 2015 Paris Climate Agreement, it is no longer possible to follow a gradual, incrementalist glide path.

We have left it too late; emergency action, akin to wartime regulation, is inevitable, which further increases the transition risk. Market-based measures alone are insufficient.

Despite years of denial in the top echelons of corporate Australia, legal opinion has confirmed that: “company directors who fail to properly consider and disclose foreseeable climate-related risks to their business could be held personally liable for breaching their statutory duty of care and diligence under the Corporations Act.”

Regulators are finally waking up that climate risk has the potential to create a crisis far greater than the 2008 Global Financial Crisis, emphasising that: “climate risks are foreseeable, material and actionable now.”

They have yet to honestly face up to the existential implications.

Curious, then, that the Minerals Council of Australia (MCA) should recently publish an astonishingly misleading report on Market Demand for Australian Export Thermal Coal, 2017-2030.

In 52 pages, from consultant Commodity Insights, there is not a single mention of the greatest threat to thermal coal exports, namely climate change risk.

Government estimates of thermal coal expansion are used to produce a single-line estimate of a massive 60 per cent increase in thermal coal import demand by 2030 for countries across the Asian region.

A strongly supportive media release from MCA Coal Director Greg Evans, claims that “Australian coal is ideally placed to meet this growing demand”, albeit the report is silent on Australia’s possible share of this growth.

The report optimistically includes new power station builds, but fails to properly net out older power station closures.

It contradicts authoritative studies such as the International Energy Agency (IEA) 2017 World Energy Outlook, which suggests that to meet Paris climate change commitments, global thermal coal trade, far from expanding, will reduce by 28% by 2025 and 59% by 2040.

Even the IEA central New Policies scenario shows no growth.

The MCA is a company limited by guarantee, incorporated and domiciled in Australia, hence subject to the Corporations Act.

To promulgate such material without qualification is misleading and deceptive. MCA’s directors must consider how climate change impacts MCA’s business, and the business of its members.

This reports demonstrates an ignorance of climate risk and failure by the directors’ to discharge their duty of care and diligence in overseeing the company’s operations.

The report is a blatant attempt to influence the current toxic political debate on climate and energy policy in favour of coal expansion.

The MCA has form in this regard, for three decades having been a serial offender preventing the introduction of serious climate policy in Australia.

It has reached the point that the two major MCA members, BHP and Rio Tinto, under pressure from their own shareholders, finally reconsidered their MCA involvement given the stark contrast between MCA climate policy and their own.

Following reframing of MCA policy, which includes the duty to consider climate risk, both BHP and Rio retained their involvement.

Yet this report appears to breach the updated policy. Thus, MCA’s directors are increasingly exposed to personal liability for failing to govern the company in a manner that adequately considers climate risk.

Some MCA directors have short memories.

In November 2015, the New York State Attorney General, via the US Securities and Exchange Commission, secured undertakings from the world’s largest coal company, Peabody Energy, for violating state laws prohibiting false and misleading conduct in regard to Peabody’s public statements on risks posed by climate change.

In part by misrepresenting the findings and projections of the IEA.

Peabody Energy Australia, a subsidiary of Peabody Energy, is a member of the MCA, with a director on the MCA Board.

The implications of South Asia following a Chinese pattern of coal expansion, which is what this report implies, are horrendous in terms of climate impact; the result would be: “a world incompatible with any organised global society.”

Far more people would die from the use of coal than will ever be pulled out of poverty. The market for seaborne coal, far from growing, would disappear. The cost to Australia, in terms of stranded assets, would be massive.

In the national interest, regulators must now stop the stream of MCA disinformation once and for all.

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Ian Dunlop was formerly an international oil, gas and coal industry executive, chair of the Australian Coal Association and CEO of the Australian Institute of Company Directors. He is a Fellow of the Centre for Policy Development and Director of Australia21.  

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28 Comments
  1. Tim Buckley 3 months ago

    Spot on Ian, the MCA are rank hypocrites, putting out lobbyist material dressed up as “financial research” without one word of the single largest risk to their pie-in-the-sky forecasts.

  2. D. John Hunwick 3 months ago

    Ian, you may be the loudest spokesperson for climate sanity – but you are supported by thousands of others like me who know you are “spot on”. Perhaps your next article could be a series of dot points identifying exactly what people like me can DO. I will use it as a checklist -and when I have completed acting on it I will get back to you for more suggestions!

  3. trackdaze 3 months ago

    With coal plant utilisation down and global capacity additions about to irreversibly turn negative it wont be long until coal shipments in volume and value go negative.

  4. Gregory J. OLSEN Esq 3 months ago

    The crazy thing is that they are shooting themselves in the foot by their own recalcitrance. Their fantasy serves nobody any good. Sheer madness!

    • Joe 3 months ago

      I want to see ‘The Climate Criminals’ ( The MCA and The COALition ) getting their day in Court in the very near future. Their willful disregard for the health and well being of the planet and citizenry…jail time!!!!

  5. There is nothing wrong with coal itself.
    However, it should always be burned with mandatory CCS.
    And effective filtering of any harmful content from the smoke stack.
    Modern coal plants show that this is possible, with todays technology.

    So, WHY does Australia not export this technology with its coal?

    IPCC scientists concluded that CCS is necessary anyway
    And that is still useful when coal plants start burning biomass.
    Then the power becomes CO2 negative.
    Extracting CO2 from the biosphere is necessary anyway, so installing mandatory CCS at all large CO2 emitters is a no regret policy.
    Cheap fossil power will become a bit more expensive, but that helps renewable to become more competitive, and drive fossil power off the market, where possible

    • Joe 3 months ago

      CCS hasn’t been shown to be commercially viable so it is FairyLand talk. I remember an earlier article here in the pages of Renew Economy where a coal industry exec debunked the whole idea of CCS…it just ain’t gonna happen. We don’t need to extract CO2 if we stop our emissions in the first place, so to keep burning FF is just crazy.

      • No Joe, we burn a LOT of fossil fuel, so it is crazy to assume we can just stop burning it. Society will no accept it.
        We CAN however make the use of CCS mandatory. The coal plants have to install the technology. And fossil power will become more expensive, mandatory.
        And normal competition between more expensive fossil and renewables will decide how much they grow or leave the market
        Cl8mate neutral fossil power will only be useful to balance the variation in Renewable power

        • Peter Campbell 3 months ago

          The crazy thing is to assume we can keep burning coal. Clearly we can’t. CCS is energy intensive. The laws of thermodynamics mean it will always be so. It takes a substantial fraction of the power output of a coal power station to run the CCS. Renewables are cheaper already without adding another 30% to the fuel cost burden.

          • David Boxall 3 months ago

            The solution is obvious. Next to your coal-fired power plant, you build a nuclear plant to power the CCS gear.

          • Joe 3 months ago

            You serious? A Nu Clear power plant next to every Coal power plant…you dreaming or what.

          • David Boxall 3 months ago

            It’s a joke Joe.

          • Joe 3 months ago

            Got it.

          • Yes Peter CCS is energy intensive. But that is a problem for the coal plant operator.
            He has to innovate the way he does CCS.
            And compete with renewables
            Probably power from coal with CCS is more expensive than renewable power. That too is a problem of the coal plant operator.
            When renewables grow climate neutral power will be pushed back to the niche we call “storage”

          • PLDD 3 months ago

            “Probably power from coal with CCS is more expensive than renewable power. That too is a problem of the coal plant operator.”

            A standard Coal power station is already more expensive than renewable in terms of the long run economics of the projects – that is why banks have stated they won’t lend the money as the assets will become stranded and the money will be lost.

            So CCS is not economically viable for the private sector. The only way they will get built is with government money. And as a tax payer I would prefer my government not to waste my taxes on such projects.

          • The real price power users have to pay, depends on government regulations, and the regional price of coal.
            In the US coal is more expensive than natural gas.
            En Europe natural gas is more expensive than coal.

            Agreed that in theory renewable power is the most low cost power, but regulations distort that fact.
            Furthermore the world can not have power all the time, with only renewables.
            And renewable power should not be commercial only.
            Turbines and solar panels work automatically, so power users can simply own them, and generate their own power, when possible.
            That leaves a real market for additional power, from the cheapest dispatchable power sources, power plants that burn fuel.
            Because we have a climate problem, together, CCS should be mandatory, not dependent on free choice in the private sector.
            CCS should be mandatory, because it is Best Available Technology

          • PLDD 3 months ago

            Fuel costs are only part of the cost, capital, operating, maintenance, and site remediation costs are also very important factors that affect th3 wholesale price. Renewables are lower cost because their are no fuel costs – either gas or coal, maintenance costs are far lower and site remediation is very low cost – no residual pollutants in the soil/water table to clear.

            Commercial sized solar farms are established in all countries and are very mature technologies. Plants that combine wind and solar plus a bit of storage are very capable of supplying despatchable power 24×7 and do so in many countries. These are cheaper than coal, gas or nuclear and they are getting cheaper every year. One of the reasons many US coal and nuclear power companies are facing bankruptcy is that the combination of renewables with gas peaking plants has undercut their prices so much. The same is true in some European countries and India and China.

            If you add CCS to coal or even gas generators it will just sink them faster. The flagship $7.5 billion Kemper CCS plant in Mississippi has had work suspended as it wasn’t working and last heard of was running as a straight gas plant.

            P

          • Mandatory CCS is necessary for all fossil fuels burned on large scale. Because it will take decades for renewables have replaced fossil fuel. Al that CO2 has to be prevented from entering the atmosphere.
            Because of this slowly lower use of fossil fuels, we will overshoot acceptable CO2 concentration, according to peer reviewed IPCC scientists.
            That is why we have to keep using power plants that burn biomass based fuel with CCS, to reduce the CO2 concentration IN TIME before too much ice has melted on both Greenland and the Antartica.

            The process of lowereing CO2 concentration and global warming can not be left to commercial free choices, because these are the root cause of global warming

        • Ross 3 months ago

          There is no CCS Henc. The only thing available to us is to transition to distributed solar and wind with storage.

          • CCS is used for years, to squeeze the last oil and gas out of old wells.
            So CCS is available, and yes it costs money.
            The climate disasters we know will come, also cost money.

            About storage,
            did you know that a coal plant with CCS is by far the cheapest storage?

          • Richie 3 months ago

            CCS stands for carbon capture and STORAGE. Where is the evidence that CO2 used for oil recovery stays where it is put (underground) for the necessary 1000 years? CCS efforts around the world have been billion dollar failures. Any mention of CCS is simply a red herring and only serves to delay responsible action to stop emission of CO2 into the air and oceans. CCS is a crock. If you do not know what that means ask any Australian.
            The best way to capture carbon is to leave it where it is. Walk away. Don’t touch it. Don’t even think about it any more.
            Build renewables as fast as we can and we have a hope. Otherwise you can kiss your ass goodbye.

          • Sorry Richie, HOPE does not remove the excess CO2 from the biosphere.
            Building more renewable power does NOT reduce CO2 emission.
            We have tro actively remove CO2 from the air.
            CCS and other ways to store or fix CO2 are necessary.
            When CO2 is pumped in old gas or oil reservoirs, it wil stay there in the same way as the oil and gas stayed there.
            Given the operator closes the well in a professional way, as they do for natural gas.

          • Francesco Nicoletti 3 months ago

            CCS as proposed does not remove CO2 from the atmosphere. It merely intercepts CO2 that would be released by a fossil fuel burning power station and sequesters it.
            As far as I know all CCS development has petered out. This was not done by renewables advocate but by the researchers giving up.
            Actually CO2 removal from the atmosphere requires technologys that a just being talked about. By definition they will have little to do with power stations.
            Not burning fossil fuels is the most direct way to not release CO2. Renewable power is the alternative to burning fossil fuels.

          • Right, Francesco, CCS only prevents CO2 entering the atmosphere when something is burned.
            This is the first step to solve the climate problem.

            And you are right too, that CCS is not widely used yet.
            Therefore it has to be made mandatory. To put an end to free CO2 emissions.
            In the Paris climate agreement, most countries promised an effort to keep global warming below 2 and preferably 1,5 degrees.
            Mandatory CCS is an important step.
            The earlier world leaders start implementing that, the less CO2 overshoot we will experience.

            To compensate for countries that do not not start with CCS and other ways of CO2 reduction, we also have to grow biomass, and burn that in coal plants with CCS, this is called BECCS
            Growing biomass is a cheap way to extract CO2 from the atmosphere.
            Burning it with CCS, definitely keeps it away from the atmosphere. This is a cheap way to lower CO2 concentration.
            Others are
            – different land use, to keep more biomass in the top layer soil
            – new forests or plant trees where they were removed
            – spread olivine powder on beaches, Olivine is a mineral that slowly converts CO2 to a solid.
            – Olivine can also be used for CCS, it may even be a cheaper process.
            This blog has a short explanation
            http://www.duurzamebrabanders.nl/blog/2017/02/regulations-are-essential-for-successful-energy-policies-wind-power/

        • Ian 3 months ago

          You are right, FF plants should not be allowed to operate unless they capture their carbon emissions. Maybe you should campaign for that in your country;)

  6. Peter Campbell 3 months ago

    Quoted from above:
    (1) “This reports demonstrates an ignorance of climate risk and”
    (2) “failure by the directors’ to discharge their duty of care and diligence in overseeing the company’s operations.”
    (3) “The report is a blatant attempt to influence the current toxic political debate on climate and energy policy in favour of coal expansion.”
    I agree with the statements 2 and 3 but not the first statement. It is not possible that the educated, informed MCA members are ignorant of climate risk. It is being overly polite to ascribe their actions to mere ignorance.

    • onesecond 3 months ago

      Well, I am not 100% certain how it is in English, but in German “ignorieren” means that you willfully ignore something although you know better. “Ignoranz” is the German noun to that and the Englsh “ignorance” can be translated like that, although it also can be translated as “Unwissenheit” which means not having knowledge of something. You can see that German has two totally different words for the two meanings of ignorance, which I think makes a lot of sense.

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