The pulse of the energy markets will tell you coal is in terminal decline. But with economies around the world still heavily reliant on the polluting energy source its demise will be a scrappy, drawn out affair.
Major coal exporters, such as Australia, will sense real anguish as they weigh the possibilities of transitioning to clean sources of generation against a rich history of revenue.
It needn’t be that way.
New research from The Australia Institute’s Climate & Energy program has shown that an orderly approach to phasing-out thermal coal would shield Australian workers, communities and the economy from the negative consequences of an unmanaged transition.
Half Australia’s coal exports by value are metallurgical coal, a premium product used in steelmaking. Thermal coal, which accounts for the great majority of production and is used in electricity plants, is battling to remain competitive as the costs of solar, wind and hydro fall.
The study, written by John Quiggin, Professor of Economics at The University of Queensland, found that a managed transition out of thermal coal should be prioritised to reduce Australia’s carbon output. If coordinated action is taken early the outcome can be achieved with relatively modest measures.
Key findings of the report include:
- A transition out of thermal coal is going to occur, because the world is moving to other sources of energy – our choice is whether that transition is planned and orderly, or delayed and disorderly.
- In the context of Australia’s economy, the thermal coal industry accounts for a small share of total economic activity and around one-quarter of 1% of overall employment.
- The phase-out of thermal coal production and use over 10 years could be achieved with minimal disruption to coal workers, regional communities and the Australian economy.
“Australia’s transition away from excessive carbon pollution must begin with an urgent and coordinated phase-out of thermal coal production and use,” Quiggin says.
“Fortunately, with enough advance notice and an appropriate transition plan, the thermal coal industry can be phased-out over time without any significant dislocation to workers.”
The development and widespread adoption of a carbon-free technology for steel production is unlikely to take place before the 2030s, the report says. This implies that the need for Australian metallurgical coal will continue, and that the focus for the 2020s must be on phasing out thermal coal.
A well-planned and coordinated phase-out of coal would be based on targeted development of the renewable energy resources abundant in many coal-mining regions. It would include transition supports for early retirements, retraining for employees and economic diversification for affected communities.
“Through a managed transition, Australia can wean itself off coal by 2030, while also protecting the interests of workers, communities and the economy at a very modest cost. The costs of not acting, by contrast, are both huge and long-term,” said Richie Merzian, climate and energy program director at The Australia Institute.
“A well-managed phase-out of coal would be the best way forward, but it can only be achieved through a coordinated approach involving the private sector, government and the unions who represent workers.”