Gymnastic Australian coal industry comes out swinging but keeps head in sand

Intro

The Australian Coal Association (ACA) has joined a chorus of Government voices to attack research from Australia’s Climate Commission, the Carbon Tracker Initiative and The Climate Institute in an attempt stop investors losing confidence in Australia’s coal industry. The ACA report argues that coal is a “solid investment in a growing world”, an assertion that’s a lone voice amidst a chorus of recent reports from Australia’s Climate Commission, the International Energy Agency, and the World Bank. Their analyses and others from Standard & Poors, HSBC and more, emphasise that time is of the essence if we are to make an orderly and socially just transition to a low carbon economy.

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MT @jconnoroz Australia’s #coal industry’s feeble attempt to undermine @carbonbubble, denying global trends, wrong on #climate negs http://shar.es/x4gg9

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Key Points

  • A new report from the Australian Coal Association has attempted to dismiss the concepts of ‘unburnable carbon’ and ‘carbon investment bubble’ as having no impact on industry profitability, but it has only succeeded in highlighting its own investment bubble thinking and desperation, according to The Climate Institute. The ACA has been charged with ignoring a recent International Energy Agency report that itself overwhelmingly supports the unburnable carbon concept, as well as analyses from financial institutions such as Standard & Poors, HSBC and more.
  • Australia’s Climate Commission, the International Energy Agency, and the World Bank have all released reports in the last week warning that 80% of fossil fuels need to be left in the ground globally if we are to have an 80% chance to stay under a global average temperature rise of 2degC – the red line agreed by world governments at the Copenhagen UN climate summit. With eminent financial institutions such as the World Bank (Tree Alert) and institutional investors taking climate change seriously, it is difficult to see how the coal industry’s future can appear bright given it is already suffering a strong downturn in demand for its product as China’s appetite for coal slows and it launches its own carbon trading schemes.

Background

The Australian Coal Association (ACA) took aim at groundbreaking research from the Carbon Tracker Initiative and The Climate Institute today, attempting to “debunk” the notion of ‘unburnable carbon’ and protect investor confidence at a time when port expansions are being put on hold, resource projects shelvedanalyses of projects such as GVK’s proposed Alpha Coal finding them to be lemons, and the coal industry struggling in general.

Commissioned by the ACA, the new report attempts to shore up the idea pushed by the industry and Government Ministers that fossil fuels are vital, and a “solid investment in a growing world”, despite other major reports demonstrating the opposite. Australia’s Climate Commission, the International Energy Agency, and the World Bank have all released new reports carrying grave warnings of the need to leave 80% of fossil fuels in the ground globally if appropriate action is to be taken on climate change.

The world’s remaining ‘carbon budget’ – that is the amount of carbon that can foreseeably be released into the atmosphere while retaining an 80% chance to keep world temperatures under a 2degC average increase – is around 500 billion tonnes (gigatonnes). However, the world’s fossil fuel companies have around 2,795 gigatonnes of carbon on their books and in known reserves. Australian export coal alone is expected to increase to 800MtC02eq a year by 2025.

Despite only 20% of these known reserves being able to be exploited, the ACA argues that “there is no systemic risk to global financial markets of a ‘carbon price bubble’ from investors overestimating the value of fossil-fuel assets”. CEO Nikki WIlliams told the ABC value is built on profitability and not proven assets, and accused Carbon Tracker’s analysis of being “concocted to make it seem that a bubble exists”. This is “classic investment bubble thinking that smacks of desperation” according to Climate Institute CEO John Connor.

The Climate Commission, IEA and World Bank all stress the need for an orderly transition away from fossil fuel extraction and burning, however, just like this report from the ACA, so far the only response so far from the Government and the coal industry in Australia and internationally has been to attack on short-term economic and political levels.

As Professor Lesley Hughes of the Climate Commission put it, it isn’t their “job to reconcile the politics of this with the science” as scientists, economists and researchers “are simply presenting the facts” as best they know them. “Just because the facts may be unpalatable to some people doesn’t make them any less important,” said Hughes.

Connor also notes that organisations such as The Climate Institute and Carbon Tracker Initiative are not necessarily calling for full divestment, but for “far greater consideration and disclosure of carbon and climate risks from investors, as well as greater investment in low carbon solutions.”

One of the solutions the ACA’s report focuses on is Carbon Capture and Storage (CCS), however, Williams concedes that commercial application for this still unproven technology is not likely before 2030. This is long after the critical decade for climate will have passed, sinking the cognitively dissonant idea that the world can remain under 2degC while continuing to exploit fossil fuel reserves.

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Key Quotes

“The report borders on classic investment bubble thinking that smacks of desperation. In fact, global investors and regulators are beginning to take seriously the exposure of high carbon investments that can not, and should not, be developed if we are to avoid dangerous global warming. The attempt to critique the latest research from The Climate Institute and the Carbon Tracker Initiative on Australia’s unburnable carbon is gratifying, but largely ignores similar analysis from the International Energy Agency and financial institutions such as Standard & Poors, HSBC and others. The reality is that many institutional investors are beginning to take the concept of unburnable carbon seriously. Just last week, investors held a historic summit in Hong Kong focused on their role in avoiding the economic costs of dangerous climate change and launching a new global low carbon investment register.” CEO of The Climate Institute John Connor.

“The denial of the potential for unburnable carbon is exactly what will create a carbon bubble, wasted capital, and stranded assets – the coal industry needs to accept the need to change our energy mix and address air quality and climate change now.” Carbon Tracker Research Director James Leaton.

“Once you know those numbers, you realise that [the fossil fuel industry] has become a rogue industry. Because that rogue industry is also the richest enterprise in human history, and so it’s able to exert powerful influence on our political systems to prevent change. They’ve become outlaw companies – outlaws against the laws of physics.” 350.org founder Bill McKibben.

“The coal industry calls us radical. But radicals run coal companies. If you’re willing to fund your desire for replica Titanics by altering the chemical composition of the atmosphere, then you’re a radical on a scale that would make any 60s hippie blush. In the environmental community we take it as our job to stand up to that radicalism.” 350.org founder Bill McKibben.

“You either [accept] climate science and you understand those coal reserves have to stay in the ground or, if you’re going to back those coal reserves and the ports in Queensland, then you don’t believe the climate science.” Greens leader Christine Milne.

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  • RT @kellyrigg: The coal industry is clearly rattled that @CarbonBubble concern taking hold in investment world http://t.co/xoCbXwtcR0
  • RT @megcevans: @AustCoal: says “concept of “unburnable carbon” invalid” -argument basically “but CCS!” http://t.co/enVrl7xvxi http://t.co/bmjl7WTnMx #coal
  • RT @JeremyLeggett: Oz Coal Ass throws a Warner at @CarbonBubble. http://t.co/VoaBQJRpsj Heading for an Ashes wreck by any chance fellas?
  • MT @David_Ritter: Meanwhile on #planetnewman… @theqldpremier enters the world of conspiracy theories: http://t.co/ajwZvb4os9 #shadyagent #qldpol