Mark Butler (Port Adelaide, Australian Labor Party, Shadow Minister for Climate Change and Energy) Share this | Hansard source

Ten days ago, the Australian newspaper published an article headed 'South32 dumps thermal coal, citing uncertainty, climate change'. Matt Chambers wrote that the BHP spinoff is:

… getting out of thermal coal because it is becoming less attractive to investors, has an uncertain future that does not support long-term investment and because the world needs to decarbonise.

There is a clear structural shift underway in the global thermal coal market, a shift driven by a change in the nature of China's economic growth and its war on air pollution and a global shift away from coal-fired power generation.

The great hope for the thermal coal industry has been India. The Indian prime minister, Narendra Modi, was elected on a promise of bringing affordable electricity to all Indians by 2019, but it's increasingly clear that the Modi government does not intend to deliver that promise on the back of Australian coal. The Indian government has imposed production quotas on the local industry that are intended to put an end to coal imports by the end of this decade. Thermal coal imports to India have been declining substantially since 2015 and are expected to continue to do so.

I pause to emphasise that I'm not dealing with the outlook for coking coal, which remains relatively robust as industry still searches for cleaner ways to make steel, but the outlook for thermal coal traded across the seas is a different matter. Australian governments have still been consistently bullish about the outlook for thermal coal exports. The energy white paper of 2012, for example, forecast that total coal exports were expected to grow strongly to up to 690 million tonnes by 2025. The paper said pointedly that 'increasing demand has meant that an entirely new coal precinct has opened up in Queensland's Galilee Basin.' The reality today, though, is quite different. Total coal exports are running at around 390 million tonnes, not 690 million tonnes, about half of which is thermal coal, and volumes have been flat for several years now.

The IEA, the International Energy Agency, describes the Adani Carmichael mine as the only significant export-oriented greenfields project—that is to say a project in the new thermal coal basin—on the face of the planet. The case made a decade ago for opening up the new thermal coal basin rested on demand projections that are fundamentally inconsistent with current market trends and the more probable scenarios for future global demand. In all of the many discussions that I've had over recent years with different interests about the Galilee Basin projects, a consensus view has been put to me that they are simply not financially viable. Adani, we know, continues to struggle to get financial backing for the Carmichael mine, which was most recently seen in the decision of the largest Chinese banks to walk away from the project. The projects that are next in the Galilee queue, owned by GBK and Clive Palmer, appear even further removed from financial viability.

We all recognise that there is a great deal of frustration in Queensland about the constant delays and the debate about the Adani project and whether the promised jobs will ever really happen. In a region that's been hit very hard by the end of the mining boom, job opportunities are crucially important. Bill Shorten isn't willing to wait on Adani's continual delays in this project, delays that will likely come to naught, anyway. He's putting concrete announcements with the member for Herbert and others from Queensland for the people of Central and North Queensland about jobs that we can guarantee will happen.

I and most commentators might be wrong about all this. Adani's project at Carmichael might notionally go ahead, particularly if the Turnbull government finds some way of throwing a heap of taxpayer money at it, but the industry itself has been clear that any thermal coal mine from the Galilee to chase a declining seaborne market would simply displace coal and jobs in existing coal regions like the Hunter Valley—advice contained in the details of a report from the well-known coal industry analysts Wood Mackenzie. For the life of me, I can't see how that prospect is in the national interest.

Even on the IEA's two degree scenario—a scenario that says we do achieve the Paris commitments—there will continue to be substantial demand overseas for thermal cold exported from Australia's established basins, like the Hunter Valley, for some time to come, but the growth projections that underpin plans for a brand-new basin in the Galilee have simply disappeared.

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