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Australia’s cheap coal dilemma

Australia’s cheap coal dilemma CBPIX
29 Mar
2016
New figures show that one third of all coal mines in Queensland, Australia are running at a loss

A report by the Queensland Resources Council (QRC) has found that one third of its coal mines are running without producing a profit. As one of the main coal producing regions in Australia, Queensland is a strong representation of the coal market across the country. The QRC’s chief executive, Michael Roche, has implored the government to provide more subsidies to protect jobs, causing mixed reactions from the public.

According to Dr Adam Lucas, Senior Lecturer in Science and Technology Studies at the University of Wollongong, Australia’s loyalty to coal is institutional. ‘Fossil fuel industries have been particularly effective at gaining political support,’ he says. ‘There is an ingrained ideological commitment to the idea of cheap energy.’

Given the collapse of international coal prices, the industry will only be able to continue to expand if it receives even larger government handouts than it has enjoyed in the past

For more than 50 years, Australian governments at the local, state and federal levels have provided the coal mining industry with subsidised road, rail, port and municipal infrastructure, all of which have contributed to the industry’s exponential growth. Coal provides 70 per cent of Australia’s electricity and is a source of major export revenues. Soaring exports to India and China helped Australia become the world’s largest exporter of coal. Confident that its exports would continue to increase, Australian governments continued to endorse plans to triple the industry’s 2010 production levels over the next 20 years.

Those export revenues, however, are in fast decline. Demand from China is decreasing as it tries to curb its fossil fuel industries and decrease air pollution, and the report shows Indian imports fell in January following drops of 49 per cent last November and 34 per cent in December – the largest three-month decline on record.

‘Given the collapse of international coal prices, and the lack of financial viability of many of the existing Australian mines, the industry will only be able to continue to expand if it receives even larger government handouts than it has enjoyed in the past,’ says Lucas. Forever under pressure from environmental groups, coal might now be the target of the country’s economists as well. ‘The private sector is not going to underwrite losses or bank on potentially stranded assets,’ he says.

This was published in the April 2016 edition of Geographical magazine.

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