Page 2307 - Week 08 - Wednesday, 5 August 2015
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use of coal––about half the global use––will not peak in the next five years. Australia is a good source of coal for these countries. It is these countries that are financing the development of new coal mines in Australia, which, by the way, they are seeking to develop on prime agricultural land in New South Wales and Queensland.
Coal plays a significant role in the economic wellbeing of Australia, but that does not make it right. I guess these figures provide enough comfort to the federal government about the future of coal. But five years is not a long time, and I suggest they need to look further ahead than that and plan for the next 10, 20 even 50 years. They may think scaring off investors in renewables is not much of an issue at the moment, but that is only because they have not faced up to the reality yet. They have convinced themselves we can go on as we are for decades and decades and that it is not their problem. They live that reality. They are surrounded by people who believe it, too, but the bottom line is that they are in denial.
Federal Labor perhaps is not in quite such denial, despite their difficulties giving up the black stuff and despite their support for the “dig it up and ship it out as fast as we can” policies on coal exports. At least federal Labor have the good grace to look like they care about transitioning to renewables. At least they have the political smarts on this issue to realise that you put the renewables first and talk about coal exports later. That does not make them or their state Labor colleagues in Queensland any less complicit in the destruction of prime farming land for coal mines or the investment in new coal port infrastructure.
Of course, what we are hoping is that the divestment movement catches up with the coal developers and financiers. The notion that the world’s financial markets are carrying a carbon bubble has been well outlined by the Carbon Tracker Initiative’s report Unburnable Carbon. The report outlined the risk to global investments in fossil fuels, coal, gas and oil through the action of governments implementing their climate change policies. It effectively describes that if the world is to stay below two degrees of warming, only a certain amount of fossil fuels can be burnt. The rest of it must stay in the ground.
However, the total carbon dioxide potential of the planet’s fossil fuel reserves is more than five times the amount budgeted to stay below two degrees, and burning even the list of reserves held by the top 100 listed coal companies and the top 100 listed oil and gas companies takes us beyond two degrees of global warming. Investors are, therefore, left exposed to the risk of unburnable carbon.
This has significant implications for Australia’s coal sector in particular, as it is estimated that our coal reserves owned by listed companies account for 51 gigatonnes of CO2 equivalents. We hear a lot of discussion about a property bubble, but this notion of a carbon bubble is a very important one to understand because it has significant implications for our superannuation industry right through all sorts of investment portfolios. If those companies own assets that the science tells us we cannot burn, that means they have stranded assets. There will be a point at which the financial reality of that will strike. That is why organisations like the Carbon Track Initiative and other organisations that analyse these things talk about a carbon bubble.
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