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Subsidising coal

November 18th, 2014

I was going to post on the Newman government’s announcement of subsidies to development of new coal mines in the Galilee Basin, but this piece by Michael West says it all. Key observation

The very day after the G20 concluded, with its recommendations about ending government subsidies to fossil fuels, it appears the Queensland government is poised to ramp up its subsidies for the humungous Galilee Basin coal project.

Read more: http://www.smh.com.au/business/mining-and-resources/wise-investment-or-fossil-fools-queensland-backs-coal-as-g20-moves-the-game-on-20141117-11odkq.html#ixzz3JM8yeHsw

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  1. Hermit
    November 18th, 2014 at 06:30 | #1

    I wonder if Newman used to smoke cigarettes behind the shed on school sports day to be a smart aleck. Now Andrew Robb is saying US/China are only making promises but we have Direct Action and it’s happening now. Er, not really. We should think of Galilee Basin not as a coal deposit so much as a pre-sequestered carbon reserve. It’s doing a good job just keeping that carbon out of the atmosphere. Burning coal was a major energy source in the time of Charles Dickens and you’d think two centuries later we’d have moved on.

  2. adeepgreenheart
    November 18th, 2014 at 06:37 | #2

    So much of climate policy is caged in the words of trade policy – hard-out negotiations based on starting positions, gambits and red lines. Conversely, now Newman has revealed he’ll pour as much public money ‘as it takes’ into opening up the Galilee basin, why would any coal company spend another cent in investing in any supporting infrastructure? He’s revealed the government’s negotiating position from the get go: “here’s the public purse, take what you want”. It’s just stupid. (Notwithstanding, opening up the Galilee Basin as being climatically insane!)

  3. Ikonoclast
    November 18th, 2014 at 06:41 | #3

    At a time when the rest of the world’s punters are disinvesting in coal, Newman wants to pick a winner by putting everything on “Galilee Basin” at a 1000 to 1.

  4. Ken Fabian
    November 18th, 2014 at 07:07 | #4

    Here in NSW, for the past few years our power bills have contained the partisan political message that Federal Carbon Tax and “Green schemes” (subsidies) cost households $300+ per year. These messages, very pointedly, make no mention of costs from non-green related Federal or State policies – like subsidies to coal!

    My very rough calculation (1.5 million households, $666M per year) is that coal subsidies have cost Qld households more than that at about $450 per year . With coal’s health impacts it would be more. With climate consequences, more again. Are there any quality cost estimates along these lines to link to?

    Seems to me there are some compelling arguments for determined advocates of a low emissions transition to exploit right there. I would love to see billboards done in the same style as those familiar red inked messages on every NSW power bills, to turn that appalling use of power bills as an exclusive and very pointed partisan messaging media right around.

  5. Hermit
    November 18th, 2014 at 08:12 | #5

    I think government supplied infrastructure such as port and rail is intrinsically different to concessions like the diesel fuel rebate. All miners get the diesel rebate only some get capital help. There are various levelised energy cost calculators (like that of the NREL) that ask you to put in a cost of capital percentage in the range say 6% to 12%. If half the capital cost of a private project is paid by taxpayers then instead of 10% private cost of capital it’s effectively 5%.

    It should be pointed out that the dead-agency-walking ARENA gives generous capital grants to renewables http://arena.gov.au/
    If Australia were to build a big nuclear power station for say $10 bn it seems inconceivable that the government wouldn’t chip in. Even to replace a big coal station a decade from now would cost billions.

  6. Ikonoclast
    November 18th, 2014 at 09:19 | #6

    No miners should get the diesel fuel rebate. All fossil fuel subsidies should be phased out rapidly. No fossil fuel industry – mining or generating power or pushing transport – along should get any subsidy of any kind.

  7. Tim Macknay
    November 18th, 2014 at 11:21 | #7

    Newman’s apparent desperation to get the Galilee basin up and running is reminiscent of Colin Barnett’s desire to establish the ill-fated Kimberley LNG hub in the face of public hostility, questionable economics and industry ambivalence.

    Like Barnett, Newman seems to be trying to wish away the inconvenient economics and force the project to happen through some kind of derigiste force-of-will. Barnett still occasionally fantasises that his LNG hub will happen, even though the oil and gas industry has long since moved on. When you think about it, a Premier’s ego is a remarkable thing.

  8. conrad
    November 18th, 2014 at 11:26 | #8

    If they can’t even get the Chinese government/State firms to invest in poor quality projects and have to resort to dubious Indian investors instead, it really does say something about the worth (or perhaps cost is a better word) of the project.

  9. Jim
    November 18th, 2014 at 12:10 | #9

    Don’t just blame this on the politicians. Most aren’t that smart.

    Where are the economists in Queensland Treasury and Dept of Premier and Cabinet (ditto for Canberra)? I know they are there, and I know a few of them read this blog. Where is their analysis? Where is their advice? Such major decisions should never be made without robust and transparent analysis. Why is there more transparency, analysis and debate in the blogosphere?

    Given the constant string of dumb economic policy (think Strong Choices in Qld) and investments in white elephant projects (think a string of failed PPPs) we’ve seen in the last few years from governments of all colours, I can only conclude the economists in the public service are either incompetent or completely frozen out of the decision making process. Either way, they provide no public service.

  10. rog
    November 18th, 2014 at 15:09 | #10

    China didn’t say that they would stop using coal – they intend to modernise and/or replace their existing boilers with more efficient units, thereby reducing emissions. So there is no indication that supply will diminish.

  11. rog
    November 18th, 2014 at 17:08 | #11

    Thinking about it a bit more; after watching Turnbull deflect criticism on QandA I think that the only reason that they are “sticking their head in the sand” over fossil fuels is that they believe that it’s either prosperity or war and that the price of peace will be a warmer world.

  12. Happy Heyoka
    November 18th, 2014 at 18:38 | #12

    @rog, never watch QandA (TJ gets right up my nose…)

    What’s the basic outline of the choices?
    I know the argument “we’ll all be rooned by this climate change nonsense”; the war side not so much.

    Personally I think it would be a fascinating and enlightening thing to see a directed graph of entities with pecuniary interest in the coal industry – extended to include those at several levels of indirection. For bonus points make it one of those fancy time series “bubble” graphs that guy on TED used.

    I suspect a lot of people doubled down on mining investment in the late 90’s or so; certainly speculation followed the rising the coal price.
    The exact relationship of those folks to, for example, the Queensland government would be interesting… and I’m not even particularly thinking “Eddie Obeid” interesting.

  13. jungney
    November 18th, 2014 at 20:14 | #13

    According to Adani;s website:

    The Carmichael coal, railway and port project includes building Australia’s largest thermal coal mine in the north Galilee Basin approximately 160km north-west of Clermont in Central Queensland, linked by a new 388 km standard gauge rail line to a new terminal at Abbot Point Port near Bowen.

    That’s a lot of line to protect from disruption and delay. There’s a time when a policy stance must turn into strategy and tactics. Right about now, I reckon.

    The histories of the Greek, Italian and French resistance as well as the Vietnamese, the Titoists, the Jews from Poland and all over Europe who fought their way free or survived in one way or another, these are the teachers for fractured times. There are many, many other stories of survival from which we can draw strength.

    “Let them eat coal” shrieks the high priestess of a twilight zone colonial emperor in between bites of the carpet.

    Eff me. If you aren’t planning for global revolt, not revolution, but revolt, within the next decade, then I want some of whatever you are smoking, please, to ease the pain.

  14. jungney
    November 18th, 2014 at 20:26 | #14

    @rog
    That’s interesting, rog. I invite you to unpack that understanding. The right is not stupid so the question is what is their vision of the future they are creating? I wouldn’t trust them to create a utopian effin’ car park, let alone the sociality for a whole planet under their rule. So, understanding where these mofos are heading is important.

  15. rog
    November 18th, 2014 at 21:23 | #15

    @jungney I don’t know but if they aren’t stupid (and they can’t all be stupid?) then what is the thinking that lies behind the position?

    I know that some, like Mark Carnegie, are pro fossil fuels and pro carbon tax.

  16. Donald Oats
    November 18th, 2014 at 23:51 | #16

    Newman and Abbott are prime examples of politicians who refuse to take on board the message: if we keep burning coal, we will regret it. Or our kids will. If we dig it up and sell it to someone else who burns it, we will still regret it. Given how automated these mines are now, it isn’t even like there are many jobs in it, nor are they typically jobs of a permanent nature. These politicians are willing to fire great numbers of people at the drop of a hat, and yet they’ll subsidise something we know we really oughtn’t. Streuth, it couldn’t be plainer than the recent IPCC statements about it.

  17. Ikonoclast
    November 19th, 2014 at 07:09 | #17

    @rog

    What lies behind their position is “What’s in it for me now?”. Political donations play a big role. Politicians like power and donations help parties gain power. Power helps them to gain wealth too in various ways

    “In 2004-2005, the Labor Party raised $64.8 million from both the corporate sector and public funding, while the Liberal Party raised over $66 million. Most of the large corporate donors conduct business in an area greatly affected by government policy, or are likely to benefit from government contracts.”- Wikipedia.

    At a deeper level, our entire system has its own momentum and its own tendency to replicate and grow itself. Only those who support the status quo and business as usual are rewarded with jobs, government office, influence, good press and so on.

    Why are the leaders of China and India hanging on in Australia? Simple. China wants our coal, gas and food. India want our coal and uranium. It’s not because they like us or even our “cuddly”, smelly, scratchy, piddling koalas. Why do our elites cosy up to the Chinese and Indian elites? Simple. Our elites want to sell our country and our climate out from under us. There is money and influence in it for them now. The future doesn’t matter to them… at least not beyond the next election.

    (Remember, Abbott signed a uranium deal in New Delhi on 06/09/2014.)

  18. Donald Oats
    November 19th, 2014 at 11:27 | #18

    The front page of the Wednesday paper (you all know the one I mean) goes on about how President Barak Obama upset them by talking down coal in a coal mining state, i.e. Queensland. The article goes on to say that some of the pollies are thinking of lodging a formal complaint.

    So, my reading of this is that it is okay to engage in a war by stealth in the Ukraine, and still be allowed to come to Australia for the G20, no problem there, but should you make one remark about coal not being everybody’s best friend, and you are a pariah. Thanks Queensland, you’re the best.

  19. bjb
    November 19th, 2014 at 13:46 | #19

    Donald Oats :
    The article goes on to say that some of the pollies are thinking of lodging a formal complaint.

    Wasn’t Howard in the USA before the last presidential election and said it would be good for terrorists (or something to that effect) if Obama was elected. I guess Obama was just repaying the compliment.

  20. Dave Lisle
    November 19th, 2014 at 14:12 | #20

    “Let there be no demonization of coal” or the Qld government. Michael West did not report this in his article (above), but it is not just the Qld govt who wants to fund Gallilee. Crikey is reporting that the Bank of India (majority owned by Indian taxpayers) has offered Adani a $1 billion line of credit. Coal must be good for humanity.

  21. plaasmatron
    November 19th, 2014 at 19:26 | #21

    It is reminiscent of the Tamar valley pulp mill. If organisations like Get-up keep opposing it long enough then the market conditions will kill it, despite government’s best attempts to keep it going. (search “abc news tasmanian-proposed-timber-mill”)

  22. Ernestine Gross
    November 19th, 2014 at 22:03 | #22

    Michael West is on the ball on many important topics (taxation, mncs, environment. corporate welfare…. – my categories). IMHO, Gina’s ‘t/o’ attempt resulted in the smh publishing more cutting investigative articles as well as sharp critiques.

  23. November 20th, 2014 at 03:49 | #23

    @rog
    “So there is no indication that [Chinese coal] supply will diminish.”
    Really?

  24. Fran Barlow
    November 20th, 2014 at 05:15 | #24

    You might find this interesting Ronald

    http://bit.ly/1q9lJ95

  25. Donald Oats
    November 20th, 2014 at 13:53 | #25

    We now have PM Abbott commanding the world to come to next year’s Paris meeting with stringent targets for reduction of greenhouse gas emissions, and he implicitly rebukes them for the failure in Copenhagen…a failure which various LNP funders and/or members did everything they could to ensure happened. Under the Howard government, of which Tony Abbott was a significant member, they sought to disarm the Kyoto protocol, refusing to ratify it. If it weren’t for the State Labor governments of the time, there would have been very little local action at all.

    Backstabbing bastardry and a rotten stench of fetid corruption reeks in the halls of this parliament, so don’t expect the most recent utterances of PM Abbott to be either meaningful or an honest statement of Australia’s position—note how he berated and commanded the rest of the world to come up with tougher reductions, but what of Australia’s targets for the Paris meeting? No doubt this government will, eventually, blithely say we’ve already made our reductions, so no need for even more—or something to that effect.

    Mark my words: if PM Abbott and his front bench are still in power by the time of the Paris meeting, they’ll be taking every available step to scuttle an agreement, or, failing that, trying to delay its date of effect. Just remember PM Abbott’s own words: “Climate change is cr*p.”

  26. November 21st, 2014 at 10:00 | #26

    The current scam on the people of Queensland, Australia, and the world, is for the mining companies involved to talk up the economic benefits of opening a new coal basin so the Queensland government will pay billions in infrastructure costs which will allow the mining companies to make huge profits if the price of coal increases and which will enable them to abandon the project at much less cost to themselves if the price of coal falls. A “Heads I win, tails you lose,” situation. Shame on Queensland politicians and the federal government for believing this crock of effluent.

  27. Ikonoclast
    November 21st, 2014 at 10:24 | #27

    @Donald Oats

    Abbot’s lies are so blatant one would think everyone could see them. However, the public has to realise that switching back to Labor will solve nothing. Labor are equally neoconservative, equally economically illiterate and equally inhumane to the poor, aboriginals, refugees and other vulnerable groups. Real change for the better can only occur if the voters reject neoconservatism and both major parties. Voters must move to the only other signficant party with good environmental and humane values and a passable though not great understanding of economics. That party is the Greens.

    BTW, I am not involved with the Greens or with any party politics but I do vote Green or Socialist at every election now. I still struggle with what to do with my preferences. I don’t give them where I can avoid it and still register a valid vote.

    LNP are beyond the pale of course but Labor are also totally irredeemable. LNP and Labor must be destroyed at the ballot box for us to have any hope of a viable envirionment and a passable economy. The current major parties are destroying both.

  28. Ikonoclast
    November 21st, 2014 at 10:26 | #28

    Footnote: The Green’s “passable” understanding of economics is far better than the abysmal lack of understanding of economics rampant in the LNP and Labor.

  29. November 21st, 2014 at 12:39 | #29

    Wow, it sounded funny in my head when I wrote, “Shame on blah blah blah…” But now I’ve reread it I actually sound about a quintillion years old.

  30. hix
    November 21st, 2014 at 20:45 | #30

    Uhhh, i could just repeat my other comment here -_-. The world is a strange place. Sometimes, when it comes to some topics, i think people are from a different universe in other nations and sometimes its all the same all the same….

  31. Fran Barlow
    November 22nd, 2014 at 05:45 | #31

    I”m also not sure Ronald that one can either believe or disbelieve ‘a crock of effluent’ or even the more usual variant, though this latter has the advantage of distracting the listener from the proximal verb and having a sufficiently well-established metaphoric usage to get away with it even if it fails.

    ‘I am scandalised that they’re peddling this nonsense’ might have worked better and probably would have been closer to the sentiment that moved you. Then again, that too would have sounded quite old …

    ‘Sucks that they’re pushing this crap’ is more concise and contemporary and may have been a good option.

    😉

  32. Right
    November 26th, 2014 at 06:01 | #32

    Hermit :
    I wonder if Newman used to smoke cigarettes behind the shed on school sports day to be a smart aleck. Now Andrew Robb is saying US/China are only making promises but we have Direct Action and it’s happening now. Er, not really. We should think of Galilee Basin not as a coal deposit so much as a pre-sequestered carbon reserve. It’s doing a good job just keeping that carbon out of the atmosphere. Burning coal was a major energy source in the time of Charles Dickens and you’d think two centuries later we’d have moved on.

    US has direction action and China is directly building nuclear reactors 🙂

  33. Right
    November 26th, 2014 at 06:04 | #33

    Ken Fabian :
    Here in NSW, for the past few years our power bills have contained the partisan political message that Federal Carbon Tax and “Green schemes” (subsidies) cost households $300+ per year. These messages, very pointedly, make no mention of costs from non-green related Federal or State policies – like subsidies to coal!
    My very rough calculation (1.5 million households, $666M per year) is that coal subsidies have cost Qld households more than that at about $450 per year . With coal’s health impacts it would be more. With climate consequences, more again. Are there any quality cost estimates along these lines to link to?
    Seems to me there are some compelling arguments for determined advocates of a low emissions transition to exploit right there. I would love to see billboards done in the same style as those familiar red inked messages on every NSW power bills, to turn that appalling use of power bills as an exclusive and very pointed partisan messaging media right around.

    Not sure it would come out as much as you think, you need to understand the size of the power industries.

  34. Right
    November 26th, 2014 at 06:08 | #34

    Hermit :
    I think government supplied infrastructure such as port and rail is intrinsically different to concessions like the diesel fuel rebate. All miners get the diesel rebate only some get capital help. There are various levelised energy cost calculators (like that of the NREL) that ask you to put in a cost of capital percentage in the range say 6% to 12%. If half the capital cost of a private project is paid by taxpayers then instead of 10% private cost of capital it’s effectively 5%.
    It should be pointed out that the dead-agency-walking ARENA gives generous capital grants to renewables http://arena.gov.au/
    If Australia were to build a big nuclear power station for say $10 bn it seems inconceivable that the government wouldn’t chip in. Even to replace a big coal station a decade from now would cost billions.

    The government has a role to seed industries, if we want to go Nuclear (which we should) then sure a subsidy would more than likely happen. FYI $10 billion is big number for one plant, but yes the ROI on such makes coal still look very very cheap by comparison.

  35. November 26th, 2014 at 11:10 | #35

    Right, with point of use solar and wind power cheaper than new coal capacity, why would we want or need nuclear power? The only reason I can think of is if we wanted to delibrately waste money.

  36. Fran Barlow
    November 26th, 2014 at 11:41 | #36

    Right

    if we want to go Nuclear (which we should) then sure a subsidy would more than likely happen.

    It’s unnecessary if you price emissions aptly. The problem is that we don’t. We ought to be pricing CO2 at around $AUD150 — maybe as high as $200tCO2e …

    There should also be sharges for other toxic emissions (Hg, SO2. actinides etc …)

    If we did that, no subsidies at all would be needed.

  37. November 26th, 2014 at 12:04 | #37

    @Fran Barlow
    Fran, since we can remove carbon dioxide from the atmosphere and sequester it for around $100 a tonne, and probably less in practice, that will put an upper lid on the carbon price. At that price it would be cheaper to burn natural gas or even coal in exisitng power plants and then capture and sequester the CO2 released than to pay Hinkley C prices for nuclear power. (And I’ll mention that very little of our electricity would be generated that way at that carbon price.) But whatever the price we put on carbon it should definitely be higher than the current one of $0 a tonnne.

  38. Fran Barlow
    November 26th, 2014 at 16:38 | #38

    @Ronald Brak

    I disagree. The cost of CO2 should include pollution of waterways as well as the Charney forcing. The cost of coal (as distinct from natural gas) includes all of its VOCS/particulates as well.

    Also, it is improbable that much more than a fraction of CO2 could be sequestered in aquifers for $100 per tonne. Those aquifers are themselves a scarce resource. At industrial scale, all the cheap aquifers would be saturated within a very short time, and let’s not forget that unlike actinides, CO2.is forever. We might be able to use algae of course for a lot cheaper than that, but that would only deal with CO2. I’d prefer these were used for emissions that really are too technically difficult to abate.

    As you say, at $100tCO2e, thermal coal is finished anyway so the point is probably moot. Everything else, including nuclear power, would be in front.

  39. November 26th, 2014 at 17:01 | #39

    Fran, the cost of emitting a tonne of CO2 into the atmosphere is very high, but the carbon price doesn’t need to be as high as that cost to prevent CO2 being emitted into the atmosphere. CO2 might cause $300+ worth of damage per tonne, but a price of $100 a tonne should be more than sufficient for society to go carbon neutral. And I can’t see us sequestering CO2 in aquifers for $100 a tonne. That method would probably be more pricey. You also mention they’d soon be saturated, but I don’t think there would be very much CO2 emitted with a $100 a tonne carbon price, for as you wrote, thermal coal would be finished anyway. And so would natural gas and oil except for critical purposes.

    Now one could argue that we should have a higher carbon price to draw down CO2 from the atmosphere, and in the future that is something we certainly should do, but first we need to stop smashing our hand with a hammer: http://www.angryflower.com/smashi.html

  40. Fran Barlow
    November 26th, 2014 at 17:33 | #40

    @Ronald Brak

    Now one could argue that we should have a higher carbon price to draw down CO2 from the atmosphere, and in the future that is something we certainly should do, but first we need to stop smashing our hand with a hammer.

    I do argue it. We should begin doing it right now. That would underline the scale of the damage already done and the burden our generation and those before are by dissonance inflicting on future humanity.

    If you’re tied to a railroad track, as in one of those early 20th century melodramas, slowing the approach of the train is good. Sawing through the ropes is also good, if you can manage it. But if you can’t stop the train or get off the tracks in time you will be crushed, sooner or later.

    Slowing emissions puts off catastrophe, but still does huge damage. As these lines are being composed we are doing harm, and would continue to do harm even if all emissions stopped right now. Silicate weathering will remove lead to falling concentrations over the next 100,000 years, but in the interim, it is what it is with all of the perturbation. We need to be drawing down to 280ppm — probably lower — ASAP, and probably doing some geoengineering to subvert the forcing while we get there.

  41. Fran Barlow
    November 26th, 2014 at 17:42 | #41

    Oops …

    {Silicate weathering will remove lead to }

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