Leaving it in the ground

If there’s to be any chance of stabilizing the global climate, a large proportion of existing reserves of coal will need to be left in the ground. The Galilee Basin, estimated to contain 27 billion tonnes of coal, enough to raise atmospheric concentrations of CO2 by several parts per million on its own, is arguably the biggest test case in the world right now. Fortunately, the latest news is good.

The critical project is the Carmichael Mine proposed by Adani Coal. To get the coal out Adani proposed a new rail line and a port expansion at Abbot Point. Korean conglomerate POSCO (originally a steelmaker) was named as the builder of the railroad, with the prospect that POSCO would take an equity share and the Korean Export-Import Bank would lend money on favorable terms. If the rail line is built, other projects could go ahead. One such project, owned by Bandanna Coal (now in receivership) was just approved by Environment Minister Greg Hunt.

It now seems clear that Adani is mothballing the project. A month ago, the engineering design teams were told to stop work, and now Posco’s contractors have been sent home. Coincidentally or otherwise, Posco has announced the intention to return to its steelmaking roots, with aggressive cuts to its engineering and construction divisions.

Adani is still blaming regulatory delays, but this seems increasingly implausible. The sacking of the engineering teams will set the project back many months, if not years, and burning your primary equity partner doesn’t seem like a sensible response to regulatory problems. At this point, I’d say the strategy is to obtain and bank the regulatory approvals then hope that the price of coal increases in the future. This seems unlikely, given the collapse of demand in the US, declining demand in China and increasing Indian focus on renewables, in which Adani itself is a big player.

Moreover, with every year that passes, the obstacles to coal projects of any kind get bigger. Most international development banks will no longer lend to such projects, global banks are under similar pressure and institutional equity investors are being pushed to divest. It’s unlikely that the proponents of new coal projects in Australia will ever again see a government as favorable as the Abbott government, so if they can’t succeed now, they will probably never do so.

33 thoughts on “Leaving it in the ground

  1. @Mack

    Yes, Marohasy quotes Scafetta, who appears to go on about cycles. The influence of those pesky planets, rather than the vast amount of CO2 we’ve pumped into the atmosphere. And I note that in a comment, you mention Doug Cotton, who is just batshit crazy. I prefer the batshit crazy denialists, because they upset the slightly smarter and (ipso facto) slightly more dishonest denialists.

    The ALP has a problem with this stuff, because members of affiliated unions get paid to dig this stuff out of the ground. I couldn’t understand Rudd, “greatest moral challenge of our time” being hand in hand with Ferguson – who just wanted to dig it all up.

  2. @Mack

    So, reading her response to Orr, is Marohasy supporting the theory that the orbits of Jupiter, Saturn and the Moon cause 60% of global warming?

  3. @Ivor

    I think you’ll find that she won’t like you trying to pigeon hole her like that. She’s just supporting brave, persecuted scientists willing to stand up to the global warming bullies.

  4. Solar power in India has been bid in at 8 US cents a kilowatt-hour: http://solarlove.org/skypower-wins-150-mw-india-solar-bid-record-tariff-7-95%C2%A2kwh/

    In the UAE it has been bid in at 6 US cents a kilowatt-hour and in the US at about 5 US cents. And in Australia point of use solar can provide electricity to consumers at a lower cost than any utility scale generation.

    And note that it is not enough for a coal plant to beat renewables on price today. It will have to outcompete renewables on price for years to come to turn a profit and that looks increasingly unlikely to occur.

  5. @Mack
    I don’t know why you’d quote Marohasy on anything. I still haven’t decided for sure whether she’s a fool or a liar, but the categories are not mutually exclusive.

  6. @James Wimberley
    I stand corrected: in more detail, this report analyses the trends. There is a strange dip in the last couple of years (in growth rate of emissions rate, that is), and I’ll leave it to the report to give the explanation.

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