Coal, cronyism and corruption

The latest issue of Coalwire, a weekly newsletter covering the transition away from coal list three separate corruption cases involving coal: in Indonesia, South Africa and Bangladesh. These aren’t isolated instances: in just about every jurisdiction that isn’t moving away from coal at a rapid rate, the industry is associated with cronyism at best, and outright corruption at worst.

In Australia, for example, the push to develop the Galilee Basin is being driven by a set of politically connected billionaires (or pseudo-billionaires on the Trump model). In China, the move away from coal is being obstructed by provincial governments eager to keep the construction gravy train rolling. In India, there’s Coalgate. Crony capitalist governments like those of Trump in the US, Erdogan in Turkey and Law and Justice in Poland are among the leaders in resisting decarbonization.

The explanation is simple. Coal can’t survive in an open market environment, particularly one with a carbon price, nor under a coherently planned system. It’s only under the toxic mixture of markets and intervention represented by ‘business friendly’ government that money can still be made from destroying the global environment.

40 thoughts on “Coal, cronyism and corruption

  1. Ken Fabian and James (see Para 5),

    There will be an affect on Australian consumption of coal – it will be taxed but not on exports. This does sound terrible but the reality is we will not stop the exports and, even if we did, new sources of supply would emerge elsewhere. Hand-wringing is pointles – you want something that will work. The following is a longer post I used elsewhere to comment on an AFR editorial.

    Coal is Australia’s second largest export – over 10% of total exports. These will not end soon and the coal lobby is a politically powerful obstruction to taking measures to effectively address climate change. The suggestion by Geoff Carmody – one I have also long endorsed and written about – is to impose a destination-based carbon tax which exempts all coal exports but which taxes coal consumption locally as well as all other forms of carbon pollution locally. Imports of carbon-based products should be taxed at the border by means of border tax adjustments reflecting the excess of our carbon tax over those of exporting countries. This removes a significant first constraint on Australian actions to address climate change and costs little – criticizing the coal exports will not end them – they will continue anyway and even if you could, substitute production will enter the market from elsewhere in the world. Coal is an abundant resource – Australia alone cannot stop its use.

    The destination accounting proposal has recently been endorsed for the US by Janet Yellin, Ben Bernanke and Alan Greenspan but has long been rejected by the mafia who control climate policy discussions in Australia by wrong claims of lack of policy practicality: See the AFR editorial this week.
    The policy is simple to implement – the border taxes are WTO compliant and would be concentrated in a handful of industries. These adjustments would deal with the often-exaggerated concerns about carbon leakages and import competing industries being put at a competitive disadvantage because of carbon pricing. This gets rid of a second major constraint to introducing effective carbon pricing in Australia – the unfair competition argument. This no longer arises.

    In addition, this type of tax regime establishes the right types of incentives for other countries to levy production-based taxes. If they don’t levy carbon taxes we impose a tax on them ourselves and we keep the money. If they impose comprehensive carbon taxes they get to keep the money. Obviously this type of argument is of greater force for large countries such as the US and China but also for Australia too. James alleged criticism is – in fact a virtue

    Finally, the advantage of this type of proposal is that it gets Australian discussions on climate back to be where they should be. We omit a tiny part of global carbon emissions and restricting our emissions won’t make much difference to anything. Our focus should be on setting a good example, on playing a proportionate part in addressing climate and on developing pricing mechanisms that will be robust and which will help to foster international agreement on effective climate action.

    Most importantly we will not put ourselves in the silly position of trying to stop carbon pollution in the rest of the world by restricting our exports. We cannot do that because the substitution possibilities are too great.

    https://www.afr.com/opinion/editorials/its-simple-we-need-a-proper-price-on-carbon-20190225-h1bokt

  2. If history to date is any guide, we are not going to prevent climate change. We are not doing enough, in time. Instead we are consistently doing too little, too late. Is it too harsh for me to say HC’s plan above is an example of a reasonable argument for progressing to climate change? If I constrain myself to realistic arguments, I can come up with no better plan myself. Maybe we could ban new coal mines or new coal mines whose coal quality falls below a defined standard.

    What are the fundamental problems which, seemingly , make it impossible for us to deal with climate change in a timely manner? In summary they may be any or all of;

    (1) Faulty temporal discounting;
    (2) Overlooking inter-generational equity claims;
    (3) Failure to hold values outside economic values;
    (4) Economic and energy system momentum – the difficulty of restructuring everything.
    (5) Systemic features of capitalism itself;
    (6) Systemic features of nation-state competition (Offensive Realism).

    Personally, I think all these factors are at work.

  3. “the substitution possibilities are too great”

    Harry, you’ve mentioned this several times, but I don’t recall you providing any evidence.

    Australia is responsible for 36.6% of the world’s coal exports. If we phased out Australian coal exports over the next 10 years:

    1) Which countries will supply the extra 375 million tonnes of export coal per year?

    2) What would it do to the price of coal across the world?

  4. Australia has 5% of the world’s coal and currently produces 1/9th of the world’s coal.

    The price effects of the scenario you envisage (which will not occur) would be positive but really a very tough exercise to nail down.

  5. Nobody wants to be the first to change to save the world. Therefore, climate catastrophe is inevitable.

  6. Harry – “…the silly position of trying to stop carbon pollution in the rest of the world by restricting our exports” ?

    To me it sounds like the drug dealer’s defence – if we don’t sell it to them someone else will. Not convinced it passes any reasonable ethics test to maintain that the economic benefits of selling coal are so great whilst the biggest associated economic harms are deliberately excluded from calculations; especially when those are expected to exceed the sale price. By long standing legal principles a supplier/seller does bear responsibility for the harms of what they sell, so the perceived benefits from the coal industry are based on an enduring amnesty on accountability for climate costs – effectively benefits are sustained by institutionalised cheating. Without that cheating 100% RE dominated by solar and wind and batteries – even a great many very large scale and expensive batteries – looks cheap in comparison. Even high cost nuclear looks cheap in comparison – just not nearly as cheap as RE for the early to mid stages of a transition.

    Yes there is harm from too rapid transition – but that is balanced against continuation of the very rapid, unprecedented accumulation of climate ‘debt’, to be paid over decades and centuries in the form of multi-generational impacts and harms. No clever accounting tricks can void those debts. And what do we consider a serious economic harm? People who live lives of extravagant wastefulness – of wealth and luxury unparalleled in history – strenuously objecting to be a few percent less wasteful or being a few hundred dollar per year less prosperous are not, in my view, objecting to real and significant economic harm.

    The accumulating climate debts will be paid out of a non-replaceable stock of essential environmental capital – the climate stability our agriculture and infrastructure depends on. Yet the mainstream “Climate Movement” has been been consistent in supporting phased transitions and promoting support for those disadvantaged by it; coal miners and power plant workers will get transition packages that most Australian workers never see when their industry gets phased out.

    And it isn’t like taking the RE course eliminates mining in Australia – on the contrary, the transition to low emissions involves mining and use of resources and industry at unprecedented scales. Just not coal and gas and oil mining.

  7. Ken Fabian,

    An excellent answer which skewers the fallacies and moral bankruptcy of the position HC argues for. I wish I had thought it and written it myself. I am not saying HC is morally bankrupt, I am simply saying that that position is morally bankrupt. Equally, my real consumption situation is morally bankrupt because my carbon footprint is (and has been) higher than the global per capita sustainable level. We in the first world are all, or mostly, morally culpable in one way or another on this issue.

    The central problem is that rapidly moving from fossil fuel use to RE is both absolutely necessary and completely unrealistic under the current political economy. Radically changing our political economy or that of the globe is also completely unrealistic, at this stage in history. I wish it were not so but it does appear to be so.

    The best we can do is keep advocating policies which would stop climate change no matter how unrealistic these policies currently seem politically or in a capitalist-systems sense. Until there is a game changer these policies won’t become realistic. If there is a game changer these policies might become realistic. A “game changer” will be a natural physical / biological event, in the form a large civilizational or regional catastrophe directly and undeniably attributable to climate change. It will need to possess ample demonstration effects on the global human population such that the majority in a majority of nations become stridently, radically and forcefully in favor of rapidly phasing out and banning fossil fuels. Not to put too fine a point on it, the public at large needs to become absolutely terrified by clear and present or closely imminent risks to life, limb, wealth and amenity from climate driven catastrophes. Then and only then will the public demand and indeed force action.

  8. Its nice to know, Iconoclast, that I am not morally bankrupt even if the policy position I adopt is. The distinction is a subtle one though greatly appreciated as I take the not-so-long march towards boot hill.

    There is nothing wrong with trying to restrict Australia’s coal exports or to stop new mines from developing – go for it. The difficulty is that it won’t happen and, even if it did, the impact on climate would be negligible. Coal use in a coal-abundant world is mainly demand-determined and my policy position addresses demand.

    Taxing carbon consumption – leaving out carbon intensive exports and taxing carbon-intensive imports – has desirable incentive effects for generating an international consensus as I mentioned. It is also something that countries can adopt one at a time so you don’t need to start off with a comprehensive agreement plus promises, sanctions, threats etc.

    The urge to endorse renewables and the desire to eliminate coal exports are issues that I often see addressed here. But these seem secondary to me to the issue of achieving a good global response to climate based directly or indirectly on a carbon price and then allowing markets to do their thing. The weak point always seems to me US government policies but things may change in that direction if Trump is not reelected. It is good that the destination-based tax base is now being discussed in the US and taken seriously.

  9. HC,

    I also am undertaking the “not-so-long march towards boot hill”. I have decided to torture myself in my last decades with issues of philosophy, ontology and the ontology of economics. I must be a masochist, especially as I am not educationally fitted to these tasks. Take a look at my long post in the latest Sandpit thread and you will see what I mean.

  10. “The weak point always seems to me US government policies but things may change in that direction if Trump is not reelected. if Trump is not reelected”

    There is little if any objective reason to think Trump won’t be re-elected, so it will be (at least) another four years before there’s a positive US administration. An even if there is, the Democrats would need to control both houses of Congress which will be be a big ask. And even if they do, there will be Democrats from resource states who will have the power to stop anything meaningful happening.

    So counting on helpful US government policies is waiting for Godot-ish.

  11. Harry Clarke refers to “demand” meaning economic demand. This raises an interesting point because demand has at least one other meaning, namely moral or public demand. The issue is which kind of demand we allow to be operational in our society for various products.

    For example, there is an economic demand for the products (objectified persons) of sexual slavery. At the same time there is a moral and public demand to end it (to ban it and ensure effective compliance with that ban.) There are obvious cases where we consider that moral demands should outrank economic demands.

    It is clear from various analyses that a proportion of all fossil fuels should be left in the ground. There are large reserves of fossil fuels which cannot be burned if we are to avoid more than 1.5 degrees C of global warming as set by the Paris Agreement. There seems to be general scientific agreement that 1.5 degrees C warming is the most we can safely allow and even that level might be unsafe.

    Leaving the necessary amount of fossil fuel reserves in the ground means leaving assets stranded. Every nation seems to want to play musical chairs with this, in that they want to end up on the seat with the least stranded assets and they want other nations to end up on the seat(s) with more stranded assets. Either that or they will all burn too much together and all collapse together from climate change damage.

    It’s clear that a moral demand needs to be made for nations to accept stranded fossil fuel assets. This is not about economics at all, it’s about morality. If the destruction of the biosphere (effective destruction of its capacity to sustain human and much complex animal and plant life), is not about morality then I don’t know what is. People (especially but not only social conservatives) want to invoke morality in some cases and economics in other cases. They want to pick and choose which kind of demand (economic or moral) is put on the table, on a case by case basis. Case by case determinations are fine but not when fundamental criteria (life quality and survival) are selectively invoked or ignored.

    Having said all that, mine is a purist or idealist position and not a realist position. Harry Clarke might be advocating the most realistic position which actually has a chance of partial (definitely only partial) amelioration of AGW dangers. However, I am not sure. It could easily turn out to be an essentially temporizing strategy, one that makes no substantial difference to the problem and simply paves the way to catastrophic AGW.

    HC is not a neoliberal from what I read. However, my admittedly rather subjective judgement of neoliberalism is that it propounds, promotes and gratefully accepts from other quarters all temporizing solutions which functionally enable the indefinite continuance of business as usual.

  12. Ikonoclast – thanks. It is hard to tone down the depth of my concern. I think anyone not frightened by what is happening to Australia’s climate and remains unalarmed at what another global 4 or 5 degrees might do can’t have been paying attention or thinking this through.

    I think it requires believing three decades of top level expert advice is completely wrong just to avoid the mortal shame that suggesting ‘if the cost of regaining climate stability is Australia’s coal industry we should just let the planet cook’ ought to bring – yet that is the position the current LNP government holds (and possibly Labor too). It is hard to gather much optimism, yet the denial is getting harder to justify and sustain, technology that can help is becoming mainstream and less of the public is ignorant and apathetic.
    ——————————————————————

    Harry – “The urge to endorse renewables and the desire to eliminate coal exports are issues that I often see addressed here. But these seem secondary to me to the issue of achieving a good global response to climate based directly or indirectly on a carbon price and then allowing markets to do their thing.”

    The idea that we should use pricing carbon and let markets do their thing has been consistently well supported here. It is the absence of any prospect of carbon pricing – something both The Greens and Labor have put up and the LNP/IPA/MCA/BCA pulled down and still oppose ferociously – that prompts efforts by other means, such as increasing direct support for RE and upping (border neutral) calls for an orderly but rapid as possible phase out of coal mining, starting with no new mines. I have a say – if a small one – in Australia’s coal mines. Starting there makes sense to me. I’m quite non-discriminatory; whether it’s coal for domestic use or coal for export, either way.

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