The Indo-Pacific Coal Line

By Rose Hawkins
Master of Environment student, University of Melbourne

With Australia’s relationships across the Indo-Pacific increasingly defined by a stance on coal, does the coal export market have a future?

For countries like India, Australian coal provides opportunities for economic development. However, Leaders in the Pacific Islands link Australia’s coal use to climate change and consider it an ‘existential threat’ to the future of their nations. This division—the Coal Line—has divided those for and against coal, both in Australia’s international relationships and its domestic politics.

Understanding the Coal Line

The division created by the Coal Line generally boils down to the value of Australia’s export income versus its international commitment to reduce its greenhouse gas emissions. Supporters of coal argue that Australian exports remain viable because there is a strong international market for thermal coal; Australia cannot be expected to make substantial changes when other countries are not doing the same.

Furthermore, they have argued that Australia has a moral obligation to export coal to give people in developing countries access to electricity to the same level Australians enjoy. Each year, Australians use 10,000 Kilowatt Hours (kWh) of electricity per capita; Indians use 800 kWh.

On the other hand, critics of coal believe Australia has a moral responsibility to account for greenhouse gas emissions from Australian coal exported to other countries. Australia was recently ranked second last in the world for action on climate change, and analysis suggests that it will not meet its commitments to the 2015 Paris Agreement if it does not transition away from coal and reduce its greenhouse gas emissions, including in its electricity sector.

Linking coal and climate change

Australia’s summer 2019-20 bushfires solidified the link between climate inaction, including coal exports and climate impacts, in the eyes of the world. The bushfires were already raging in eastern Australia during the UN climate negotiations in December 2019 (UNFCCC COP 25), where Australia’s diplomatic contribution was described as ‘cynical, irresponsible and ultimately destructive’ by the former Executive Secretary Christiana Figueres. The Australian public’s increasingly widespread opposition to coal mining is also being noticed by international onlookers.

Australia’s relationships with the countries most threatened by climate change are deteriorating as a result of its commitment to coal mining and export. The tension between Australia and Pacific Island states increased during the Pacific Islands Forum (PIF) last year, when Prime Minister Scott Morrison fought to soften language on coal and climate change in the final communique from the forum.

This is a concern for Australia, with China currently vying for influence in the Pacific Islands through its investment in the region. However, China is unlikely to emphasise the role of coal in Australia’s fragmented relations in the Pacific. Despite being the world’s largest producer of coal, China has so far avoided criticism from the Pacific only by virtue of not being a PIF member.

The current state of Australian thermal coal

The impacts of COVID-19 have led to an 8% drop in global coal demand in 2020 based on 2019 levels, triggering speculation that it will cause a rapid shift away from coal. Wind, solar and hydro power are projected to increase their share of the nation’s main grid from 21 to 27 per cent this year, according to global energy specialists Schneider Electric.

Nevertheless, coal remains an important trading link between Australia and the Indo-Pacific. Australia is one of the world’s largest coal exporters, shipping $26 billion of thermal coal for electricity generation to countries and regions including Japan, China, South Korea and Taiwan in 2018-19.

With renewed demand for Australian coal in China despite ongoing tensions, Japan’s ambivalence about its future energy mix, and coal demand projected to rise in Southeast Asia for decades to come, the future of Australian coal may not be as dire as it appears. While Australia is strongly criticised for its coal exports by Europe, other countries welcome the economic opportunities that coal-powered electricity will bring.

Thermal coal plays an important role in the deepening trade relationship between Australia and India. Currently under construction, Indian company Adani’s Carmichael coal mine in Queensland will produce 10 million tonnes of thermal coal per annum in its first stage, to be exported to India and other international markets.

Though the Indian government aims to become self-sufficient in its domestic production of thermal coal by 2023-24, the pace of development means that demand for coal may continue to outstrip India’s domestic supply in the near future. However, this does not appear to be spurring local coal production in India. In line with the current global trend, India has shut down more coal generation infrastructure than it has opened this year.

Karan Adani, the CEO of Adani Group’s Ports and Special Economic Zone argues that the company’s thermal coal projects will be offset by its investment in renewables. Alongside its coal mines, power plants and ports, Adani has a number of renewable energy projects in India. This includes the world’s largest solar project, which was recently awarded to Adani Green Energy by the Indian government.

Growing momentum for change

As federal policy on emissions reduction increasingly fails to reflect the stance of Australia’s business, industry and financial sectors, and its citizenry, Australian states and territories are taking action. All have committed to net zero greenhouse gas emissions by 2050. The ACT and South Australia have joined the ‘Powering Past Coal Alliance’ – an international organisation promoting a technology transition to reduce GHG emissions led by UK and Canadian governments.

The push to reduce Australia’s greenhouse emissions is now also receiving support from increasingly unlikely actors. The Australian Energy Council is now calling for the Federal Government to commit to net zero emissions by 2050. This includes owners of all coal-fired power plants in Australia’s national electricity grid. Even the peak body representing the coal industry, the Minerals Council of Australia, has endorsed a non-dated target of net zero emissions.

Momentum is also building in the industrial sector, with the announcement of the Australian Industry Energy Transitions Initiative. Under the initiative, eight of the largest industrial companies in Australia, which collectively account for 14% of its industrial emissions, have committed to making their operations carbon neutral by 2050. The initiative is funded by the federal government, despite its refusal to commit the nation to net zero emissions by 2050. Australia looks increasingly likely to reduce its domestic greenhouse gas emissions significantly in the near-term, in a shift driven by non-state actors.

What will happen next?

Along with the growth of renewable energy investment in Australia, hydrogen power is gaining increasing attention. The rise of hydrogen looks set to reshape Australia’s trade relationships with some of the biggest buyers of its thermal coal. The federal government hopes to establish Australia as a ‘global player in the hydrogen industry’ by 2030, and released a National Hydrogen Strategy in November 2019.

The COAG Hydrogen Project Team has emphasised the importance of international cooperation in developing hydrogen in Australia, and has already developed agreements with the Republic of Korea, Japan and Singapore relating to the development of hydrogen power. But this raises further questions over the future of Australian coal, as hydrogen can be produced using fossil fuels or renewable energy.

Australia is heading towards a major transition of its energy sector, and this change is increasingly apparent at a global level. With coal production winding down around the world, the domestic and international divisions created by the Coal Line look set to dissolve in the coming years.

Rose Hawkins is an intern at Asialink, completing her Master of Environment at the University of Melbourne.

Banner image: Trucks transport coal through mine in Blackwater, Queensland, Australia.