$1 trillion wasted on unneeded coal while Future Fund considers backing Adani

There is almost $1 trillion in the pipeline for new coal developments, even as the sector is facing structural decline, a new report from The Sierra Club, Greenpeace and CoalSwarm has revealed.

And in Australia, as investors back away from Adani’s controversial Galilee Basin coal mine and superannuation companies haemorrhage members’ money on fossil fuel investments, our $118 billion sovereign wealth fund, The Future Fund, is considering bankrolling the project.

There are too many coal plants in the world, but the fossil fuel industry is intent on building more anyway. That’s the contention of a new report released this week by The Sierra Club, Greenpeace and CoalSwarm, which estimates it would cost $981 billion to construct all the proposed coal developments in the world, even as the industry faces what many analysts say is a terminal decline.

The cost is 150 per cent more than what the International Energy Agency estimates it would cost to provide renewables to the 1.2 billion people lacking access to energy.

The report says the industry has “ignored” the trends of a growing decline in electricity production from coal, with close to 1500 gigawatts of capacity currently being constructed or in various stages of planning.

Because of excess capacity in the system, existing coal stations are already running at decreased utilisation rates, most extreme in China where the average coal plant is operational just 49.4 per cent of the time, and expected to fall further this year. Regardless, due to a shift in permissions from central to provincial government, approvals for new coal power plants tripled over the past year in the country, the report said.

“Coal use keeps falling off a cliff and plants are sitting idle, yet more money is being wasted on misguided attempts at locking in this dirty, dangerous fuel,” Sierra Club senior campaigner Nicole Ghio said. “The hundreds of billions being thrown at coal could instead go toward the booming clean energy sector, helping more than a billion people get access to the clean, reliable electricity that fossil fuels have failed to deliver.”

Greenpeace senior global campaigner Lauri Myllyvirta said the coal industry was making “a last-ditch effort” in the face of faltering business cases, growing health impacts and a warming climate.

“China alone is housing the largest power market investment bubble the world has ever seen,” he said. “Even after announcing suspension of new permits in 13 provinces, the country could still bring over 500 new coal-fired power plant units online while power generation from coal is falling precipitously on clean energy growth and slower power demand.”

The report rebutted the claim that new plants are appropriate to build because they are more energy efficient, saying it would lock in “large, long-lived carbon emitters”.

“In terms of climate safety, the clock is ticking on the transition to clean energy,” CoalSwarm director Ted Nace said. “There is no time to waste.”

Will Australia gamble the nation’s wealth on coal?

One project still attempting to get up in this environment is Adani’s Galilee Basin coal mine, which over the past year has seen a procession of lenders back away for both financial and reputational reasons.

These include the Commonwealth Bank, NAB, Citigroup, JP Morgan Chase, Goldman Sachs, Deutsche Bank, BNP Paribas, Barclays, HSBC, the State Bank of India, the Queensland Treasury and the Royal Bank of Scotland, among others.

On the reputational front, the development has successfully been connected to the destruction of the Great Barrier Reef, which in recent weeks has been in media around the world for a severe coral bleaching event, which has been linked to climate change.

Not only would the coal from the project help fuel the effects of climate change, part of the Great Barrier Reef Marine Park would also have to be dredged so coal could be shipped through it.

Aside from reputational risk, reports have suggested that the coal project just doesn’t stack up financially.

Now reports out of India have revealed that Adani’s Arun Jaitley has flown to Australia and will on Friday meet with Future Fund chairman Peter Costello to discuss making funds available for the project.

The news was slammed by former fossil fuel boss turned climate campaigner Ian Dunlop, who said Mr Costello had “lost the plot”.

“It is extraordinary that faced with the structural decline of thermal coal and even a basic understanding of climate change, Peter Costello would entertain the possibility of funding Adani’s Galilee Basin coal mine,” Mr Dunlop said.

“It seems remarkable, but perhaps the former Treasurer hasn’t noticed the coal boom has ended. One would hope that his fellow board members would have greater foresight.”

He said the Future Fund board had a fiduciary responsibility to “objectively assess and manage the risks and opportunities implicit in their investments”.

“Failure to honestly account for climate risk will expose board members to personal liability, as is happening overseas.”

This story was published with permission from The Fifth Estate.

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