After Paris, the future of Australian coal is downhill

Despite its vital role in the development of Australia's economy, the future of coal looks grim in a world aiming to limit warming to below two degrees Celsius, says Newcastle University academic Gary Ellem.

The ink is barely dry on the Paris climate agreement and the debate has already started on how the deal will affect the future of fossil fuels, particularly coal.

Following the deal on Sunday, the mining industry has responded that Australian coal will remain an important provider of affordable energy to developing countries. The industry argues new low emissions technologies will keep coal in business as the world cuts carbon.

Foreign minister Julie Bishop echoed the sentiment in Paris last week, stating “coal-fired power generation is here to stay.”

The agreement aims to limit global temperature rise to less than 2 deg C, with an aspiration of 1.5 deg C. So what is the future of coal in a world that meets these temperature limits?

Who’s going to build the new coal infrastructure?

Keeping warming “well below 2 deg C above preindustrial levels and pursuing efforts to limit the temperature increase to 1.5 deg C” essentially means all new electricity generation from now on must be zero emissions or have a short amortisation life. Current emissions-intensive generation will also have to be phased out in line with the end of its initial design life.

Most coal in Australia is mined to be exported. For Australian coal exports to continue to play a significant role in our balance of trade, we must have international customers.

Australia produces both thermal coal for electricity and metallurgical coal for manufacturing, which is exported mainly to countries in Asia. Some of these customers, such as China and India, have their own coal production sectors, which produce significantly more coal than Australia. Others, such as Japan, are completely import dependent.

Whichever way the coal is used, it will add to the amount of greenhouse gases in the atmosphere unless these emission are captured by carbon capture and storage (CCS) technologies.

The infrastructure that will power our international customers’ electricity grids, steel and cement plants in 2050 largely hasn’t been built yet. In a less than 2 deg C world, all of this infrastructure will have to be close to zero emissions. In a 1.5 deg C world, any remaining emissions will have to be offset.

This means that if our customers decide to stay with coal, they will have to replace their existing infrastructure with new infrastructure incorporating carbon capture and storage, and even further offset emissions for a 1.5 deg C future with the use of biomass.

It’s clear that China has already opted for an anything but coal policy. The policy future for India is not so clear, but they are clearly planning to be more self sufficient in coal production regardless of climate objectives. Neither of these look good for the future of Australian coal exports in either the short or long term.

The competition is heating up

The Australian coal export sector is threatened by both the rise of competing technologies and other suppliers.

Competing technologies in the electricity generation space are numerous and include nuclear as well as a swathe of renewable energy technologies that are becoming cheaper and more practical.

It’s clear that carbon capture and storage technologies have failed in the current competition environment as a cheap alternative to the other low and zero-emissions technologies such as renewables. Coal has rapidly ceded ground to gas, wind, hydro and solar in key markets such as the US and China.

The long-term outlook for coal for electricity then, is shaky at best. Australia is competing for market share in a shrinking market. The International Energy Agency report quoted by the Minerals Council for a rosy coal future is very clear that the modelling is based on the continuation of pre-Paris trends rather than the Paris agreement.

It’s hard to see a long-term positive future for the industry in a global marketplace looking for competitive solutions to their 2 deg C and 1.5 deg C needs.

Even the well-trodden claims that intermittent renewables can’t supply the baseload power normally supplied by coal are looking flaky. Energy storage in the form of batteries in particular is rapidly getting cheaper and building in production capacity. A number of different battery types including lithium ion, sodium ion, aluminium ion and liquid metal batteries are all in development with on grid storage markets in mind.

The outlook for metallurgical coal may be more promising, simply because there are fewer technologies to compete.

Coal is used predominantly in blast furnaces to convert iron ore into metallic iron. Blast furnaces use coking coal to hold iron ore in place, while cheaper Pulverised Coal Injection (or PCI) coal is used to remove oxygen from the iron.

PCI coal can be replaced by charcoal from plants, reducing emissions by 18 per cent to 40 per cent. But there’s no current replacement for coking coal used in a blast furnace.

The Hismelt process from Rio Tinto can convert iron ore to new iron without the need for coking coal. But this technology is in its commercial infancy.

Should we rely on the Australian coal industry?

The coal industry has played an important role in the development of Australia as a modern industrialised economy. It has formed the basis for energy security in the Australian electricity sector and our domestic steel sector.

In more recent times, coal has been a major export commodity for Australia and has also powered the export-focused aluminium sector. Despite all of these great achievements, it’s hard to see a long-term positive future for the industry in a global marketplace looking for competitive solutions to their 2 deg C and 1.5 deg C needs.

Innovation is borne of constraint however, and it will be good for all of us if carbon capture and storage could be made cheap enough and deployable enough for widespread use. There are reasons for pursuing this technology besides coal. Carbon capture and storage can be combined with bioenergy in the form of BECCS to develop one of the few large-scale ways in which we may actively remove greenhouse gases from the atmosphere.

Given the likely demise of this substantial national export industry over the next few decades, we would be wise to think about what other innovative opportunities we can draw from the sector while it still has scale. Our coal miners are in the energy industry, but we would be foolish and simplistic if we think the only replacement industries emerging from coal is renewable energy.

We have a coal export industry simply because we have an area of natural advantage in coal i.e. high quality coal resources with rail and port access. We are yet to identify an equivalent area of natural advantage in renewables that could power a similarly scaled export industry. Yes we have sun and wind in abundance, but there is no real mechanism yet to export that to an international market.

But all is not lost. Mines are large consumers of energy and technology resources and have management responsibilities for significant tracts of the Australian landscape.

With the right guidance and incentives, the industry may yet lay the foundations for a sustainable legacy for our national economy and local communities in exportable products such as an innovative approach to professional services, transport technology and high intensity food production.

Gary Ellem is conjoint Academic in Sustainability, University of Newcastle. This article was originally published on The Conversation.

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