Friday, September 16, 2016

Coal moratorium would be blip for economy, modelling suggests

New research out today says Australia's economy would not be hurt by a gradual phasing out of coal production in Australia.

Modelling from the Centre of Policy Studies at Victoria University commissioned by the Australia Institute says there would be minimal economic impact if the government imposed a moratorium on new coal mines or the expansion of existing ones.

The study says the managed winding back of coal production as existing mines are depleted would be an economic blip given the industry’s share of employment which represents 0.04 percent of the Australian workforce.

It says the economy would grow regardless of a phasing out with a difference of 0.06 percent in 2040.

Professor Philip Adams who led the research told the ABC's AM program that environmental policies to put a tax on carbon was effectively a tax on the use of coal.
"The world outlook for coal is fairly bleak. We don't see much likelihood of strong market conditions for coal  over the longer term," Professor Adams said.

"Our modelling suggests that the impacts will not start for ten to 15 years. There is enough coal in mines that are operating or will be operating to continue the level of exports that we see now.

"But thereafter coal production will slow as new mines which otherwise would come on are not allowed to come on.

"Is this a bad thing for Australia? The answer is no."

However, the study commissioned by the Australia Institute concedes that while the national economic impact would be minimal, the phasing out from coal would be painful for regional areas relying on the industry.
"The Fitzroy area in Queensland, the Hunter Valley in New South Wales will be significantly affected adversely by the slowing down in both demand and supply of coal production.

Australia Institute chief economist Richard Dennis says the research is a wakeup call for the coal industry and the federal government.

"Look the end of coal is nigh. The question is whether it's nigh enough," Mr Denniss told AM.

"The effect is a rounding error - it's trivial. The Australian economy will still double in size in the coming decades.

"Literally when you graph the economy with a moratorium and without a moratorium, you need a microscope to find the difference."

The coal industry has rejected the calls for a coal moratorium and says energy generated from coal remained critical to Australia's economy.

Benjamin Sporton, chief executive of the World Coal Association, says coal currently provides 41 percent of the world's electricity and 90 percent on Australia's eastern seaboard.

"To try and say we're going to move away from a fuel that provides that much of the world's electricity, I just don't think is realistic," Mr Sporton said.

"Coal is going to play a big role in the world's economy and the world's electricity mix for decades to come and it's incredibly important that we focus on a role for low emission coal technology."

While Richard Denniss doesn't see the government imposing a coal moratorium, he says market forces will apply and that history provides some good lessons.

"The government's decision to abandon the car industry has hurt in Victoria. The Kennett government's decision to privatise electricity saw ten thousand jobs go back in the 1990s.

"Imagine if you heard someone say in the 90s they want to build a big new video cassette recorder factory?"