Can Australia ever give up coal?

Australia was the fifth-largest hard coal producer in 2021, trailing China, India, the US and Indonesia. The country mines its large coal resources both for internal use and export.

Even though the share of coal in its power mix has decreased, Australia ranked second among the International Energy Agency (IEA) member nations in terms of coal usage in energy production and electricity generation in 2021. According to an IEA report, Australian hard coal production increased from 348 million tonnes (Mt) in 2010-2011 to 420 Mt in 2020-2021 at a compound average annual growth rate of 1.9% throughout the last ten years.

Nevertheless, China’s unofficial import ban on metallurgical coal imports, the global Covid-19 pandemic, a shortage of labour, and unfavourable weather due to the La Niña phenomenon, which brings heavy rainfall and severe storms, have all negatively impacted Australia’s overall coal production and exports in recent years, the report said.

Meanwhile, despite mixed signals from the government, non-renewable energy production in Australia continues to contradict its efforts to mitigate climate change.

Coal consumption and government Initiatives 

By 2030, emissions resulting from the use of coal must peak and sharply decline in order to stay within the 1.5°C target set by the Paris Agreement, the IEA report says.

Given that many coal-importing countries and companies have committed to achieving net zero emissions by 2050, Australia’s trading partners that have submitted nationally determined contributions (NDC) may see a decline in coal usage.

From 1 July 2023, the Australian Government capped the price of coal used to generate electricity at A$125 a tonne in collaboration with the New South Wales and Queensland Governments. It was part of an A$1.5bn programme meant to reduce annual utility costs for customers by roughly A$230.

“Coal price caps were implemented to address the domestic impact of high global thermal coal prices resulting from the war in Ukraine,” a spokesperson for Climate Change and Energy Minister Chris Bowen told the Sydney Morning Herald.

However, as the government looks for cost-of-living solutions, Bowen is prepared to lift the federal government’s restriction on coal prices, with compensation worth hundreds of millions of dollars to power companies. Bowen has yet to make a final decision.

The tabloid newspaper also reported that the total cost of the compensation to coal companies would be “in the order of A$1.5bn to A$2bn, with the Commonwealth paying a 50% share”.

The Energy Price Relief Plan serves as a supplementary measure to the government’s extended energy transformation strategy for Australia. As Australia moves towards a renewable energy system, this includes cooperating with the states and territories through the National Energy Transformation Partnership to “maintain reliable, secure and affordable electricity”.

The Australian coal industry is also pushing and funding the development of low-emission technologies (LET), including carbon capture, utilisation and storage (CCUS), lignite-based CCUS, and gasification-based hydrogen production. The government has made investments totalling A$790m in linked emissions technology, including CCUS, since 2008.

The Australian Government stated that 82% of the country’s electricity would come from renewable sources, the IEA said. However, there is still ambiguity regarding the coal consumption…