Asleep at the Wheel: why Australia’s emissions policy debacle puts hundreds of communities at risk

by Michael West | Nov 1, 2020 | Comment & Analysis, Energy & Environment

Hundreds of communities across Australia are hurtling towards the coal and gas cliff as politicians obsess over Cartier watches and pandemic politics. Michael West reports on the spectre of plunging demand for fossil fuels and the savage effects it will reap on regional communities.

Australia is hurtling towards the fossil fuels abyss with nothing in the way of a policy to save thousands of communities across the land from destitution. There is no transition plan for the nation’s future. Nothing.

Nothing, despite the compelling facts. The urgency of plummeting demand for our major exports cannot be understated, says IEEFA energy analyst Bruce Robertson, whose predictions on fossil fuel markets over the past decade have been spot on.

“No major politicians are talking about it. “There are no transition plans. They are pretending it is not happening, that it doesn’t exist.

“It doesn’t matter what you think about climate change, what you think about emissions,” says Robertson, whose progressive energy think tank advocates renewable energy. All that matters is what our major customers think. The politicians are selling Australia’s coal communities down the river”.

Here is the need-to-know. Korea joined Japan and China this week with net zero emissions targets. The former two are now pledging to move to net zero by 2050 and the latter by 2060. Australia – and its prime minister’s office stacked with coal lobby types – has no zero emissions target.

All this means, as these countries are huge consumers of Australian gas and coal, that demand for our major exports is about to plunge; plunging hundreds of coal communities into economic distress at the same time.

And despite the confronting facts, there is still no government plan for transition to new industries. Nothing to bridge the gap, nothing.

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The IEA has stated that primary energy demand has to fall by 17% by 2030 to a level similar to 2006, even though the economy will be twice as large, says Robertson. And the International Energy Agency (IEA) is hardly anti coal. Two of its major funders are the US and Japan.

Just as the rapid pace of price deflation in renewable energy has stunned even the most ardent supporters of renewables, the rapidity in decline for fossil fuel demand is likely to be greater than the IEA forecasts.

Coal demand falls by 60% over this period to a level last seen in the 1970s, says Robertson, due to the global response to climate change and its corollaries: electrification, efficiency gains and behavioural changes. The impact on Australia is immense.

It is inconceivable that the Government has not been advised about the fossil fuel cliff, that Treasury has done no modelling. Despite its reluctant acceptance that climate change is real, the Coalition has just rush a bill being through federal parliament which effectively prepares the nation for a militarised response to climate breakdown

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While politicians persist with small-time politics and point scoring, their champions in the media are also ignoring the immense threat to the economy. Neither is there any plan espoused in the editorial pages of the two largest national newspapers.

Yet the changes are upon us now.

“Origin’s Australia Pacific LNG venture with ConocoPhillips and Sinopec has only drilled 23 wells this financial year compared with 95 at the same time last year, according to analysis by adviser EnergyEdge, which raised concerns about the impact on future production levels,” noted the Australian Financial Review this week.

“Looks like a fracking collapse to me,” says Robertson. “Also just to spice things up, Shell has announced another massive $1.9 billion write-off on Prelude, its floating LNG facility off the North West Shelf of WA.

Shell, which posted its September quarter results on Thursday night, disclosed that its Prelude facility accounted for $US1.327 billion ($1.9 billion) of pre-tax write-downs. The oil major said the impairment reflected the “revised outlook for production, with no output expected to resume at the troubled venture this year”.

“Just to clarify, that is $1.9 billion on top of $12.4 billion in the first six months written off by Shell in Australia (not just Prelude, they also took a hit on their Queensland coal seam gas to LNG assets)”.

Thrashing for thermal coal

Meanwhile, the price of thermal coal is taking a thrashing while analysts are now saying green hydrogen is likely to be commercialised in steel production in the 2030s, rather than 2050s, which imperils Australia’s coking coal exports. Oil major Exxon is trying to flog its Bass Strait hydrocarbon assets. There are fossil fuel properties up for sale around the world.

Says Robertson: “Serial write-offs, collapsing investment and our customers stating they don’t want our fossil gas. Just where does that leave the gas-fired recovery?”

The “gas fired recovery” is in the face of net zero carbon emissions commitments by mid century, for all our three major trading partners for thermal coal and LNG. Japan, China and Korea, in that order, are our three biggest customers.

The market is pricing it in. Gas drillers Santos, Woodside and Origin are down 58%, 58% and 69% in share prices respectively over the past 10 years. Some $25 billion in asset write-downs across the gas sector already.

Here is the latest on export earnings from the Department of Industry, Resources and Energy quarterly:

LNG is the second largest export at $49 billion in 2018-19.

Thermal coal is the fourth largest export at $26 billion in 2018-19.

These export earnings are now in structural decline.

Nonetheless, both major parties, both funded by oil and gas donations, are still pushing the policy of a gas-led transition for Australia’s energy future. Our governing class is behaving like a deer in the headlights of a speeding Mack truck.

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Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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