I can’t quite remember who was calling for funds managers to eliminate all coal assets from their portfolios lest investors sue them for negligence because there is no future for coal in a carbon-constrained world. (Yes, I could write their blurb for them.)
But here in the Fin today, there is an article about coal rosy future from none other than the energy forecasting body, the International Energy Agency, a body which is generally responsible for promulgating left-wing tosh. (I enclose Ben Potter’s piece below.)
This made me think of the Climate Change Authority’s hilarious, if treacherous, latest report in which we are told that Australia should rejig its emissions reduction target from 5 per cent by 2020 over 1990, to 19 per cent. We need to do this because the rest of the world is doing so much.
But here’s the kicker, which is completely inconsistent with the last sentence – we should purchase international emissions reduction permits because they are so CHEAP. But hang on – why are they so cheap? BECAUSE THE REST OF THE WORLD IS DOING SO LITTLE.
(Don’t bother reading the CCA’s report unless you want to spoil your day. Bombastic, unsubstantiated assertions with a few charts thrown in, pretty much sums it up.
Oh and by the way, the reason that the US will meet its emissions reduction target has nothing to do with government policies (well, apart from getting out of the way) but everything to do with the discovery and exploitation of shale gas (via fracking) – which the greenies hate, by the way. In fact, Obama’s regulatory interventions are just harmful, economically and socially.
Here is the piece on the IEA report:
King coal is here to stay, says the world’s top energy forecaster. Australian coal producers “definitely” have a rosy future once they get over current pricing and cost woes, Fatih Birol, chief economist of the International Energy Agency, said.
“People have been wrong many times saying that the time of the coal is passed, is over,” Dr Birol toldThe Australian Financial Review in an exclusive telephone interview from Paris. “[But] we have seen that the coal is still growing strongly – unless there are some regulations [to slow its growth].”
Dr Birol, architect of the IEA’s World Energy Outlook, said such regulations were not yet in force in developing Asia – the fastest-growing market for coal, natural gas and other forms of energy.
He said about 70 per cent of new power plants under order from utilities in China, India and south-east Asia were coal-fired, many of them “sub-critical” – or not of the most efficient modern design. Sub-critical power stations use up to 15 per cent more coal than the most modern ones, locking in higher carbon dioxide emissions.
Coal-fired power plants had a powerful competitive advantage over natural gas in the region, generating power at less than half the cost of gas, Dr Birol said. Gas-fired power still costs 2.2 times as much as coal-fired power.
Dr Birol’s comments are bad news for environmentalists campaigning to curtail the use of coal, the largest generator of carbon dioxide emissions. But they will be a relief to Australia’s besieged coalmining industry. Coal companies have laid off thousands of workers in the past two years amid falling coal prices, surging costs and a vociferous anti-coal campaign.
Coal’s position means demand and sales should continue to grow over the next two decades even as demand for liquefied natural gas in the region booms and coal use declines in rich countries with stringent pollution rules.
With Asian demand for energy continuing to grow strongly as demand from rich countries plateaus, Australia is set to overtake Qatar as the world’s largest exporter of LNG by 2018 as a $200 billion investment comes to fruition.
Dr Birol said “harsh competition from coal” and fresh sources of LNG exports to Asia from the United States, Canada and Mozambique from about 2020 would act as some constraint on LNG prices.
Australia’s LNG project developers have suffered huge cost blowouts – exemplified by the $17 billion overshoot on Chevron’s Gorgon project off the coast of Western Australia. Dr Birol said there could be some softening of LNG prices as new exports come to Asia from about 2020. These will be priced on the cheap US Henry Hub benchmark and provide Asian buyers with more flexibility and insurance against a supply crisis.
But Dr Birol said Asian LNG import prices would “absolutely not” collapse, because the cost of liquefaction and transport would lift the price of those exports closer to current Asian LNG prices.
“To believe that, like oil prices, the gas prices will converge globally and the Asian gas prices will come closer to US gas prices is only a dream and not more than that,” he said.
“We will see still significant price differences between the Asian, the European and the US markets for at least two decades to come.”
This is “good news” for exporters like Australia which can expect to enjoy “significant export revenues” for years to come.
China has shown mounting concern over coal pollution and recently signed a memorandum of understanding with the US on climate change.
But it is yet to take action and India and most parts of south-east Asia have yet to broach the subject in a serious way. “Looking at the current amount of regulations, or lack of it, I would still say that the coal has a very strong economic competitiveness vis a vis gas in many Asian markets,” Dr Birol said.
He said it would take stronger environmental regulations and some softening in LNG prices for gas to make greater inroads into Asian markets at the expense of coal’s entrenched position.
Countries such as China and Thailand, that are suffering from bad air pollution from coal use, had talked about new regulations but not implemented them yet.
It “would help gas tremendously if there are some constraints as a result of local pollution,” Dr Birol said. But environmental regulations could be countered by measures to use coal more efficiently. Australia should push for a ban on inefficient, sub-critical coal-fired power plants because more efficient coal-fired plants would reduce coal’s environmental footprint.
Asian coal prices have fallen as much as two-fifths in real terms from their peak before the global financial crisis. BHP Billiton, Glencore Xstrata, Peabody Energy, Wesfarmers, Downer EDI and Whitehaven have shed thousands of coal jobs between them in the past two years.
The World Energy Outlook 2013 forecast booming energy demand to 2035 under current policies, and still strong demand even if new policies were put in place to constrain the growth of carbon dioxide emissions and fossil fuel use. Coal would jump 44 per cent to 5435 million tonnes of oil equivalent (MTOE) by 2035 under current policies, and 17 per cent to 4483 MTOE under new policies.
Only under a global agreement to cap atmospheric carbon dioxide at 450 parts per million, which few expect, would coal use fall. Developing Asia would come to dominate global coal demand with about two-thirds of the global total as the share from elsewhere shrinks.