#Carmichael – Of subsidies, coal mines and nation-building #auspol #climate

carmichaelmapWho’d try to build a new coal mine?  The divestment campaigns are slowly convincing banks to steer clear (), the coal price is in the floor. The Indians seem to be (finally) increasing domestic production and their solar price is tumbling.  The environmentalists and their pesky skinks are slowing things down, the social licence to operate looking being undermined .  And now the Federal government, previously a reliable source of support, might be blinking. While Malcolm Turnbull’s Resources Minister, Josh Frydenburg continues to argue that there is a ‘strong moral case’ for selling coal to the developing world.  (This argument that predates Peabody Energy’s notorious ‘Advanced Energy for Life’ by 20 years ).

Perhaps tellingly he did not put taypayers’ capital – and his own political capital – where his mouth is. He

“hinted that Adani was unlikely to get access to any cash under the $5 billion northern Australia infrastructure concessional loan kitty. “This wouldn’t be a priority project for us,” he said. Asked if Adani will be seeking taxpayer subsidies, Mr Frydenberg said it was a “commercial operation and needs to stand on its own two feet”.

The dilemma for Adani and its supporters is that to get its coal from the newly re-approved Carmichael mine, 400km inland, to the Abbot Point terminal on the Great Barrier reef would require a very expensive and controversial 400km long railway.

Meanwhile, in the US a producer in the Powder River Basin has welcomed delays in the construction of a West Coast coal export terminal, saying they “believe these agencies and environmental groups are doing the coal producers a favour by not approving or supporting the approval of these terminals”

Perhaps on the basis that the price for coal is already quite low enough, thank you.

Straws in the wind

There are straws in the wind that the incumbents are worried that overproduction is hurting their interests.  In May the chair of global commodities trader Glencore, Tony Hayward (he of the ‘I’d like my life back’ gaffe when head of BP during the Deepwater Horizon disaster) called for an end to subsidies for fossil fuels, but as a prelude to the introduction of a global carbon price, although cynics might say that this is simply a way of slowing down a price’s arrival.

More tellingly, last week the Sydney Morning Herald reported that the head of Glencore’s Australian coal operations was opposed to governments funding new entrants, saying  “Bringing on additional tonnes with the aid of taxpayers’ money would materially increase the risk to existing coal operations,”

Nothing new under the sun – nation building

Australian federal support for energy giants is nothing new.  In 1981 historian Richard White observed in his magisterial “Inventing Australia” that

“There was wide agreement that it was the government’s responsibility to provide much of the infrastructure for development, although private industry might reap the profit. An example was the establishment of B.H.P’s steel-works at Newcastle in 1912, the biggest single step towards industrialisation. State and Commonwealth Labor governments disregarded the federal party platform and helped establish B.H.P.’s steel monopoly by contributing land, power, harbour facilities, government contracts and financial support from the new Commonwealth bank.”

(page 115) [See also this excellent article about BHP’s history]

It should be remembered, for instance, that it was Labor’s Federal Infrastructure Minister Anthony Albanese who, in May 2013, extended the “Major Project Facilitation” status of the Galilee Coal Project.


When is a subsidy not a subsidy and who would  benefit  if they were cut?

Late last year the London-based Overseas Development Institute released a report,  the “The Fossil Fuel Bailout”  which estimated that “exploration by coal and energy companies is subsidised by Australian taxpayers by as much as $US3.5 billion ($4 billion) every year in the form of direct spending and tax breaks”.   It’s an argument also made repeatedly by the Canberra-based Australia Institute.  The Minerals Council of Australia’s response to these attacks is that “government funding and tax breaks for exploration are not subsidies but legitimate tax deductions for business” and that “official estimates of subsidy to the mining industry are actually quite small when compared to estimates provided by various lobby.”groups.

As Richard Denniss, Chief Economist of the Australia Institute who is campaigning for a moratorium on the construction of new coal mines made clear at a seminar in Manchester last week, by restricting supply in an era of rising demand, a moratorium would in part benefit the owners of existing mines.  This may explain some of Glencore’s recent statements.

Reframing ahead of a U-turn?

Predicting the twists and turns of government policy is a mug’s game.  Perhaps the fact that the Federal Minster Fryenberg has demured  means nothing. Or perhaps it means that the Turnbull government thinks that it’s one thing to give planning approval to Carmichael six weeks before the Paris climate conference, but quite another to throw more tax payers’ money at the scheme during an alleged budget crisis.  It could be that they are laying the groundwork (hoho) for a graceful exit from giving capitalists capital.  Time will tell.

What, however, is certain is that, with all the different controversies around mining – the dust, the stresses for and social consequences of fly-in fly-out workers, the noise, the potential dangers to the reef, and above them all climate change – there are many more battles to be fought between the miners and their opponents. The regulatory and financial powers of both the state and Federal governments will be a key battleground.

One thought on “#Carmichael – Of subsidies, coal mines and nation-building #auspol #climate

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  1. It is not just the Australian Government, as the UK Government has always subsidised the oil & gas industry, especially in the North Sea. And is of course pushing through ‘fracking’ and coal-bed methane extraction. The Canadian Government was pushing through the expansion of ‘tar-sands’, but maybe that will now change. I have found out, the Portuguese Government granted 50 licenses for oil & gas exploration in the Algarve, inshore and offshore. Whilst the Brazilian Government has recently tried to auction of lots for oil & gas exploration within the Amazon.
    It would see m, the oil & gas industry along with Governments, have an agenda to exterminate all human beings!

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