Tag Archives: Australia

Of the Australian iron ore price plummet and mining’s “social licence to operate”

Iron Ore royalties leave, just when we needed them most…

All is not well in the great Southern quarry that tourists know for its koalas and Ramsay St. For the last ten years  selling iron and coal (and building infrastructure to sell ever larger tonnage) kept Australian mining companies busy, and rich.    But since early 2011 the price that mining companies (and the royalties governments get) has been plummeting(1).   If you want the gory details of the iron ore boom and bust, Mike Sainsbury and Mike Seccombe have both written excellent articles recently.

The gist is this;  the price for a tonne of iron ore is now under $50 (and still heading south), less than is a third of the $150 it was only a couple of years ago. The main customer for all this iron ore (which, along with coking coal, is used for making steel) is China  And it turns out that the Chinese
a) have not retired/mothballed as much of their own iron mining capacity as was predicted, and have cut taxes on their own producers ( Sanderson, 2015)
b) are recycling more of their old steel. (Who knew, that you could do that, eh? It turns out that “steel is 100 per cent recyclable. Steel created 100 years ago can be recycled today and used in new products and applications.” I’m quoting from an article (Howes, 2009) in which the national secretary of the Australian Workers’ Union tried to claim that steel workers were in ‘green jobs.)
c) are building fewer houses than was predicted even recently. Perhaps they can’t find enough ghosts to live in the ghost cities they built?

So, with assumptions of profits turned to dust, a bunch of “smaller” mining companies (e.g. Atlas) are doing mothballing of their own,  because they are losing money on every tonne they dig up. Meanwhile the big boys (especially Rio Tinto, BHP and Vale) can scrape by (or indeed ‘thrive‘) because they have got deeper pockets and run more efficiently (i.e. economies-of-scale and more automation). Still, even there the market is sending signals –   “BHP, Rio and Vale were among the eight iron ore miners put on negative credit watch by Standard & Poor’s this week.” (AFR, 17th April).

Meanwhile, the Western Australian government has a whacking great hole where a goodly chunk of their budget used to be. (They were expecting to be creaming off royalties per tonne. Fewer tonnes equals more migraines for the treasurer).
Last September, back when the Iron ore was selling at $85 per tonne  the economics editor of the The Western Australian put the edges of the hole at $1.7 billion.

It’s a wider, deeper and blacker now… The next state election is almost two years away, but nobody is predicting a magical price rebound anytime soon

Immediate implications
The Australian Financial Review(AFR;  think” Financial Times”, only not quite as pink) has some predictions and observations about this–

[Western Australian] Premier Colin Barnett has repeatedly expressed palpable anger at the threat to state revenues and the Pilbara’s mining landscape that is posed by the big boys’ approach to growth. (April 15th)

As the AFR (April 16th) points out.
There is a clause in each and every one of WA’s iron ore mining agreements that says an operator must “ship from the company’s wharf all iron ore mined from the minerals lease and sold and use its best endeavours to obtain therefore the best price possible having regard to market conditions from time to time prevailing… there is very well-informed speculation that this is the point that Barnett intends to labour in meetings that he will schedule with the local bosses of Rio and BHP over the coming weeks, and that he will again remind them that they require further state approval of retention licences and of future development plans.

Longer term implications (or “where can I buy one of these ‘ social licences to operate?’”)
The AFR (April 15th) wrings its hands that the “social licence to operate [of BHP and Rio Tinto could face the most severe test in this country since native title”, warning that “the winners of iron ore’s Darwinian struggle have a Himalayan public affairs challenge ahead.”
[For non-Australian readers- “native title” refers to the legal headaches that come up once you’ve admitted that the land the white Australians ‘found’ in 1788 wasn’t empty after all.]

Social licence to operate? That’s corporate/academic speak for how ‘legitimate’ business is perceived to be. Suchman (1996) is the key text, if you’re that interested. Especially since the 2002 Mining, Minerals and Sustainable Development report the global mining industry has been paying more (than?) lip service to whether they have the tolerance of the communities they operate in.  Let’s go to some academic classifications

According to … Lindblom (1994) also identified four strategies an organisation seeking legitimation may adopt. The organisations can use external disclosures to seek to:
(1) educate and inform its “relevant publics” about (actual) changes in the organisation’s performance and activities;
(2) change the perception of the “relevant publics” – but not change its actual behavior;
(3) manipulate perception by deflecting attention from the issue of concern to other related issues through an appeal to, for example, emotive symbols; or
(4) change external expectations of its performance.
(Yongvanich and Guthrie 2004:8)

Note that nothing in the above says “demonstrably pay your taxes.” And here the Australian narrative goes to levels that a satirist just would not dare push it. It is an exquisitely bad time to be perceived to be tax-dodging, but that’s what BHP has achieved, (with Rio Tinto in the same fleet, if not the same boat.)

As Leonore Taylor reported on 10th April

BHP Billiton executives have infuriated a Senate committee by refusing to say how much the Australian Taxation Office believes it is owed because of the way the mining giant channels profits through a marketing hub in Singapore.
They also declined to say how much tax it paid in that country.
The Senate economics references committee has now demanded BHP Billiton answer its questions. Continued refusal could ultimately result in the company being held to be in contempt of the Senate.

[This ‘transfer pricing’ was identified by Bernard Keane (2011) as a more important issue than ‘foreign ownership’.] Meanwhile, the corporate behemoth Glencore, which swallowed Xstrata in 2011 and is licking its lips at the prospect of swallowing Rio Tinto (2), is doing what it can to look good. It is going to relocate its coals sales from Singapore to Australia. This follows “a clear signal this week from Joe Hockey, Australia’s treasurer, that he would block any formal takeover proposal [of Rio Tinto] due to concerns about protecting the country’s tax base.” (Smyth, 2015)

Meanwhile, the New South Wales government has changed the law to give Rio Tinto permission to mine “Saddle Ridge”
– (which in 2003 had said it would never do). Why does this matter? Because it would make the town of Bulga uninhabitable.  The locals aren’t going to take this lying down.
bulgadeclaration

So, to recap –  the mining companies are laying off workers, causing budget chaos, selling coal to anyone who’ll burn it (Japanese emissions are up)  and are apparently unbothered about being seen as tax dodgers. And now they want to pick fights with farmers, wine-makers, the tourism industry and people who are fighting for their homes. That is quite a display of … confidence.

Notes
(1) This “commodity cycle” is one of the oldest stories in commodities, but always seems to come as a surprise to our “groundhog day” brains.)

(2) The story of all the attempted takeovers of Rio Tinto – by BHP, Chinalco etc –  is fascinating, but not one for now.

References
Australian Financial Review (2015) Let them eat iron ore dust 15th April

Australian Financial Review (2015) Magnificent Seven to Atlas’ rescue 16th April

Australian Financial Review (2015) Miners go from rock stars to ore wars 17th April

Howes, P. and Leahy, M. (2009) Steel is green as the wind The Australian 25th March

Keane, B. ( 2011) ‘Selling off the farm’ isn’t the problem for the mining industry Crikey 30th June

Mitchell, T. (2015) Dumping On Bulga: How The NSW Government Abandoned An Entire Town To Big Coal New Matilda 8th March

Sainsbury, M. (2015) How Big Iron’s mistake cost you billions Crikey 9th April

Sanderson, H. (2015) Iron ore sinks further after Chinese tax cut Financial Times 11th April, page 19

Smyth, J. (2015) Glencore to shut Singapore coal hub amid tax concerns Financial Times 11th April, page 15

Seccombe, M. (2015) Resources bust worse thanks to Howard-Costello The Saturday Paper 18th April

Suchman, M.C. (1995), “Managing legitimacy: strategic and institutional approaches”, The Academy of Management Review, Vol. 20, No. 3, pp. 571-610.

Taylor, L. (2015) BHP Billiton refuses to reveal tax bill estimate to Senate committee Guardian 10th April
http://www.theguardian.com/australia-news/2015/apr/10/bhp-billiton-refuses-to-reveal-tax-bill-estimate-to-senate-committee

Yongvanich, KI. And Guthrie, J. (2004) The Australian Mining Industry’s Sustainability Reporting: An Examination of Legitimation Strategies Macquarie Graduate School of Management Working Papers

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What Australia knew about #climate change… and buried (Book Review)

When PhD candidates review a book in ‘their field’ they face multiple dilemmas. If the book isn’t helpful to their research, they’ll be tempted (fairly or unfairly) to be dismissive. It’s too helpful, they’ll be resentful because someone else has Gotten To Their Topic first. And regardless, they may feel tempted (or scared) to slag the book off, in order to make a name for themselves by cutting down a tall poppy.

taylorcoverI’m a PhD candidate, and my topic covers “Global Warming and Climate Change: what Australia knew and buried … then framed a new reality for the public”, which is the title of a new book by Maria Taylor, published by Australian National University Press.

And… (pause for comedic effect)….

This is a good book, but not too good, and it deserves a wide readership.

As Taylor points out

Australia is exceptional amongst countries, thanks to policy decisions to focus the national economy on mineral and coal exports, and ‘cheap’ electricity production for the domestic market and to attract energy-intensive multinational industries like aluminium. With this narrative, Australia was reconstructing its social reality in the 1990s.
(page 3)

Taylor covers the period 1987 (when the Australian Commonwealth Scientific and Industrial Research Organisation [CSIRO] got together with the “Commission for the Future” and set up the short-lived “Greenhouse Project”, which educated policy-makers and the public about climate change, hosted workshops for insurers and manufacturers and so on) through to 2001, with the Third Assessment Report of the Intergovernmental Panel on Climate Change, the American exit from the Kyoto Protocol process and the final Australian retreat into recalcitrance, selfishness and stupidity (a stance it has re-adopted, after a brief period of making the ‘right’ noises.).

This fifteen years was an (in)action-packed time, full of high hopes, low cunning and frustration for everyone except the coal exporters and their supporters.  Australian “commitment” probably peaked in October 1990, with the Cabinet decision to aim for a 20% reduction of C02 emissions by 2005 (as long as other advanced industrial states followed suit and the economy wasn’t affected (!)).

What happened in the 1990s? Most dramatically, the fossil fuel and allied industries got into gear. The momentum to support and expand the existing fossil fuel economy was boosted by neo-liberal think tanks and insistent sceptics, in sympathy with free market economic ideology. They mounted a potent and high-level lobbying campaign aimed at federal politicians. Coal, oil, natural gas and other extractive industries, along with other multinational corporations, such as the energy-intensive aluminium smelting industry, got organised and exerted considerable influence on government, particularly after 1995 (Hamilton 2001; Pearse 2007).
(page45)

Taylor tells the story well, and alongside time in the newspaper archives, has interviewed a bunch of interesting people (journalists, scientists and academics). She seems not to have had access to some of the more interesting ones (Barry Jones, Science Minister until 1990; Mark Diesendorf), or some of the Environment Ministers (Graham Richardson, Ros Kelly, John Faulkner, Robert Hill.)
Nonetheless are some knock-out quotes from her interviewees. Environmental consultant Alan Pears told her that Australia during the 1990s and into the mid-2000s experienced an ‘almost complete policy failure’ in curbing greenhouse gas emissions.

“We know how to make cuts in every sector, some demonstrably successful. But there are powerful economic groups and narrow theorists and nervous politicians believing that environmental action will hurt the economy. It’s been a brilliant PR strategy, and it’s left the community confused and disempowered. These beliefs are based on interpretations of crude economic modelling and reinforced by the preconception that you help either the environment or the economy.”
(page 100)

Another Alan: Alan Tate, ABC environment reporter 1990s tells her that “[I]t was the biggest, most powerful spin campaign in Australian media history—the strategy was to delay action on greenhouse gas emissions until ‘coal was ready’—with geo-sequestration (burying carbon gases) and tax support. (page 103) He tells Taylor that the strategy seems to be

“First sow seeds of doubt about the science — make it a nonsense. Say let’s not be part of the Kyoto Protocol — it’s too little anyway. Then say OK we’ve got a techno fix, geo-sequestration and nuclear. Ignore energy efficiency and renewables, why bother, those are green issues, it’s all marginal. The Oz main game is coal and cheap energy. “ (page 122)

Taylor is good on (the lack of) environmental values generally, but could have made more of the Dunlap and McCright notion of “anti-reflexivity” and how it plays out in the Australian context (she comes close to this on pages 80-84). Reference to “Terror Management Theory” and old white conservative types may have helped too. She’s also good on the silencing of Australian scientists, who mostly seem to have retreated from the fray under organised attack from pro-fossil individuals and groups (and are nowadays getting death threats).

What’s missing
Agnotology – “the creation of ignorance” is a missing concept (and while on the missing concepts –  Chomsky gets a citation, it’s not for the work on “manufacturing consent” that he did with Ed Herman.)
* The American connection – links between American denialists (at, say, the Competitive Enterprise Institute and Frontiers of Freedom) and the Australians such as the late lamentable Ray Evans, and his boss Hugh Morgan (an important figure who appear on only two pages of Taylor’s narrative).
* Environmental social movements are largely absent. (Australian Conservation Foundation, The Wilderness Society, the Friends of the Earth Australia etc)  For a detailed account of precisely this period see Joan Staples’ very interesting PhD thesis. For an excellent broader overview, see Hutton and Connors (1999) History of the Australian Environment Movement
* Trades Unions. The ACTU’s 1991-2 “The Greenhouse effect: employment & development issues for Australians” is a fascinating historical document, as is the United Mineworkers Federation’s co-sponsorship – along with the Australian Coal Association, BHP etc – of a report saying that doing anything about climate change would cost gazillions of jobs-  (Garran, R. (1992) Suffocating under greenhouse tax Australian Financial Review 6th February)

* (More) detail and examples of the specific campaigns run by the Minerals lobby (AMIC/MCA) and the ideologues (Institute of Public Affairs). Some of that detail is included in Bob Burton’s masterful “Inside Spin”.
* Hard numbers on public opinion (see McAllister, I. and Studlar, D. (1993) Trends in Public Opinion on the Environment in Australia International Journal of Public Opinion research Vol 5, (4) 353-361; Crook, S. and Pakulski, J. (1995) Shades of Green: Public Opinion on Environmental issues in Australia Australian Journal of Political Science Vol 30, pp. 39-55.)
For example, in November 1997 poll conducted by the Sydney Morning Herald found that
90 per cent of Australians are either “concerned” or “very concerned” about the environmental effects of global warming in Australia.
* 83 per cent believe global warming is a serious threat to humans and the environment.
* 79 per cent feel that Australia should join other developed nations in signing a treaty to cut greenhouse gas emissions.
* 68 per cent say the Government’s concern that a treaty will cause Australia to suffer economically should not stop it signing.  (Hogarth, M. (1997) PM Out Of Step On Greenhouse Sydney Morning Herald 26th November)

Indeed, there seems to be a partial elision in Taylor’s work between public concern and political power, with a lack of the latter being seen as indicative of the former. But given Keating’s decision to tack away from ‘green’ voters back to the ‘heartland’ of Labour support, the silence of the trades unions (other battles to fight – Workplace Relations Act (1996) etc,) the aforementioned weakness/”trees” focus of social movements (something Taylor touches on) it is unsurprising that there is a gap between what the public said they wanted and what they actually got

* Timelines of the ebbs and flows of policy-making, external pressures and internal bun fits.

The biggest “short-coming” of the book (note the quote marks ) is that it doesn’t offer up (“normative”) ideas what to do. Clearly, in the absence of a time machine we can’t change the past. However, we can learn from it, with enough courage and clarity. Taylor begins her book with the observation that

“ If we don’t understand where we have been, how public understanding can be reframed and manipulated and, indeed, how that was the story in Australia and in other Western democracies in the 1990s, it will remain easy to confuse the public and hard to move forward.” (page xiii)

But doesn’t offer up any specific suggestions. While it is true (spoiler alert: closing words of the book) that “Effective action on climate change will start when society decides that things can be handled differently, as they once were” it would have been interesting to hear Taylor’s views on how society might come to decide that, and what things might be handled differently, and how.

Verdict: All Australians who care about how we got “here” (very bad place) after what was a promising start in the late 80s/early 90s, should read this book. And share it with Australians who don’t.  This horrendoma is too big and metastatic to be left to only those who care.

 

Btw, a selection of resources I find useful (there are other folks too)

Reneweconomy (careful of their fondness for “grid parity” as a panacea though)
The Australia Institute
The Saturday Paper and the Monthly
Anything by Guy Pearse or Mike Seccombe
Guardian Australia – Lenore Taylor has been on this beat for almost 20 years, and knows what she is writing about
Graham Redfearn
Oliver Milman

For perspectives on Australian Climate Policy – Peter Christoff, Hayley Stevenson

Other books people might want to read on this topic
Hamilton, C. (2001) Running from the Storm
Hamilton, C. (2007) Scorcher
Pearse, G. (2007) High and Dry
Chubb, P. (2014) Power Failure

On the Stepper: 13th January: Climate reports, Stockholm syndrome and Green Bans

On an “Australian science/politics in the 70s and onwards” binge at mo’ (trying to be more systematic in my PhD reading).

Garratt, JR, Webb, EK and McCarthy, S. (2011) Charles Henry Brian Priestley. Biographical Memoirs of Fellows of the Royal Society 57, 349-278.

Didn’t read all of this, but the bits that relate to his climate work. He led the panel that wrote the first Australian Academy of Science report on climate change;

“During the following two years, extensive publicity was given internationally to suggestions by some European and American scientists that a new ice age was approaching and that droughts in the Sahel and India, and wheat failures in the Ukraine, were among the symptoms of this change. After concern was expressed at the World Food Conference in November 1974 about the possible effects of this predicted climate change on agricultural productivity and the global food supply, the Australian Government requested the Australian Academy of Science to report to it on these assertions. A committee on climate change was established by the Academy in March 1975 with Priestley as its Chairman; its report was handed down in March 1976 (AAS 1976). The main conclusion, that there was no convincing evidence of an imminent climatic change, either on a global scale or in Australia, must be set against the evidence then available in 1975. Another far-sighted conclusion stated, ‘All past climate changes have been due to natural events on an astronomical or global scale. Human activities are now developing in ways that could have an appreciable effect on the climate within decades.’ Two decades later, the Intergovernmental Panel on Climate Change (IPCC) was to take up this very issue in its first report on climate change. In 1976 the Committee’s report was well received, both at home and abroad, with little adverse publicity given to it at the time. The report’s main conclusions were in tune with studies elsewhere that global warming through an increase in atmospheric carbon dioxide may constitute a more serious cause for concern than the possibility of an ice age.”

(Garratt, et al, 2011: 374)

Then a bit of the Australian Quarternary Newsletter No 8, November 1976, which had a report on a Natural Hazards Symposium held in May 1976 in Canberra.. Need to track down an article by B. Thom Natural Hazards and future climate change. (well, “need” means – Marc about to over-research and under-write.”)

Quarternary, bless it, makes wordpress’s spell-check light up –

The Quaternary Period /kwəˈtɜrnəri/ is the current and most recent of the three periods of the Cenozoic Era in the geologic time scale of the International Commission on Stratigraphy (ICS).[4] It follows the Neogene Period and spans from 2.588 ± 0.005 million years ago to the present.[4] The Quaternary Period is divided into two epochs: the Pleistocene (2.588 million years ago to 11.7 thousand years ago) and the Holocene (11.7 thousand years ago to today). [wikipedia]

Then Elliott, L. (2011) Australia’s engagement with the UN on environmental issues: Benefits and balance in Cotton, J. and Lee, D. (eds) Australia and the United Nations. Canberra: Commonwealth of Australia

Lots of useful background info – Australia’s manoeuvres at Stockholm in 1972 take on an ironic tinge later (but that’s for another blog post).

Last and most certainly not least;

Ferguson, P. (2009) Patrick White, green bans and the rise of the Australian new left. Melbourne Historical Journal 37, pp. 73-88.

Wow!! I don’t understand why, at the posh school I went to in Adelaide in the 1980s, that they never taught me about the gay writer and the communist trade unionist who got on fine with feminists and aborigines and so on, and stopped developers pillaging Sydney for fun and profit. Don’t understand at all…

It’s a bloody good essay. And now I have to stop myself from reading too much about the “Green Bans” that the NSW Builders’ Labourers Federation used to protect Sydney…

On the stepper 11th January 2015: Wind power romance, past warnings, science hacks, climate histories

Trying to form a new habit – typing up what I read “as I go”. And connected to that, giving an account of what I read while on the stepper for 90ish minutes a day (mostly). The habit is not “fully bedded in” as a habit yet, but I refuse to use that as an excuse to stop bedding it in…

Today (11th January):

The second half of Hendry, C. and Harborne, P. (2011) Changing the view of wind power development: More than “bricolage.” Research Policy 40, pp. 778-789.

This was mentioned in a reading group/symposium yesterday by one of my supervisors. It’s a response/elaboration to a paper by Garud and Karnoe comparing the Danish and US wind energy industries and how they came about. Hendry and Harbone heartlessly puncture the lovely romantic notions that Tinkerers Matter throughout the process (they did, but once you get to a certain point, there’s no substitute for “science” and deep pockets. Reminds me a bit of Manuel de Landa in “War in the Age of Intelligent Machines,” where he makes the point that there are tactics, but strategy will overcome them, and there is strategy, but in the end, logistics – being able to feed, clothe, arm and replace members of your army at a more efficient rate than your enemy – is what matters.

Next I read King, J. (2008) “Looking back in Anger” Sydney Morning Herald April 30th

Presumably the hook to the commissioning editor was around the “2020 Vision” conference that Rudd’s Labor government had organised.   It was a reflection by him and other folks on an October 1998 conference “The Australian Environment: Taking Stock and Looking Ahead” – organised by the Australian Conservation Foundation and with speakers including Petra Kelly, David Bellamy (obviously before he decided climate change wasn’t real) and Milo Dunphy.

Some great quotes – useful for PhD – by Robyn Williams and so on.

Short version: “We knew, we were warned, and we bollocksed it up.” I’ll get that in my PhD, even if I have to do it as an acrostic in the conclusion!

Then Metcalfe, J. and Gascoigne, T. (1995) Science journalism in Australia. Public Understanding of Science 4, pp. 411-28.

Surveys show that media attention to science and technology has increased considerably over the past decade. Yet coverage seems shallow and technology-based, and does not appear to have succeed in making a real impact on people or in changing the ways they think about science and technology and its impact on their lives. The challenges currently facing science journalism in Australia include: the need for more in-depth and critical analysis of science and technology; overcoming the negative or trivial perceptions of editors, chiefs of staff, news directors and other gatekeepers about the importance of science and technology stories; and integrating science and technology with social, economic and political issues.

Useful for PhD in that there was no “Walter Sullivan” (legendary science journo at New York Times who knew EVERYONE) figure to serve as an agenda setter/issue entrepreneur in the 80s.

Finally Clark, W. Jager, J. Cavender-Bares, J. and Dickson, N (2001) Acid Rain, Ozone Depletion, and Climate Change: An Historical Overview, in Social Learning Group (2001) Learning to Manage Global Environmental Risks Vol 1 A Comparative History of Social Responses to Climate Change, Ozone Depletion, and Acid Rain

Incredibly useful (content and reference list), and written by people Who Were There.

This from page 29 leapt out but did not surprise me:

“Research on acid rain dates back at least to the middle of the nineteenth century. Robert Smith’s 1872 treatise Air and Rain: The Beginnings of a Chemical Climatology laid out many of the essential elements of the acid rain problem as they are known today. These included, but were not restricted to, sources in coal combustion, atmospheric transformation and transport, and impacts on plants and materials. Unfortunately, Smith’s integrated approach did not resonate with the science or policy concerns of the day and was ignored.”