A new study published in Nature argues that 80 per cent of global fossil fuel reserves needs to remain un-burned if we are to limit global warming temperature rise to 2 °C throughout the twenty-first century. This has implications for new coal developments in Queensland including the Galilee basin coal mines being proposed and the recently approved (19 December 2014) Acland Phase 3 coal mine on the Darling Downs.
The commitment to limit climate change to this level was made by heads of state at the Copenhagen climate talks in 2009, one of the few positive agreements to come out of those talks.
Lead author Dr Christophe McGlade, Research Associate at the UCL Institute for Sustainable Resources said: “We’ve now got tangible figures of the quantities and locations of fossil fuels that should remain unused in trying to keep within the 2°C temperature limit. Policy makers must realise that their instincts to completely use the fossil fuels within their countries are wholly incompatible with their commitments to the 2°C goal. If they go ahead with developing their own resources, they must be asked which reserves elsewhere should remain unburnt in order for the carbon budget not to be exceeded.”
The table above shows how much reserves from each region need to stay in the ground. The authors include two sets of figures: one where Carbon capture and storage commercial technology is developed by 2025 for widespread implementation, and one without carbon capture and storage. I have highlighted the OECD Pacific region.
I think the painfully slow development of CCS shows that it is an uneconomic technology that will be made irrelevant by the advances in solar panel efficiencies and rollout of wind power. But that also limits the amount of fossil fuels we can burn and still meet the 2 degree target.
Without CCS being implemented, Australia must keep 95 per cent of coal reserves in the ground, unexploited, un-burned. That means the proposed coal mines planned for Queensland's Galilee basin need to remain undeveloped no matter the economics of the projects.
The Pacific OECD region is Australia, Japan and South Korea, but with most of the fossil fuel production from Australia.
Co-author Professor Paul Ekins, Professor of Resources and Environmental Policy at and Director of the UCL Institute for Sustainable Resources, made it clear that investing in fossil fuel companies was increasingly risky, “Companies spent over $670 billion (£430 billion) last year searching for and developing new fossil fuel resources. They will need to rethink such substantial budgets if policies are implemented to support the 2°C limit, especially as new discoveries cannot lead to increased aggregate production. Investors in these companies should also question spending such budgets. The greater global attention to climate policy also means that fossil fuel companies are becoming increasingly risky for investors in terms of the delivery of long-term returns. I would expect prudent investors in energy to shift increasingly towards low-carbon energy sources.”
The McGlabde and Ekin study abstract says in full:
Policy makers have generally agreed that the average global temperature rise caused by greenhouse gas emissions should not exceed 2 °C above the average global temperature of pre-industrial times1. It has been estimated that to have at least a 50 per cent chance of keeping warming below 2 °C throughout the twenty-first century, the cumulative carbon emissions between 2011 and 2050 need to be limited to around 1,100 gigatonnes of carbon dioxide (Gt CO2)2, 3. However, the greenhouse gas emissions contained in present estimates of global fossil fuel reserves are around three times higher than this2, 4, and so the unabated use of all current fossil fuel reserves is incompatible with a warming limit of 2 °C. Here we use a single integrated assessment model that contains estimates of the quantities, locations and nature of the world’s oil, gas and coal reserves and resources, and which is shown to be consistent with a wide variety of modelling approaches with different assumptions5, to explore the implications of this emissions limit for fossil fuel production in different regions. Our results suggest that, globally, a third of oil reserves, half of gas reserves and over 80 per cent of current coal reserves should remain unused from 2010 to 2050 in order to meet the target of 2 °C. We show that development of resources in the Arctic and any increase in unconventional oil production are incommensurate with efforts to limit average global warming to 2 °C. Our results show that policy makers’ instincts to exploit rapidly and completely their territorial fossil fuels are, in aggregate, inconsistent with their commitments to this temperature limit. Implementation of this policy commitment would also render unnecessary continued substantial expenditure on fossil fuel exploration, because any new discoveries could not lead to increased aggregate production.
The implications for Queensland and development of Galilee basin coal
As far as I can see the Galilee basin mines at current projected coal prices and projected demand from China (China demand for coal may peak as early as 2016) and India are uneconomic. (See IEEFA report: Briefing: The Outlook for Financing for Australia’s Galilee Basin Coal Proposals)
When you factor in climate commitments and the world moving to cap carbon emissions and the latest study this article discusses (which I made a point of reading) it is clear substantial Government subsidies for Galilee basin including development of train line and port expansion, are at high risk of being stranded assets.
That McGlade and Ekins (2015) study mentioned in this article says that for Australia 85% of gas reserves (including CSG) and 95% of coal reserves must remain unburned to realise a 2C climate target agreed to at Copenhagen in 2009. So, we should ask for a full cost/ benefit and environmental (including climate) analysis of these projects well before they start, to hold LNP treasurer Queensland Treasurer Tim Nichols to his promise he made to "subject major projects to cost benefit analysis" in the budget speech as reported in the SMH.
According to ABS statistics (2011) the coal industry is one of the smallest employers in the Queensland economy, accounting for just 1.2 per cent of employment or about 24,000 jobs. There are far more jobs in manufacturing, tourism, education, even arts and recreation, singly than in coal mining. Coal royalties represent around 4% of Queensland Government revenue, about $2billion per year. Expansion of coal mining impacts jobs and contribution to the economy from both tourism and agriculture. (Campbell, Australia Institute: The Mouse That Roars: Coal in the Queensland economy, October 2014)
Coal is an industry which Queensland taxpayers have heavily subsidised, far more than any other state, to the tune of $9.5 billion, reports the Australia Institute (Mining the age of entitlement June 2014). This table shows the amount each state is subsidising the profits of fossil fuel extraction companies:
This Australia Institute chart shows the breakdown of subsidised funding showing the substantial amount that coal is being subsidised:
Fossil fuel subsidies in Queensland were on par with the health services budget, or with Disability expenditure:
The Australia Institute also examines the return on investment from royalties. "In 2013-14 the Queensland government is budgeting to spend $1,489 million on industry assistance. This is almost 60 per cent of the $2,604 they are anticipating receiving in royalties."
This all comes with Queensland in a snap election mode with Premier Campbell Newman calling an election on Saturday January 31st, with the campaign being conducted while many people are on summer holidays.
Just before Christmas last year on December 19, literally on the eve of the election being called, the Newman Government gave it's assent to the Acland Stage 3 New Hope coal mine on the Darling Downs. The owner of the New Hope mine, Washington H Soul Pattinson, has given over $720,000 to the Liberal and National parties (state and Federal branches) between 2010-2013.
Sources:
- Christophe McGlade & Paul Ekins, 2015, The geographical distribution of fossil fuels unused when limiting global warming to 2 °C, Nature 517, 187–190 (08 January 2015) doi:10.1038/nature14016 (abstract)
- UCL News, 7 January 2015 - Which fossil fuels must remain in the ground to limit global warming?
- Andrew Campbell, the Australia Institute Mining the age of entitlement, June 2014
- IEEFA report, October 2014: Briefing: The Outlook for Financing for Australia’s Galilee Basin Coal Proposals
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