Explainer: The rise and possible fall of Australia’s Carmichael coal mine
What links yakka skinks, Standard Chartered bank and the president of Kiribati?
They are all some of the recent obstacles to the Carmichael coal mine – a proposed project in the Galilee Basin of Queensland, Australia, that could become one of the world’s biggest sources of carbon dioxide emissions.
The A$16.5 billion coal mine was approved by the Australian government in 2014, and is being developed by Indian company Adani Mining. It is expected to start operating in 2017 and run for 90 years, producing 60 million tonnes of coal a year when operating at full capacity.
Controversy
This would make it Australia’s largest coal mine, as well as one of the largest in the world. Its production would be equivalent to around 5% of global coal exports. Burning this amount of coal would produce 128.4 million tonnes of carbon dioxide (MtCO2) a year – roughly equivalent to the emissions of Belgium.
The mine is an environmental double whammy. Not only would it increase CO2 emissions, but activists are concerned that it will threaten the Great Barrier Reef.
The coal produced at the Carmichael mine would be exported to India. In 2013, Australia was the second largest coal exporter in the world, after Indonesia. It is slated to regain the top spot by 2017.
The top five coal exporters in 2012. Source: US Energy Information Administration. Chart by Carbon Brief.
Though Australia is the world’s second largest coal exporter, it ranks only fifth in terms of total production.
The top five coal producers in 2012. Source: US Energy Information Administration. Chart by Carbon Brief.
To facilitate coal exports from the Carmichael mine, Adani is building a new railway line and expanding its terminal at Abbot Point, a coal port which lies adjacent to the Great Barrier Reef.
This involves dredging the seabed. Although plans to dump the spoil into the reef itself have been abandoned, a panel of independent experts has informed the government that the process of dredging itself can have negative impacts on marine life, both locally and possibly more broadly across the reef.
The reef is already vulnerable higher water temperature, acidification and sea level rise caused by climate change. Severe bleaching events occurred in 1998, 2002 and 2006.
Tim Flannery, the former chief commissioner of the now disbanded Climate Commission, spelled out some of the other threats arising from the Carmichael coal project to the Great Barrier Reef in an article in The Guardian. These included the possibility of a ship running aground in the sensitive area, and coal dust having a toxic effect of the corals.
There is also a risk that the improved mining infrastructure could open the floodgates for further coal exploitation in the Galilee Basin.
Adani’s Carmichael mine is just one of nine large projects that have been proposed in the Galilee Basin. This region has so far been too remote to be mined economically, but this could change with better railway links and an expanded port.
If all nine Galilee Basin mines went into operation, they would produce 330Mt of coal a year. If burnt in addition to existing coal production, this would produce 705Mt of extra CO2 emissions a year, according to a Greenpeace report.
Another joint report by Greenpeace and Ecofys, a consultancy, listed Australian coal expansion as one of the 14 “carbon bombs” that would make it extremely difficult to avoid temperature rise of 2C above pre-industrial levels, the internationally agreed limit.
Nonetheless, the project has the support from both sides of the political spectrum, including Prime Minister Tony Abbott and the Labor government in Queensland.
The Australian government lobbied Unesco to withhold the Great Barrier Reef from its “in danger” listing – a decision which would have made it more difficult to expand the nearby coal mining.
Obstacles
Unesco announced in July that it would spare the reef from its “in danger” status, but this is not the only problem that has hindered progress on the beleaguered Carmichael mine.
Banks around the world have sought to distance themselves from the project. The Commonwealth Bank and UK-based bank Standard Chartered are the latest to cut their ties with Adani.
Three French banks – Societe Generale, Credit Agricole and BNP Paribas – have distanced themselves from the Carmichael mine, as have HSBC, Barclays, Morgan Stanley and Citi. Insurance firm Aviva has warned of the “grave reputational risks” of being associated with the project.
Lack of investment is not the only financial problem to beset the company. Analysis released in August by the Institute for Energy Economics and Financial Analysis suggested that the mine could be left without a market if Indian coal imports plummet.
On the back of India’s increasing domestic coal production, Indian energy minister said in April that he was “confident that in the next year or two, we will be able to stop imports of thermal coal” – a prediction that could place the Carmichael project in dire straits if realised. In China – the second biggest market for Australia’s coal exports – demand for imported coal is also falling.
Elsewhere, the falling price of coal is taking its toll on the industry, with coal companies in New Zealand and the US forced into bankruptcy earlier this month.
President Barack Obama has sought to reduce emissions from the power industry through his Clean Power Plan, which is expected to lead to continuing falls in coal’s share of US electricity generation. The President of Kiribati has written to world leaders asking them to support a moratorium on new coal mines.
The yakka skink has also proven an unlikely stumbling block to the mine. Environment minister Greg Hunt’s approval of the mine was overturned by a federal court in Sydney earlier in August – the result of a lawsuit waged by conservation groups, which claimed that the initial decision had not significantly considered the impact on this rare breed of lizard and also the ornamental snake.
Australia’s Department of the Environment has said it will take six to eight weeks to prepare new advice and for Hunt to reconsider his decision.
Adani is also facing a legal battle with the native Wangan and Jagalingou people, who rejected an Indigenous Land Use Agreement with the Indian conglomerate.
Conclusion
None of this spells an end to coal in Australia. Thomson Reuters data shows that banks have poured more than $3 billion into Australian coal projects in the past 18 months, despite a 28% fall in thermal coal prices over the same period. Meanwhile, Australia’s coal exports are forecast to rise this year to 202.9 million tonnes.
Yet, in June, Adani halted work on the project, pulling a team of 40 engineers off the project. This led to speculation that the company was planning to abandon the scheme, The Guardian said, while The Sydney Morning Herald cited suggestions from industry sources that it could be an attempt to accelerate the process.
It could be that the legal battles, troublesome lizards and wary banks are beginning to take their toll on Adani and the Carmichael mine.