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New IEA report shows NSW government must manage coal decline

Lock the Gate Alliance is calling on the NSW Government to act to manage the structural decline of the thermal coal industry following the release of a report by the International Energy Agency (IEA) dramatically revising down its projections of coal demand. 

The IEA has this morning released a Medium Term Coal Market Report that shows that for the first time since the 1990s, global coal demand growth halted in 2014 and that a drop in 2015 is also likely. While the agency is still expecting global coal demand to increase modestly, at 0.8% per annum, it has now also modelled a new scenario where Chinese coal demand continues to fall from here to 2020. Under that scenario, the IEA forecasts Australian coal exports drop by 44 million tonnes by 2020.[1]

Lock the Gate Alliance New South Wales Coordinator, Georgina Woods said, “This is an admission by the IEA that their expectation of continued strong growth in coal demand was very wrong. The implications of the decline of coal for New South Wales particularly are serious, and Mike Baird and Glady Berejiklian cannot afford to take the ostrich view.

“For the last decade, New South Wales and Australia have been recklessly expanding production volumes of coal for export. The price we have paid for this in lost farmland, damaged rivers and disruption of rural communities has been profound.

“Evidence from the Hunter Valley now shows that mining approvals do not lead to secure employment. The mining industry is slashing jobs brutally, even as it applies for new mines and expansions. We can’t afford to sacrifice any more farmland and water to an industry in structural decline, and we can’t afford to let a regional economy fall into chaos because the Treasurer and Premier would not heed the very loud and clear warning signals that there is trouble ahead.

The IEA report shows that:

  • Global demand for coal decreased by 0.9% in 2014, and they are expecting demand to fall this year too. The agency contrasts this fall with the average growth rate of 4.2%pa in the last ten years. This is total coal demand - the thermal coal drop of a full 1% is larger. 
  • In China in 2014, electricity generation grew by 3.6% but thermal coal consumption actually fell, indicating that economic and energy growth is decoupled from coal.
  • For the first time since the Medium-Term Coal Market Report was first produced in 2011, a “peak coal scenario” in China is probable.
  • Though the IEA models significant demand growth for coal in India, it also warns that country is “not the new China.”

“Coal companies are misleading the people of the Hunter, assuring us that the coal market will bounce back, and the industry has a strong future. That assessment has been discredited by financial analysts around the world, and now by the IEA.”

“The global coal market faces considerable uncertainty, but there is no uncertainty about the damage that expanded coal mining is doing to water, farmland and regional communities. The only certainty is that the future will only be bright for economically diversified regions that act now to support agriculture, tourism, renewable energy and other industries.”

[1] IEA Medium Term Coal Market Report 2015. Page 101. 

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  • Donella Peters
    commented 2016-01-04 17:47:56 +1100
    A friend provided a very interesting quote from a book she is reading (title unknown to me): "Bloomberg has reported that independent oil and gas companies will this year be spending $1.50 drilling for every dollar of income from oil and gas sales. This is the case despite the high-price oil ameliorating the low-price gas in the mix of hydrocarbons that the companies sell. Even the Oil and Gas Journal, a stalwart industry defender, has noticed that there might be a problem. They report $35 billion of writeoffs in shale investments by 15 of the main drillers, observing in an editorial that this raises “financial questions”.