The Stats Guy: Australian coal – burn it or leave it in the ground?


Transitioning towards less polluting renewable sources of energy will be a project of many decades, writes Simon Kuestenmacher. Photo: TND/Getty
At one point in history coal was the cleaner, less polluting alternative source of energy.
Burning coal to heat homes and to cook was much less environmentally damaging than burning wood. Air pollution in the home was minimised and the amount of land used for basic heating and cooking purposes was drastically reduced. Coal allowed us to settle in bigger cities without destroying all the forests nearby.
During the Industrial Revolution coal was burned in steam engines, and enabled large scale steel production and electricity generation. Coal was the enabler of economic growth.
We are only too aware of coal’s darker side now. When burned it emits CO2 and speeds up climate change more than other energy sources. We must therefore consider coal as a transitionary energy source that eventually needs to be phased out.
In the 20th Century, oil and natural gas began to replace coal in many applications due to their higher energy density, ease of transport, and cleaner combustion. A very pragmatic shift in energy usage.
Starting in the 1950s, nuclear power entered the stage. Despite its lower emissions, nuclear energy only ever made up less than 7 per cent of global primary energy usage. After the year 2000, the share continued to fall and now sits at less than 4 per cent. The horrifying pictures of the two nuclear bombs dropped on Japan, the Chernobyl nuclear disaster, and a general fear of nuclear war ensured we never really embraced the technology.
Renewable energies have become more efficient and cheaper as time went on. As our understanding of the global climate system improved, we increasingly looked for ways to transition our energy production and transport system towards renewables.
Today many countries agreed on targets to eventually become carbon neutral, to phase out coal, or to fully rely on renewables. The shift away from coal is well and truly underway.
However, transitioning our global energy system towards less polluting renewable sources of energy will be a project of many decades. Right now, around 82 per cent of global primary energy comes from oil (32 per cent), coal (27 per cent), and gas (23 per cent). Global energy demand is usually projected to peak in the 2040s before it starts to decline.
The idea that we would be able to just stop oil now, as advocated for by the most extreme climate activists is nonsensical. A complex global system can’t possibly just give up a third of its primary energy without billions of people ending up in poverty and starvation. These calls are self-righteous moralising and utterly impractical. We can only gradually move towards a green energy future.
Back to coal
By the 2010s, global coal consumption had jumped by around 40 per cent compared to the 1990s. The economic development of many poorer economies (looking at you, China) was energy intensive and coal played a big role here. Around the world new investments into renewable energy now commonly outpace investments into coal and oil.
While we can be sure that coal’s share of the global energy mix is decreasing, it won’t disappear overnight. The long-term phaseout of coal is now guaranteed, but for decades to come it will be part of the energy mix.
So, if coal is only a transitionary energy source should Australia stop digging it out of the ground? After all, we all must do our bit to slow down climate change and bring forward a cleaner energy future. Coal mining in Australia must be stopped, right?
Let’s think through what might happen if Australia stopped mining and exporting coal tomorrow.
We would immediately see a huge global coal price surge. Australia is one of the largest coal exporters, particularly of high-quality metallurgical coal used in steel production and thermal coal for power generation. The price surge would not just impact energy but steel prices too. The global economy would slow down as costs for absolutely everything would go up. Global poverty would increase instantly.
Obviously, coal importers would scramble to secure alternative sources and further drive-up prices as they outbid each other.
Germany is a good recent example of the challenges coal importers would face. In the aftermath of the Russian invasion of Ukraine, Russian gas stopped flowing to Germany. That’s a problem because the German economy relied on cheap Russian gas to function. Gas was then imported from alternative sources at higher costs. Germany quickly built a few LNG terminals to ship gas into the country to ensure German households could stay warm.
Since the German pharma and manufacturing industries rely on relatively cheap energy, they were particularly displeased. Many scaled back their German investments, and expanded their production capacity in the US where energy is reliably cheap, thanks to the American fracking boom. The decreased industrial production in Germany meant households had enough gas to keep warm while the economy took a permanent hit.
In the short term, countries heavily dependent on Australian coal, such as Japan, China, South Korea and India, would face similar issues to Germany. They would need to quickly find alternative suppliers and pay much higher prices.
Other coal-exporting countries, such as Indonesia, Russia, South Africa and the United States, would likely ramp up production to fill the gap left by Australia and benefit from higher global coal prices. Those countries doing their best to increase production capacity would not immediately offset the lost Australian supply on the global market. You can’t just start digging coal from one day to the next. The lower quality of metallurgical coal from these new suppliers would negatively impact industries that require high-grade inputs. Products in electronics, machinery, and medical equipment come to mind.
As global coal prices rise, more investment dollars chase alternative energy sources and technologies. Global research and development of renewables would receive a boost. There would also be severe geopolitical consequences. Many global powers, none more than China, rely on the import of both food and energy as I described in a previous column.
Over time, the market would find a new equilibrium, but coal prices would likely remain higher than they were before the cessation of Australian exports. The problem for the global climate system is that most coal that would fill the Australian coal vacuum will be dirtier. Australia just happens to have relatively clean coal. A premature removal of Australian coal from the global energy system might therefore, in a very counter-intuitive way, result in higher emissions while denying Australia a nice source of income.
In summary, stopping Australian coal exports would lead to an immediate spike in global coal prices, significant short-term disruptions (poverty and geopolitical escalations come to mind), and long-term market adjustments. The overall effect would depend on how quickly other producers could ramp up supply and how consumers adjust their energy and raw material sourcing strategies.
The positive environmental impacts of Australia stopping coal exports are not as simple as an instant and permanent reduction of global CO2 emissions. It’s at least a plausible argument that emissions would go up as higher coal prices make some (much dirtier) coal deposits worth exploiting that are cost prohibitive right now. Considering that Australian coal is cleaner than most other coal around the world, the alternative coal that would enter the global market is likely more polluting. In other words, as long as the world burns coal (which it should stop as soon as feasible) it should burn Australian coal.
The global energy transition might be best served if Australia was to continue exporting coal as long as it is economically viable (we sell it for more than it costs to dig out) while at the same time spending a big chunk of the profits created on research and development of renewable energy.
Ultimately the transition to a green energy future is guaranteed once renewables are cheaper, more reliable, and practical to use (think baseline power) than the polluting triumvirate of coal, oil, and gas. Australia could dedicate itself to slowly phase out local coal power plants while continuing to export coal. If you were to design a country ideally placed to become the testing ground for all innovations in solar energy, you would come up with something like Australia. Big wide-open spaces that you can plonk solar plants on. Australia should welcome foreign investment in this field while fostering local talent and innovation in the sector. At some point in the future, we might well be able to power this country through renewables, in the meantime we will continue to inch towards that desired state powered by fossil fuels of some sort.
Designating your personal career and channelling public funding towards green technologies are more effective ways to minimise global emissions than protesting against the ageing technology of coal or demanding an imminent stop of oil.
Granted, from a purely Australian perspective this sounds like having your cake while eating it. If my logic isn’t fundamentally flawed here, Australia might yet again have proven to be the Lucky Country.
Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His latest book aims to awaken the love of maps and data in young readers. Follow Simon on Twitter (X), Facebook, LinkedIn for daily data insights in short format.