A study published on Wednesday quantified the geographical distribution of fossil fuels worldwide that must be left unused in order for the world to prevent global warming beyond 2°C this century, the maximum “acceptable” level to avoid harm. Undeterred from the report’s calculation that 90% of its coal must be left in the ground, Australia, under Tony Abbott’s presidency, is accelerating plans for controversial new coal mines in Queensland.
If the massive mines are constructed and produce their collective annual capacity of 330 million tons, the thermal coal (once burned) will emit 705 million tons of CO2, far more than Australia’s current annual emissions of 542 million tons. Most of the coal is envisioned to be exported to India and China, but that is irrelevant in terms of global emissions. Over the lifetime of these mines, they are conservatively estimated by the Green Institute of Australia to use up 5% of the entire global “budget” of carbon between 2010 and 2050 if it is to stay within the 2°C increase.
At the heart of the matter is a gamble by billionaire Indian industrial tycoon Gautam Adani, who is investing a total of $10 billion in a receptive business environment for mining, with conservative leadership at the federal level and the Queensland state government eagerly on board. Anticipating tens of thousands of new jobs, Queensland is using taxpayer money to widen the nearest port, with an estimated cost of $300 million, as well as an undisclosed amount to help finance the railroad from the mines to the port. Adani’s Carmichael mine is the linchpin of it all. After starting that first mine and organizing and financing most of the railroad and port terminal, Adani is banking on other major mining firms to also open up mega-mines and then share in the use and costs of that transportation infrastructure.
But, as Business Today reports, Adani’s gamble (backed by both Abbot and Indian Prime Minister Narendra Modi) is premised on several crucial assumptions, which should be challenged. The first is that India’s demand for imported coal will dramatically increase, despite the Union Minister of State for Power and Coal’s statement on November 12th that the country might be able to stop importing coal within 2-3 years as Coal India more than doubles its domestic production. Second, there will not be any carbon emission rules that will keep global temperatures within the 2°C increase, in essence flaunting any global attempts to reduce emissions.
The third is that bankers and politicians will not let environmental issues hinder the project, despite the success environmental activists have already had in rallying public opposition and convincing several major banks to decline participating. The State Bank of India has extended a memorandum of understanding for a $1 billion loan, but even this was harshly criticized in India’s Parliament as throwing away money on an economically unviable venture.
The last assumption is that global coal prices will increase again (they peaked at $142/ton in 2011 before dropping to around $62/ton today), hopefully to levels envisaged by the IEA’s most likely scenario — $100/ton by 2020. This is by no means a sure thing, and since coal is the dirtiest fossil fuel it is likely to be the first replaced by natural gas or renewables.
With such uncertain fundamentals, this project looks to be financially counterproductive. More alarming still, it runs counter to badly needed global cooperation on reducing greenhouse gas emissions.