Yahoo Finance The writing is on the wall: Australia's coal era is over
As the fringe of Australian politics strives to pump up the coal industry, facts show that coal production has started its long run decline.
Coal production in Australia and around the world has started to fall as energy producers rapidly move towards renewables.
Not many issues are more certain in economics and finance than the demise of coal as a source of energy generation.
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Global action on climate change and the extraordinary efficiency gains in renewable power generation means that coal is not only a blight in the fight against global warming, but it is becoming obsolete because it is getting cheaper for energy companies to use renewable sources to generate the power for our businesses, homes and cars.
Australian coal output and exports are falling
According to the latest ABS data, the volume – tonnages if you like – of Australian coal exports in the June quarter 2021 fell to its lowest level since the September quarter 2013.
From the peak volume of coal exports in the December quarter 2016, coal exports have fallen 15 per cent and the trend is clearly down.
This is not a reflection of a fall in Australian market share.
Global production of coal peaked in 2014 at 8,165 million tonnes, according to data from the Statistical Review of World Energy.
In 2020, global output was 5 per cent lower at 7,742 million tonnes.
Australia’s output of coal, which is just 6 per cent of the global total, fell to 477 million tonnes in 2020, the lowest annual output since 2014.
Growth in renewables output, conversely, is booming. Since 2014, the output of renewable energy has risen 93 per cent; it is up a stunning 530 per cent since 2006.
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The trend for renewables is clear.
Of course, coal will still be used for many years to come, but it will be in decreasing volumes. With many countries moving inexorably to renewables and away from coal, the transition is will steadily unfold.
How many years this will take is unclear. But it is easy to see the circumstances in 10 and 20 years, with coal-fired power plants closing, that coal usage will be markedly lower than it is today.
Investors are already shying away from the coal sector. Banks are scaling back their loan exposure to the coal sector at the same time they are aggressively lending for renewables.
It is easy to see how these market forces will work – coal mining opportunities will continue to wither while entrepreneurial renewable investors will likely flourish.
Fund managers are also scaling back their exposure to the coal sector as they take account of their investment guidelines which universally focus on solid long run returns for those trusting the fund to invest their retirement savings.
Some in the government and with vested interests still favour coal.
If a private sector firm is willing to invest in coal production, it of course should be free to do so. If it sees a business case for ramping up coal output, that should be allowed to happen as long as it meets the regulations and other requirements in doing so.
Quite plainly, the government should not risk any taxpayer money in such plans. Nor should it change the rules which will give the coal sector an unfair advantage. The risks are clearly too high that it will be wasting scarce money.
It is even more important that the government stay well away from coal with the global goal of zero net carbon emissions by 2050 as the world works to slow global warning and climate change.
In the end, global demand for coal has peaked and that in the years ahead, coal output will steadily decline. Many billions of tonnes of coal will be left in the ground.
Fast forward to 2050 and it’s likely that coal usage will be limited to some low income countries and not much else.
The facts on coal production are already clear. The decline in output in recent years is the start of a trend that any sensible government would be aware of when it makes decisions on whether or not to use tax payer money in any new coal projects.
It would be poor policy to allocate any money or other resources to promote coal when the writing is on the wall for its demise.
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