IEA questions Australia’s commitment to coal

The International Energy Agency has questioned Australia’s commitment to extract thermal coal from huge new reserves in Queensland, in the face of what describes as “increasingly questionable” economics.

In its latest World Energy Outlook, the conservative Paris-based organisation said thermal coal demand in China had peaked three years ago and was declining, leaving the fate of new Australian thermal coal provinces increasingly dependent on India’s market.

Under the IEA’s central policy scenario, which assumes that the world does nothing more to address climate change, coal demand in India is expected to rise.

But if the Paris climate change agreement to keep average global warming below 2°C is met, then the IEA says India’s power system mix will change rapidly: Solar will become the biggest single source of electricity by 2035, and the share of unabated coal-fired generation will shrink from more than 75 per cent now to just 7 per cent.

Essentially, IEA’s analysis suggests that the only hope for Australia’s coal mines is if the world ignores that global pact.

But even then it has caveats. Coal imports, it notes, are politically unpopular in India and policy-makers – such as the country’s energy minister – have repeatedly stated their intention to reduce or eliminate coal imports.

“A scenario in which India successfully and persistently reduces its imports cannot be discarded,” the IEA says, even of its central “new policies” scenario, where no further action on climate change is taken beyond the pledges already made.

“In light of the declining import trend in China, the need to tap new deposits in Australia’s Surat and the remote Galilee Basins becomes increasingly tied to the trajectory foreseen for coal imports in India,” the IEA notes.

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Giles Parkinson