China’s demand for coal imports, including from Australia, will drop significantly by 2025, according to new modelling led by researchers at The Australian National University (ANU).
The researchers examined China’s decarbonisation plans and investment in domestic railroads, aimed to reduce the country’s dependence on seaborne coal imports and increase energy security. Their purpose-built model shows that China’s thermal imports could decline by at least 26 per cent between 2019 and 2025. But, if China follows through on ambitious climate policies, the decline could be as steep as 45 per cent.
China coal imports to “imminently” decline
Lead author of the study Dr Jorrit Gosens said that the modelling indicates that major coal exporters, like Australia, will feel the biggest losses from the changes. “Our findings are clear; Beijing’s plans for rapid decarbonisation and energy security signal the end for Australia’s current coal export boon”, Dr Gosens said. “And this isn’t going to happen far off into the future; it is imminent.”
The study’s co-author, Professor Frank Jotzo, said that the changes would have long-lasting impacts on the Australian economy as well as political debates about climate change. “Governments and investors would be wise to consider these findings in their medium to long-term outlook, more than the short-term gains from the current energy market volatility”, said Professor Jotso.
“Our findings should be of high concern to the coal industry and to Australian governments. Coal will be on the way down. We need to foster alternative economic futures. Australia’s resource and energy industries have every opportunity to prosper in a low-emissions world.”
China’s coal imports are already in dispute
There is already friction between China and Australia related to the coal trade. In 2020, China halted imports of Australian coal, triggering a crisis and leaving an AUD $14 billion a year industry in limbo. With China’s expected “imminent” phase-down of overall coal imports, this could prove a permanent fixture.
But, despite the scale of Australia’s coal industry, it has yielded few benefits for Australian workers. “The industry is abundantly foreign-owned. The coal industry employs around 50,000 people in a workforce of 12 million, a fraction of one per cent. Even in the Hunter Valley, home of the Australian coal industry, the industry is just 5% of employment”, said Roderick Campbell, research director at think tank The Australian Institute. “In short, the Australian coal industry is a big polluter, a big talker, but contributes very little to Australians.”
New coal projects: A stranded asset risk
Countries worldwide are phasing out fossil fuels, and coal is the first to go. But, Australia has 72 major coal projects under development (2020 figures). This would double current production and add a further 1.4 billion tonnes of CO2e to the atmosphere annually.
“Despite the urgent need to reduce emissions to fight climate change, the Australian Government is aggressively pursuing the expansion of fossil fuel production rather than a planned transition away from them”, says The Australia Institute in a report, “Undermining Climate Action: The Australian Way”.
All planned projects are located in Queensland and New South Wales. These projects have an annual estimated new capacity of 528,000,000 tonnes (528 Mt) of coal production – the vast majority planned for the export market.
Experts have long warned that Australia’s new coal projects will end up as stranded assets as importing countries decarbonise and the market collapses. The new modelling from the ANU suggests this outlook is imminent.
Zero-emission exports are the future
As Australia’s major trade partners close their doors to coal, Australia has the potential to establish a new green export mix worth AUD $333 billion per annum. This is almost triple the value of existing fossil fuel exports, according to research by Beyond Zero Emissions (BZE).
These new green export industries will fulfil the surging demand for zero-carbon products, such as green steel, renewable hydrogen and ammonia, green aluminium and critical minerals that will dominate global economic growth this century.
BZE analysis shows that by pursuing an ambitious “Go for Gold” scenario, Australia can secure a significant share of the global market for these growth commodities. However, if left too late, other nations will capture the early market share.
This new research from ANU is the latest reminder that Australia must rapidly change direction with its investments and industry. This is essential to secure a role in the new decarbonised global economy.