Delusion - and more delusion - in Australia over energy

'Delusional': NSW report banks on rising coal output and royalties out to 2056

SMH,

30 May, 2016

$17 billion finance hole revealed

The Baird government's future projection for NSW implies the state will extract more than 10 billion tonnes of coal at the rate of almost 1 million tonnes a day by 2056, forecasts the Greens say are "delusional" in a carbon-constrained world.

The NSW Intergenerational report released this month estimated Australia's richest state would swell in population by 50 per cent to 11.2 million in 40 years, with an annual output of $1.3 trillion by then.

NSW government report predicts coal mining in the state - and resulting royalites - will continue to grow well into the future. Photo: Dean Osland

The report also based its financial estimates in part on mineral volumes continuing to grow by 1.2 per cent a year. Thermal coal used in power stations currently accounts for 87 per cent of those volumes. 

The 104-page document excludes any examination of climate change.

The Greens crunched the numbers on coal, and assumed thermal and coking coal would maintain their respective shares of total mining. At a 1.2 per cent annual growth, the 196.6 million tonnes of coal extracted in the 2013-14 year would swell to 324.5 million tonnes a year by 2056 - or closing in on a million tonnes a day. 

When will forecasters dump their coal estimates? Photo: Robert Rough

Between 2016 and 2056, the state would have extracted 10.58 billion tonnes of coal - both thermal and coking - over these years based on the report's figures, the Greens said.

Jeremy Buckingham, the Greens energy spokesman, said the projections ignore climate change and the pledges made by the world's nations in Paris to shift to net-zero carbon emissions by the second half of this century.

"According to the NSW Treasury, the mining boom will never end, coal is forever and climate change doesn't matter," Mr Buckingham said. "Instead of delusional projections, we need a serious strategy to deal with the decline of coal and provide a managed transition to renewable energy."

The projections for state royalties are perhaps even more ambitious given the deep dive in coal prices since peaking in 2011. 

"With the thermal coal price assumed to grow with the consumer price inflation minus any change in the terms of trade, royalty revenue is expected to increase at an annual average of 4.2 per cent over the projection period," the report states.

Royalties from coal in 2015 were worth $1.27 billion, which on the projected rate of increase would balloon to $6.88 billion a year by 2056, the Greens said. (See chart below.)

NSW Treasurer Gladys Berejiklian, though, stood by the report's estimates, noting the figures were drawn from the federal Bureau of Resources and Energy Economics of the Commonwealth Department of Industry, Innovation and Science.

"The report assumes, as is the case with other policy areas, long-run trends continuing and no policy change," Ms Berejiklian said. "Therefore, it should not be used as a guide to future policy directions.

"As the report clearly states it is not a prediction of the future - rather, it is a long-term model of the state's fiscal gap to help assess future challenges and opportunities."

According to the government's information spruiking investment in the state's coal industry, the 10 billion-tonne coal production predicted out to 2056 would consume about one-third of the state's remaining reserves. (See chart below.)

Mr Buckingham said the impacts on the Great Barrier Reef and elsewhere with about 1 degree of global warming showed the Intergenerational Report to be already out of date.

"At a time when the Great Barrier Reef is dying and the Murray Darling Basin is collapsing, the government's report is signing the death warrant for future generations," he said.