Wednesday, April 23, 2008

A poke in the eye for the coal industry

In her earth Day speech today, Green party co-leader Jeanette Fitzsimons delivered a poke in the eye for the coal industry, with a proposal to "keep the coal in the hole" and effectively ban all new coal mines. One reason for this is (of course) climate change - with a need to cut greenhouse gas emissions by 50 - 60% by mid-century, and 80 - 90% by 2100, the world simply cannot afford to burn coal anymore. So except for cases where it is really necessary - steel production, for example - we have to stop doing it. The second is that when you include the environmental costs, coal mining simply is not profitable for society. Solid Energy delivers around $110 million a year to the government - $20 million in dividends, $40 million in GST on domestic coal sales, and $50 million in company tax (income tax on the wages it pays is presumably excluded because those people would likely be doing some other job, but you can throw that in if you want - it's an extra $20 - 30 million, and makes no difference to the final analysis). But at $30 / ton (which is now looking like a midrange figure), the carbon cost of the coal it mines comes to $204 million - almost twice as much. And that's without considering the costs of polluted waterways, dead kiwi, or dirty great holes in the ground. From the government's point of view, Solid Energy is simply a losing proposition.

The Greens' solution to this is a slow phase out. The first, and most important step is a ban on new coal mines except those necessary to fill specialist non-energy needs. Existing mines could continue operating, but demand would be reduced by banning the export of thermal coal and relegating the Huntly power station (44% of our domestic coal demand) to dry-year backup. And if CCS ever becomes feasible, industrial users would be required to use it. It's a sensible plan, it recognises that in some cases coal can't be substituted, and that the transition can't be made overnight but must instead be gradual. At the same time it is also firm in no longer being part of the problem.

New Zealand is fortunate in that we could actually do this. We have plenty of renewable energy options, so we don't actually need to burn coal to keep the lights on. Most of our production is for export, which is contributing to a global problem we do not wish to be a part of. The industry is almost entirely dominated by the government, which effectively makes a loss on it. Phasing out coal and limiting it to domestic industrial use would therefore make no difference at all to the lives of the vast majority of New Zealanders. The question is whether we will have the political will to go ahead with it.