CANBERRA: Australia’s export revenue could be in danger as China decides to curb its coal consumption in a bid to bring changes to the country’s economy and end the adverse effects of climate change. Its move also casts doubts on the future of Australia’s new mines, such as Watermark on the Liverpool Plains and Queensland’s Galilee Basin.
According to the Sydney Morning Herald, China is considering introducing a mandatory worldwide cap on coal use in the Communist Party’s 13th five-year plan next year. Teng Fei, a senior climate change academic at Beijing’s Tsinghua University, said defining and allocating the cap among various sectors was an issue.
The move to implement a mandatory cap would result in a plunge of the national coal import, which is already down by 31 percent this year. Focusing more on growing its service and consumption-based economy would not only help China fight pollution, but also stop the spread of global warming.
China’s capping is expected to pull down coal and other commodity prices in Australia, as well cut revenues assigned for state and federal budgets. The move is already affecting the Australian market as housing construction plummeted by 17 percent amid efforts to contain a potential housing bubble.
Although power demand in China has lessened, it adds one gigawatt of new coal-fired generating capacity almost every week. However, Jiang Kejun, a research professor with the Energy Research Institute, said a ban on generating coal-fired capacity was possible as he believes “there is no market.”
The Chinese economy is currently facing a slowdown, with a growth rate of only 6.3 percent, the lowest since 1990. This slowdown has serious impacts on Australian mining sector, which had earlier witnessed an investment boom due to speeding up of the Chinese economy. Based on the Department of Foreign Affairs and Trade data, China accounts for more than one-third of Australian exports, with iron sales of AU$50.6 billion and coal of AU$8.3 billion.
“The new model of economic growth involves major adjustment for the Australian resources industries if things go smoothly in China,” Ross Garnaut, professor of economics at the University of Melbourne, said. “There will be no growth in coal or steel demand in China – in fact significant declines – for the foreseeable future while increased supply capacity is being added in exporting countries,” he added.
“Their cities are choking, to put it bluntly,” said John Creyts, managing director at the Rocky Mountain Institute, an energy think-tank. “They need a development pathway that allows them to grow without choking their people and requiring them to be dependent on external economies for the resources they need,” he added. Globally, commodity prices have also decreased with China’s waning growth.
