The real cost of coal is quickly adding up

May 21, 2012 By Linda Connor and Stuart Rosewarne

"Cheap coal" is a myth. And like all myths, we accept its wisdom without thinking.

On a recent ABC Q&A show, Senator Nick Minchin said Australians "are blessed with hundreds of years of and gas resources" that give us "a comparative advantage in cheap energy" providing jobs for "thousands upon thousands of Australians."

The NSW government and the Minerals Council praise the benefits of coal: besides employment, it is the source of huge company profits as well as mining royalty payments ($1.17 billion in 2010-11). Burning coal generates most of the state's electricity and coal is the state's largest export revenue earner.

But, what is the story behind coal? The number of people directly employed in mining in NSW is currently 47,600 or 1.36 percent of a 3.5 million workforce, with about 19,000 in the Hunter (6 percent of the region's workforce).

The benefits must be weighed against many hidden costs, including government subsidies to the industry; the damage to people's health and the environment; and lost opportunities because of failure to develop other industries, including "clean" energy.

Both state and federal governments provide subsidies to the coal industry. Direct subsidies include coal terminal lease fees and providing infrastructure so that coal can be transported to electricity generators or to port loading facilities.

Recent federal government funding for the Hunter Valley Corridor Capacity Strategy rail upgrade totals almost $700 million, with further funding in the pipeline.

The whole mining industry receives a subsidy in the form of a tax credit on the diesel that fuels the trucks and machinery. Unlike the rest of us, mining companies do not pay the federal government tax on fuel. This subsidy currently amounts to $2 billion a year or an $87 annual contribution from every Australian.

NSW residents subsidise the price of coal to power stations as well as pay higher electricity prices. The previous Labor government undertook to supply coal from the NSW government owned Cobbora mine to electricity generators at a third of the price that coal could sell for in export markets, in order to secure the viability of state generators prior to privatisation. As a result, the government (and the people of NSW) will forego $2.7 billion in revenue, based on current export prices, through to 2020.

The coal industry will receive compensation once the carbon tax commences in July 2012. In NSW, instead of closing the "gassy mines" that produce high levels of greenhouse gases from methane gas leakage, NSW coal owners can draw on the $1300 million allocated to the Coal Sector Jobs Package over six years. We also need to consider the health costs from increased air pollution from mining, transport and loading of coal, and coal-fired power generation in the Hunter Region. Air pollution's harm to human health is well documented, leading to a range of illnesses and reductions in life expectancy. The 2010-2011 National Pollution Inventory for Singleton and Muswellbrook reports that particulates (PM10) from mines and power stations have increased to 62,600 tonnes (45 per cent of NSW total). Power stations emit more than 100,000 tonnes of the harmful gas SO2, 40 per cent of NSW's emissions. The Australian Academy of Technological Sciences and Engineering (ATSE, 2009) estimated the total healthcare bill from coal-fired power stations in Australia at $2.6 billion a year.

The costs to the natural environment and farming land are hard to estimate in dollar values. While the NSW Minerals Council says "coalmining is a temporary use of land," in fact, coalmining leaves large tracts of sterile landscape, punctuated by former open-cut voids filled with toxic fluid. Creek beds and aquifers are punctured and cracked. Contaminated mine water is released into river systems, which adds to salinity and harms native species. The expansion of mining threatens rural enterprises such as agriculture, viticulture and horse breeding, and the communities these industries sustain.

On a global scale, coal is the main industrial source of climate change. The burning of coal for electricity has grown faster than any other source of greenhouse gas emissions, and accounts for more than half of world emissions from stationary sources.

The time has arrived to leave behind the myth of "cheap coal". Added together, the hidden costs are unaffordable, for Australians and the planet.

Explore further: Ambitious EU targets for renewable energies make economic sense

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CapitalismPrevails
2.3 / 5 (3) May 21, 2012
including government subsidies to the industry
. They don't receive subsidies, they receive tax deductions(just like every business) to spend on more business capital.
the damage to people's health and the environment
Well if the government would let the market work, we could have been running on coal gasification plants(much cleaner and more efficient) right now but coal companies need an EPA permit for everything.
coal mining leaves large tracts of sterile landscape, punctuated by former open-cut voids filled with toxic fluid
Just like mining for other minerals does the same thing. If you want valuable resources, your gonna have to accept trade offs and stop being perfectionist. BTW, if they contaminate the water of other people water rights, than that's grounds for a sueing in court.
antialias_physorg
2.3 / 5 (3) May 21, 2012
It would be interesting to see what the real cost of coal is per kWh.

They don't receive subsidies, they receive tax deductions
How is not having to pay a tax something besides a subsidy?
Both mean you don't have to pay something which you should be obliged to (and which makes your product artificially cheap)

Well if the government would let the market work, we could have been running on coal gasification plants

And there would be no more power in the rural areas at all. As soon as you have something which all people need (and should have access to) market forces are the worst possible solution.
BTW, if they contaminate the water of other people water rights, than that's grounds for a sueing in court.

And that makes the water cleaner, does it?
CapitalismPrevails
2.3 / 5 (3) May 21, 2012
1. Because money isn't transferred, it is SAVED. Therefor, creating more money. The government promotes tax deductions to stimulate more private spending in the economy. It's artificial private spending but it's way better than government spending.
2. Why? Natural gas plants would be irrelevant? If coal companies raise there prices, it would be more practical for a more ambitious coal power startup to establish itself and compete. They wouldn't have monopoly. Also, if we would have developed coal gasification technology, we might have been gasifying other biomass by now. E.G. perhaps wood chips. If the nuclear industry wasn't SUBSIDIZED, it would have naturally resorted to more favorable profit/risk technologies like molten salt reactors or LFTRs.
3. What developed country has a perfect environmental track record?
antialias_physorg
2.3 / 5 (3) May 21, 2012
What developed country has a perfect environmental track record?

Iceland is pretty close. (They even have filling stations for hydrogen fuel cell cars on a nationwide scale)

Because money isn't transferred, it is SAVED

Sooo... money isn't transferred with a tax cut. But money is also not being payed (tax cut, remember?).
The state is out the same amount and the company has saved the same amount both ways. Where exactly did that 'create money' out of thin air?

If the nuclear industry wasn't SUBSIDIZED, it would have naturally resorted to more favorable profit/risk technologies like molten salt reactors or LFTRs.

If the nuclear energy sector hadn't been heavily subsidized from the start it would never have gotten off the ground. A lot of those subsidies went into research and development. No amount of 'tax cuts' would have gotten them past the starting line of producing their first Watt.

islatas
not rated yet May 21, 2012
""Cheap coal" is a myth. And like all myths, we accept its wisdom without thinking."

Who's 'we'? Speak for yourself.

bigleagueslider
1 / 5 (1) May 25, 2012
"Cheap coal" is not a myth. In most of the world, burning coal is the lowest cost method of producing electrical power. To adopt the simplistic attitude that "coal bad" is to ignore reality. Much of the developing world (China, India, etc.) relies on coal for generating low cost electrical power. And historically, one of the most critical factors that leads to an improvement in a population's quality of life is access to reliable, low-cost sources of power.

During the 19th and 20th centuries, abundant coal and oil were the most important factors in improving prosperity and the quality of life for Europeans and Americans. To now deny developing populations in China and India that same advantage is simply elitist.

In the US, and as I'm also sure is the case in Australia, most coal is exported. Are these governments ready to do without the massive revenues that coal exports produce?