Thursday 28 August 2014

China climate moves put Aust coal investments at risk

Galilee Basin Coal mines

As green groups world wide urge investors to stay away from coal mining, new research shows Australian coal mines are at risk of becoming “mothballed or abandoned” as China’s commodity demands change.

A study by Oxford University looked at how coal demand from China, which account’s for half the world’s coal consumption, due to environmental factors could lead to “stranded assets” in Australia.

Whitehaven-coal-mineAAP Newsagency reports stranded assets have suffered from unanticipated devaluations.

At the same time development banks and other institutions world wide are refusing to invest in coal fired power plants.

The study, released today from Oxford University’s stranded assets program, outlines the environmentally driven shifts already underway in China.

The shifts include a desire to reduce greenhouse gas emissions, reduce the exposure to the volatile commodity market and improving energy efficiency.

AAP reports researchers found these factors and others could force mine owners to re-evaluate the viability of developed coal projects and those in the pipeline.

china wind“Demand below expectations, and lower coal prices as a result, would increase the risk that coal mines, reserves and coal-related infrastructure could become mothballed or abandoned,” the report states.

“Prices could also drop to the point where it is in the interests of miners to cease production.

This would result in stranded mines and dependent infrastructure such as railways.”

Apart from the financial impacts on mine operators and magnates, state governments would also be hurt.

Ben Caldecott Stranded assets program director Oxford UniversityThe study highlighted the significant impact posed to Queensland, where mega-mines are planned for the Galilee Basin.

The reports says state governments can reduce the risk of their investments ending up as stranded assets by limiting the use of taxpayer dollars on coal-related infrastructure, such as ports and railways.

Stranded assets program director and the study’s co-author Dr Ben Caldecott said these developments were not factored into positions most coal owners and operators were taking.

“Policy makers need to wake up to these risks as well,” Dr Caldecott said in a statement.

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