The smoke and mirrors surrounding the anti-coal campaign

Coal divestment is the new black. Following the Anglican Church and others, the most recent organisations to jump onto the trend are Newcastle Council (despite the city being built on coal) and the University of Sydney. Both are withdrawing their investments from coal or other organisations that fund coal.

But like many fads, it doesn’t seem to be built on sound facts. It is more based on doing what others are doing to avoid the feeling of being left behind.

Let us look at the facts. Firstly, divestment probably won’t have a substantial impact on Australia’s coal production. Sydney University has an investment fund of about $1.4 billion, while Newcastle Council has $270 million. But the big banks reportedly have $36bn invested in coal, and the Future Fund has recently indicated it will continue to invest its $117bn in non-renewables.

Even if most of Australia’s investors engaged in divestment, there are so many other potential investors around the globe that it is hard to see any dramatic impact on the industry. And good luck to the divestment campaigners convincing investors in less democratic countries to stop funding Australian coal.

Despite this campaign, the official forecasts are for substantial increases in Australian coal production. The Department of Industry forecasts our coal exports will increase by 1.2 per cent per year to 2050. This is an increase of 54 per cent on today’s production.

To reiterate: coal production is predicted to grow by an enormous amount, not decline. And the Department also states that coal accounts for about 64 per cent of Australia’s electricity generation, and is forecast to remain at about this level by 2050.

The divestment campaign also needs to face the inconvenient predictions about coal demand, including that India has plans to almost double its coal production by 2020, and most new electricity stations under development in India are expected to be coal-based. The Department of Industry assesses that it would be “exceptionally challenging” for India to reduce its use of coal-fired electricity (to limit greenhouse emissions). The International Energy Agency’s 2014 World Energy Outlook forecasts global coal demand increasing by 15 per cent by 2040 (in its central scenario).

Not a ringing endorsement of the divestment campaign, which seems likely to having similar  success to King Canute’s command that the tide stop coming in.

Of course, official forecasts might be wrong, and around the globe by 2050 we might all be using solar panels and Tesla batteries. But this would be driven by the lower cost of these alternatives, not the divestment campaign.

Nevertheless, let us humour the divestment campaign for a moment and assume it  causes a decline in Australia’s coal production. Unfortunately for the campaign, what is most likely is that production would simply increase overseas shifting from Australia — which has high environmental standards — to other countries where environmental standards are often lower.

World coal production would remain about the same, environmental outcomes would worsen, and Australia would lose substantial export income. The value of Australia’s coal exports are expected to be $37 billion in 2014-15. It is hard to see how this is an improvement. Of course, the divestment campaign could also try to stop coal expansion elsewhere, but (again) good luck trying to do this in less democratic countries.

Surely the divestment campaign is about reducing global coal use, not moving coal production to other economies. So let us (further) humour the divestors, and suppose that it does cut the worldwide use of coal. The campaign would no doubt argue that this would help human health.

The World Health Organisation has argued that there will be 250,000 deaths per year due to global warming in 2030. This is a very large figure, granted. But there are larger figures. The WHO has also estimated that indoor smoke from open fires and stoves caused 4.3 million deaths per year in 2012. Coal plays an essential role in replacing these cooking sources.

While we should never base decisions solely on lives lost versus lives saved, it is clear that the use of coal could easily be a net saver of life. And this isn’t count the innovations that can limit the greenhouse emissions of coal, or help avoid deaths from a warmer climate. It also doesn’t count the important impact of coal in reducing human poverty. So much for the ‘human life’ argument.

The divestment campaign also misses the patronising nature of its stance. Many of the campaigners would be strong opponents of Western imperialism. But they are perfectly happy to imply (or even state explicitly) that developing countries are bad global citizens for using coal. The campaigners would consider it is wrong to tell countries such as India and China what to think or believe, but it is good to tell them what fuels to use. The hypocrisy should be self-evident.

If they are truly concerned about the use of coal in India and China, the campaigners should persuade those countries to reduce their use, rather than lecturing them from a distance. However, that would require genuine effort, rather than mere trendsetter posturing.

Michael Potter is a research fellow at the Centre for Independent Studies.