Why are the coal and gas industries blind to the looming crisis? - Grattan Institute

Why are the coal and gas industries blind to the looming crisis?

The coal and gas industries are showing no interest in carbon capture and storage. Yet on a rapidly warming planet it is the one remedy that could save them.

08.07.2013 News

Published by The Australian Financial Review, Monday 8 July 2013

A wealthy person is diagnosed with a fatal disease for which there is a possible but expensive cure. Surely this person would do everything they could to secure the cure. Yet the coal and gas industries, faced with such an outlook, are neither chasing the cure nor even accepting their fate.

A recent Grattan Institute report, Getting gas right: Australia’s energy challenge, highlights that the world has more than 200 years’ worth of gas resources. Yet to meet the climate change target agreed to by world governments, the energy system must produce near-zero emissions by mid-century. Before his appointment as US Energy Secretary, Ernest Moniz presented an analysis to a US Senate Committee that showed the demise of coal-fired power generation by around 2040 and then gas-fired power declining sharply from around 2045.

When Australia’s Climate Commission reported that “most fossil fuel reserves must stay in the ground”, the Australian Coal Association immediately described the commission as “ideologically driven to destroy Australia’s coal industry”. Whether this is a fair account of the commission’s intentions is unclear, yet some environmental advocates do indeed have this objective.

Demonisation from both sides is unhelpful. It neither helps governments to develop effective policy nor informs the public. No government will consign industries with export earnings of many tens of billions of dollars to the dustbin overnight. But at some point, an informed public will demand action from their governments.

Large energy companies and their industry associations such as the Australian Coal Association accept that greenhouse gases from burning coal are a problem. So how can energy companies justify their market valuations based on many future decades of resource extraction?


At this point, carbon capture and storage (CCS) is the one technology that could be the cure to prevent the demise of the coal and gas industries. It is a major part of the International Energy Agency’s mix of technologies that would meet global climate change objectives. The mining industry’s peak body, the Minerals Council of Australia, has described CCS as “a means of reducing emissions from coal”.

It is therefore perplexing that Australia’s coal and gas sectors are not desperately seeking the adoption of CCS technologies. The federal government has excluded CCS from receiving support from the Clean Energy Finance Corporation and has steadily reduced support for the CCS flagship program and the Global Carbon Capture and Storage Institute. The opposition has said it would shut down the institute. These decisions have met with deafening silence from the coal and gas companies one would have expected to be desperate for support for CCS, at least at levels that wind and solar energy have received.

Integrated CCS remains unproven at a commercial scale. Lack of industry advocacy or policy support means that CCS development is almost hopelessly behind the projections of the International Energy Agency and Treasury modelling of the last few years.

So we are left with a three-way conundrum: the financial market does not believe governments are serious about climate change, or coal and gas companies are overvalued, or the ugly duckling of CCS will emerge, and soon, as a swan and a saviour. A lot rests on the answer.