LAUNCESTON, Australia (Reuters) - A change in South Korea’s energy policy should have absolutely no bearing on the current Australian election campaign, but it should, as it’s a stark warning to politicians who still see a rosy future for coal mines and exports.
Australia is the world’s largest exporter of coal and South Korea has been a reliable customer for decades, taking 43.4 million tonnes of the polluting fuel from Australia in 2018, according to vessel-tracking data compiled by Refinitiv.
However, South Korea is now shifting its energy policy to effectively punish coal and promote both renewable energies and the use of cleaner-burning liquefied natural gas (LNG).
At the same time coal is a divisive issue in the federal election campaign underway in Australia, with environmental activists targeting politicians who support the development of new coal mines.
An example is Tony Abbott’s battle for re-election, with the pro-coal former prime minister facing Zali Steggall, a centrist independent who has made action on climate change the centrepiece of her campaign in the previously safe Liberal Party seat in Sydney’s north.
The ruling Liberal Party, which is behind the opposition Labor Party in opinion polls ahead of the May 18 vote, is generally pro-coal mining and exports, and has given its backing to the most controversial of the planned new mines, the Carmichael project being planned by India’s Adani Enterprises.
The Labor Party is more conflicted when it comes to coal, as it tries to appease its union supporters, who are keen on the high-paying mining and infrastructure jobs in the industry, and its progressive, urban voters who favour a rapid transition to renewable energies.
The pro-coal argument in Australia is generally along the lines of its better that countries in Asia burn higher-quality Australian fuel, and that the amounts being exported aren’t enough to make much of a difference to global emissions anyway.
But the idea that there is a strong and sustainable market for seaborne coal is starting to be challenged, with South Korea’s new policy being the latest.
From this month, the South Korean import tax on coal was raised by 28 percent to about $40 a tonne, while the tax on LNG imports was cut by about 75 percent to about $20 a tonne.
This is part of efforts by Asia’s fourth-largest economy to boost the share of energy generated by natural gas and renewables and move away from coal and nuclear.
A report by the Institute for Energy Economics and Financial Analysis, citing Bloomberg New Energy Finance forecasts, said that South Korea’s generation mix will move from 72 percent coal and nuclear in 2017, to 71 percent natural gas and renewables by 2050.
This sort of shift would mean a substantial drop in coal imports, undercutting the justification for new long-life, export-focused coal mines in Australia, such as Adani’s Carmichael and the Bylong project, which is being planned by Korea Electric Power Co.
It’s not just South Korea that is shifting away from imported coal, with several planned coal-fired power plants being cancelled in Japan and question marks being placed over others in South East Asian nations such as Thailand and Vietnam.
China, the world’s largest coal importer, has a policy of cutting the share of the fuel in its energy mix, while India, the second-biggest importer, has a policy of reducing imports to zero over time.
The policy shift against coal across Asia means the risk of so-called stranded assets is rising, and it’s the possibility of losing money that is likely to become a major impediment to new coal mines, related infrastructure and power plants across the region.
The opinions expressed here are those of the author, a columnist for Reuters.
Editing by Christian Schmollinger