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Mine Site Greenhouse Gas Mitigation

Greenhouse Abatement Strategy for the Coal Mining Industry

Mine Site Greenhouse Gas Mitigation » Mine Site Greenhouse Gas Mitigation

Published: May 00Project Number: C8002

Get ReportAuthor: Craig Windram, Stuart Dix | E3 International

This project is intended to make a positive contribution to the debate over the impact of domestic and international climate change policy on the coal mining industry, with particular reference to the impact that downstream abatement strategies in the steel and power sectors in key export markets will have upon the Australian coal mining industry.

The objective of the project is threefold:

  • To provide a broad overview of policies and mechanisms that govern international and domestic climate change policy and assess theis impact on the Australian coal mining industry;
  • To collate and describe a series of practical case studies that achieve cost effective greenhouse gas emissions reductions at the mine site; and
  • To explore the impact that downstream abatement strategies in the steel and power sectors in key export markets will have upon the Australian coal mining industry.

The implications of climate change policy are twofold: first, issues stemming from the requirement to meet domestic emission reduction targets, and second downstream factors stemming from action taken unilaterally by the industry's principal customers - electricity generators and steel producers.

Under the targets proposed in the Kyoto Protocol, the Australian coal mining industry would be required to contribute towards reductions in the nation's greenhouse gas emissions by the year 2012. Given the projected increase in Australian coal production that is forecast for the period 2000-2010, this represents a significant challenge to the industry. While greenhouse gas emissions per tonne of ROM coal have been steadily falling as a result of a variety of energy efficiency measures and improved management of fugitive emissions, a reduction in the industry's gross emissions is likely to prove more elusive.

The direct emission of greenhouse gases associated with the extraction and processing of coal are minimal in comparison with the emissions generated by the combustion of coal products. The significance of climate change policy for the Australian coal mining industry may lie not in the direct impact that domestic targets will have on coal mining operations but on the impact that targets assumed in key overseas markets would have on the demand for Australian thermal and coking coals.

The impact assessments undertaken to investigate the effect of international climate change policy on trade and the Australian economy have largely reported a bleak outlook for carbon intensive energy sources such as coal. A bottom up policy assessment of the top importing countries of Australian thermal and metallurgical coal shows that these studies have a tendency to overstate the impact of climate change policy on Australian coal exports to Annex B countries. In practice the transition towards less carbon intensive technologies in the electricity and iron and steel industries will take time.

Emission reduction initiatives in the short term will not engender any significant structural change in the electricity and iron and steel industries. Many countries, particularly Japan will rely heavily on trading mechanisms and action undertaken in developing countries under the CDM to meet targets.

Due to the time required for the turnover of capital stock in the electricity and iron and steel industries, the impacts of climate change policy in Annex B countries on the Australian coal mining industry are likely to be felt most acutely not during the first commitment period, but rather during the second commitment period, between 2013 and 2018.

Nevertheless, the period between 2000 and 2012 will set the foundations for a more radical realignment of the energy supply industry in the future. The second commitment period will undoubtedly include more stringent targets for Annex B countries such as Japan, as well as either voluntary or mandated targets for Non-Annex B countries such as Taiwan and South Korea - key importers of Australian coals. These negotiations for the second commitment period are expected to commence in 2005.

The effect of international climate change policy on the sale of coal to Non Annex B countries will continue to be unclear until these 2005 FCCC negotiations commence. At present Non Annex B countries have not assumed greenhouse gas targets. However, a number of countries, notably Korea, Taiwan and Brazil, have begun to explore the opportunities for assuming voluntary greenhouse gas reduction targets during the second commitment period.

Despite moves in a number of Non Annex B nations to investigate the possibility of voluntary or mandated targets during the second commitment period the recent economic crisis in both South America and South East Asia has shown that the economic imperative for new coal-fired power stations will remain in an economically constrained environment. The current lack of investment confidence in South America and South East Asia has had little effect on new coal fired generation proposals, while a number of higher cost yet less carbon intensive projects, most notably gas fired power, have been shelved indefinitely.

Despite the expected growth in primary energy demand and consumption of black coal in Non Annex B countries, future planning should take account of the possibility that demand from several key Non Annex B countries may be significantly undermined by climate change policies, particularly during the second commitment period.

Opportunities may arise from increased expectations for new plant to operate at increasingly higher efficiencies. Higher efficiency plant will increase demand for high quality, low ash content, high calorific coals. Examples where climate change related energy policies are creating market opportunities include both Germany and India, which are becoming increasingly reliant on imported coal to replace poor quality indigenous coal. Substitution of high ash, high sulphur and low calorific value indigenous coal with higher quality Australian coal has resulted in significant greenhouse benefits. Likewise PCI injection in steel making industry has lowered energy consumption and therefore greenhouse gas emissions, but still relies on high quality thermal.

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