Stranded assets, externalities and carbon risk in the Australian coal industry: The case for contraction in a carbon-constrained world

Plans to triple or even quadruple Australian black coal production on 2010 levels by 2030 continue to inform the policy goals of Australian state and federal governments. However, only three years after many of these plans were either formally or informally approved, a number of them are no longer financially viable, and face mounting domestic and international opposition based on three main arguments: (a) the aggregated costs of subsidies, externalities and foreign-ownership in the Australian coal industry suggest that the economic benefits to Australia are not as great as the industry and its political backers claim; (b) although Australian black coal production is not likely to peak until the 2040s or later, world coal production is likely to peak around 2030, indicating that a transition to low or zero carbon energy sources in those countries currently dependent on coal is becoming an increasingly high priority from an energy security perspective; (c) because coal is one of the main contributors to anthropogenic climate change and Australia has some of the largest untapped reserves, most of that resource constitutes 'unburnable carbon'. These three arguments provide a compelling case for the contraction of the Australian coal industry over the next twenty years.