Last week, the Queensland state government gave its final environmental approval to the controversial proposed Carmichael coal mine. Spooked by the federal Labor Party’s poor result at the recent election — where it won only five of the state’s 30 seats — the Queensland Labor government fast-tracked the final approval process. Over eight years since it was first proposed, the mine — to be owned and operated by India’s Adani Group — has faced numerous legal challenges, and become a major issue for both Australia’s domestic politics and its foreign policy.
While the final environmental hurdle for Adani has been cleared, what form the mine will take remains in dispute. The scope of the mine was reduced dramatically last November, from an initial development cost of $16.5 billion down to $2 billion, after Adani failed to secure loans from any Australian banks. Why Adani was unable to secure loans in Australia may have more to do with the banks’ calculations than their environmental concerns. In either case, the proposed output of the mine was subsequently scaled back as a result, with the target of 60 million tons of coal a year reduced to 10 million tons. Adani Australia’s chief executive has not ruled out returning the project to its original configuration.
Despite the reduction in scale, the economic viability of the mine remains in dispute.
Economist John Quiggin of the University of Queensland estimates that the current price of coal is currently below what would provide the returns necessary to maintain the project, and that the current price is also set to drop (other analysts have indicated that the mine may be “just viable”). Competition for coal from both gas and renewables, analysts note, is set to intensify in the coming years as the technological advances for renewables, in particular, accelerates.
The great hope for the project has been that it would provide a significant boost to Australia’s trade with India, and the impetus to greatly expand the bilateral relationship. Australia has benefited enormously from China’s rapid growth and its hunger for Australian resources, and India’s size and developmental needs have been viewed as a similar opportunity. However, this perspective has failed to acknowledge both the inevitable decline of the coal industry and the complexity of the Indian market compared to China.
While a report on India’s energy requirements from the Brookings Institution last September stipulated that coal won’t be entirely displaced soon, it notes that investment in renewables in India is outpacing that of coal, and the trajectory of this reality — and the technological shift increased investment breeds — indicates that coal has a limited life-span as a source of energy.
Yet despite the prospect that the mine still may not go ahead (or be only very short-lived), the environmental approval of the mine has enormous symbolic value in regard to Australia’s attitude toward climate change, and its relationships with its Pacific neighbors. As I have written previously, regardless of any other worthwhile initiatives, Australia’s climate change policy is its foreign policy in the Pacific, and the approval of the Carmichael mine continues to undermine Canberra’s reputation in its immediate region.
In May the president of the Marshall Islands, Dr. Hilda Heine, delivered a speech at the Australian National University where she stated that Australia risked losing its standing in the Pacific due to its inaction on climate change. This sentiment was echoed last week by Samoan Deputy Prime Minister Fiame Naomi Mata’afa, who stated that Australia’s inaction undermines any of the other commitments it may make throughout the region. In January, Fijian Prime Minister Frank Bainimarama pleaded with Australian Prime Minister Scott Morrison to move away from fossil fuels.
In a thinly veiled swipe at Australia, New Zealand Foreign Minister Winston Peters. speaking to the media in Vanuatu last week, rhetorically asked why countries would sign up to international agreements such as the Paris Accords and Boe Declaration if they had no intention of meeting their commitments? The Boe Declaration was signed by all members of the Pacific Island Forum (PIF) in Nauru last year, and states that “climate change remains the single greatest threat to the livelihoods, security and well-being of the peoples of the Pacific.”
Despite the Queensland government’s final environmental approval of the Carmichael mine there is still a great deal of uncertainty surrounding the project; its size and scope, its viability, and its longevity are all currently unknown. As is whether the mine with provide any great benefit to the Australia-India bilateral relationship, and whether the promised economic windfall to central Queensland will materialize. What is certain though is the deficit of trust Australia has in the Pacific — or more accurately the disappointment the region feels toward Canberra — has been consolidated.