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The real cost of coal is quickly adding up

By: Linda Connor, Stuart Rosewarne
28 May, 2012

We are paying the price for cheap energy, and "cheap coal" is a myth. And like all myths, we accept its wisdom without thinking.

On a recent ABC Q&A show, Senator Nick Minchin said Australians: "are blessed with hundreds of years of coal and gas resources" that give us "a comparative advantage in cheap energy" providing jobs for "thousands upon thousands of Australians."

The NSW government and the Minerals Council praise the benefits of coal: besides employment, it is the source of huge company profits as well as mining royalty payments ($1.17 billion in 2010-11). Burning coal generates most of the state's electricity and coal is the state's largest export revenue earner.

But, what is the story behind coal? The number of people directly employed in mining in NSW is currently 47,600 or 1.36 per cent of a 3.5 million workforce, with about 19,000 in the Hunter (6 per cent of the region's workforce).

The benefits must be weighed against many hidden costs, including government subsidies to the industry; the damage to people's health and the environment; and lost opportunities because of failure to develop other industries, including "clean" energy.

Both state and federal governments provide subsidies to the coal industry. Direct subsidies include coal terminal lease fees and providing infrastructure so that coal can be transported to electricity generators or to port loading facilities.

Recent federal government funding for the Hunter Valley Corridor Capacity Strategy rail upgrade totals almost $700 million, with further funding in the pipeline.

The whole mining industry receives a subsidy in the form of a tax credit on the diesel that fuels the trucks and machinery. Unlike the rest of us, mining companies do not pay the federal government tax on fuel. This subsidy currently amounts to $2 billion a year or an $87 annual contribution from every Australian.

NSW residents subsidise the price of coal to power stations as well as pay higher electricity prices. The previous Labor government undertook to supply coal from the NSW government owned Cobbora mine to electricity generators at a third of the price that coal could sell for in export markets, in order to secure the viability of state generators prior to privatisation.

As a result, the government (and the people of NSW) will forego $2.7 billion in revenue, based on current export prices, through to 2020.

The coal industry will receive compensation once the carbon tax commences in July 2012. In NSW, instead of closing the "gassy mines" that produce high levels of greenhouse gases from methane gas leakage, NSW coal owners can draw on the $1300 million allocated to the Coal Sector Jobs Package over six years.

We also need to consider the health costs from increased air pollution from mining, transport and loading of coal, and coal-fired power generation in the Hunter Region. Air pollution's harm to human health is well documented, leading to a range of illnesses and reductions in life expectancy.

The 2010-2011 National Pollution Inventory for Singleton and Muswellbrook reports that particulates (PM10) from mines and power stations have increased to 62,600 tonnes (45 per cent of NSW total). Power stations emit more than 100,000 tonnes of the harmful gas SO2, 40 per cent of NSW's emissions.

The Australian Academy of Technological Sciences and Engineering (ATSE, 2009) estimated the total healthcare bill from coal-fired power stations in Australia at $2.6 billion a year.

The costs to the natural environment and farming land are hard to estimate in dollar values. While the NSW Minerals Council says "coalmining is a temporary use of land," in fact, coalmining leaves large tracts of sterile landscape, punctuated by former open-cut voids filled with toxic fluid. Creek beds and aquifers are punctured and cracked.

Contaminated mine water is released into river systems, which adds to salinity and harms native species. The expansion of mining threatens rural enterprises such as agriculture, viticulture and horse breeding, and the communities these industries sustain.

On a global scale, coal is the main industrial source of climate change. The burning of coal for electricity has grown faster than any other source of greenhouse gas emissions, and accounts for more than half of world emissions from stationary sources.

The time has arrived to leave behind the myth of "cheap coal". Added together, the hidden costs are unaffordable, for Australians and the planet.

Linda Connor is a professor of anthropology and Stuart Rosewarne is a senior lecturer of political economy, both in the Faculty of Arts and Social Sciences at the University of Sydney.

This article first appeared in the Newcastle Herald.

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Mr T | Tuesday, May 29, 2012, 11:57 AM
How about an article on the myth of "clean energy"? I think it's called "pixie dust" - though I've heard it can cause sneezing. I would have thought Linda and Stuart would have come across pixie dust in their research.
kengoldy | Wednesday, May 30, 2012, 1:04 PM
re: paras.2&3.: Given the parlous state of the world and NSW economies, I think that the status quo should be left alone, until such time as the points in paras2&3 no longer apply. Para4: close the mines, and we will not have the wherewithall to develop anything. Paras5&6: Who owns the railways? If govt., then the govt. should run them, including expansion to meet demand. If private, then there is a good argument that the govt. should provide railway services, and should therefore subsidise industry to make the service available. Same principle applies to ports. Para7. I think miners (and primary industry?) are losing that subsidy under Goose's budget. It is just a money-go-round, and some of the money rubs off every time it passes through the bureaucracy. Para8:The main reason for the price hikes to date is privatisation of the industry. Too many CEOs and execs on multi-million $ salaries, and the cost of CUSTOMER CHURN. A Vic. report blames CHURN for 60% of their to-date increases. Para9: Money-go-round. Para10: How do you compensate any entity for the destruction of employment, community, infrastructure, country? Does the rest of that para mean that mining companies are going to effectivly use the Coal Sector Jobs Package money to pay the Carbon Tax? More money-go-round? Paras11,12,13,14,&15. No argument, it is a disgrace, and must be remedied. Para 16:CO2 does not drive climate change. The zealots who continue to say that it does, do more harm to the environment, than good. The "Price on carbon" tax "designed to prevent catastrophic global warming" will make certain that the resources needed to correct REAL health and envioronment problems, will not be available.
Lou Furbadamo | Thursday, May 31, 2012, 11:51 PM
I doubt whether commendable Linda and Stuart have come across pixie dust in their travels, seeing they obviously been too busy and dedicated studying and researching real facts for this important, excellent published article. Conversely, Mr T. seems to be somewhat of an expert on them, probably because he’s created plenty of idle time by eliminating all that sort of objective boffin research stuff from his imaginary hard hiding pert critique, delivered with 100% emotive passion and zero factual content. Consequently, he’s had plenty of idle time to look for these elusive, magical pixies himself. So, despite not agreeing with the article, he should respect the fact that the authors have bothered to undertake proper research to back up their informative persuasive arguments. With regard to the cynical comment on the myth of clean energy, you only need to be outside on a windy day to feel the free wind force in you hair, which could be used to power clean wind driven generators, or outside getting sunburnt by the sun’s free rays on a sunny day, which could easily generate electricity in a solar cell or roof mounted hot water system. This is basic stuff not requiring nonsense mythical pixies and fairies to confuse the issue, nor insult qualified researches who do the subject matter justice and try to inform. Linda & Stuart, for what it’s worth after the first two negative contributor comments, congratulation on an excellent article. PS. I’ve not come across pixie dust before either, but oddly enough years ago, I was actually given a genuine 50gr. Sealed Tin of 100 year old, certified French Bottle dust by a likable work colleague on his return trip from Gay Paree, which I’ve fortuitously kept closed. Probably because I was waiting to receive some of Mr T’s captured pixie dust to start my own rare collection.
Mr T | Friday, June 1, 2012, 8:10 AM
Lou - you have no real idea of the myth of clean energy - every form of energy we use creates pollution. Just in case you didn't know, we are carbon based life forms and CO2 is an integfral part of our life cycle - it most definitely is not a pollutant. You seem to live in some mystical world yourself if you think that 'free wind force in your hair' or 'the sun's free rays on a sunny day' are going to power our world cheaply and easily - and pollution free. Do you think the pixies are going to make these items in some magic garden? I bet you think those mercury filled CFLs are great too. If you want to compare, hold your hand in that free breeze, then out in the warm sun - then hold it over a piece of burning wood/coal. See if you can see or feel the difference in the energy outputs. This energy output is what is used to generate electricity - not feel good rubbish that only exists because of vast taxpayer subsidies. You may have noticed too that the wind don't always blow and the sun don't always shine. I obviously know more about energy generation than you - so stick to your 100 year old 50gr tin of French bottle dust. And keep believing that the human emissions of CO2 are causing catastrophic global warming - because it is a belief - there's no actual proof.
Lou Furbadamo | Friday, June 1, 2012, 11:24 AM
Hello Mr. T, Nice to hear your serious argument. Fortunately, as a mechanical engineer. I do have a real, practical idea of electric power generation and believe me “clean energy” is not the “myth” you suggest. Far from it! Back in the late seventies, I worked on wind driven and conventional diesel powered alternator designs for Davey Dunlite in Adelaide. So I know what goes in them and what they’re capable of. For a 5KVA output at the time: The wind driven, with controller and steel support tower cost around $1,800.(fixed location), whereas the standard alternator and coupled diesel engine with heavy mounting frame cost upward of $6,000, depending on diesel engine brand. Comparatively, although both generators were basically the same, the energy requirement and cost to produce the complex diesel engines significantly exceeded that for the fixed wind towers. So in terms of “cleaner energy”, the wind driven was way ahead from the start. Once installed there was no comparison, because it could deliver “free” power even with only a light wind blowing, compared to the guzzling, continual refuelling , send you broke diesel cost and engine maintenance expenditure of the dirtier and noisier conventional! The end result was identical Amps, Volts and Watts, but “one much cleaner”! Everyone should have a wind driven if they have a suitable location. As you detract, obviously the wind doesn’t blow all the time. But in most application you can overcome this shortfall with the practical addition of a battery bank, which still more than repays the thousands of litres of “combustible dirty fuel saved” . We kept the rear car park of Flinders University security lit at night for years for zero electricity cost and no more than infrequent maintenance inspections, a coat of paint for the tower and occasional replacement of blown spotlights. Even without battery power storage. It’s far better to have clean free power for fuel say 30% of the time topped up with conventional than the alternative of 100% expensive dirty power all of the time. We sold tens of thousands of these so called “ feel good rubbish” generators all around the world without any of your claimed ”vast taxpayer subsidies” So please take the time to better inform yourself. Pity this great Aussie Company also lost out to the cheaper foreign imports and relocated to Asia, for both wind and conventional electrical generators.
Mr T | Friday, June 1, 2012, 1:47 PM
So Lou, you're proposing we power the whole country with your little wind generators - and battery packs? All you have demonstrated is that, in some small situations, there can be a financial advantage in 'alternate energy'. It's funny tho - i don't remember paying anywhere near $6000+ for my 5kVA Dunlite generator back in the 70s. And diesel engines of the day weren't particularly 'complex'. You seem to have some fixation that these power sources are 'clean' - no pollution at all in their manufacture?? Do you consider CO2 to be 'dirty' - if so, why? Why don't you consider all the taxpayer subsidies that go into windfarms and other so-called "clean" "free" energy sources? Use your engineering skills and work out what it'd cost to power Australia with your windmills and battery packs - also better allow baseload capacity as well. You can even throw in some solar power - don't forget to allow for the inefficiences caused by dust build up in remote sunny areas (that usually lack plentiful supplies of water to keep them clean.)
kengoldy | Friday, June 1, 2012, 1:58 PM
Lou, back in the 70's, diesel and petrol powered generators were both heavily protected from imports, so naturally even those manufactured in Australia were much dearer to buy than they needed to be. Today you can buy a wind generator, without the tower, for about a dollar per watt, and DealsDirect offer an 8kVa diesel generator for $1250. Neither type of generator is very suited to the urban environment where 90%ish of us live. Neither will run a mine, or a smelter. Large scale wind farms produce no power for too much of the time.* Mining and smelting require power "on demand", if the wind ain't blowin', then the coal powered stations have to be brought up to speed, and this takes time, unless you have it running constantly on "stand by". In which case that operating cost must be added to the cost of the wind power. When (or, the way we are going, if) we develop suitable power storage of some sort, then we would be able to shut down the coal powered stations. And the cost of the storage would have to be substituted for the cost of keeping the coal powered station on standby, as part of the cost of wind power. * This is the reason so few wind farms are economically viable. Even when the wind is not blowing, loans are accruing interest, shareholders need a return on their investment, employees need salaries. It seems to me that it is an awful lot of trouble to go to, for no reason.
Lou Furbadamo | Saturday, June 2, 2012, 10:01 AM
Hello again “Mr T”, Firstly let me insist that my example was intended to demonstrate, that it’s possible to generate wind power without the conventional combustion of carbon fuel and that I did mention it’s obvious limitation when “the wind don’t blow”. Further, it’s deceptive to conclude that I proposed “powering the whole country with little wind generators” as you reported, but rather, where practical use alternative on site generated clean energy. You’d be surprised just how many larger, cost saving private systems up to 50 KVA have already been profitably independently installed to significantly reduce power costs even to small commercial ventures such dairies and farms. Anyway, it’s not a bad Idea to have a combination of cheap, small scale wind and solar generation in each household to balance and minimise overall Grid base demand. Most household demand is around the capacity of this “little 5KVA unit” anyway. It’s only the cumulative total of many households that demands the Mega and Giga watts. People obviously realise that large scale wind power generation utilises the much larger, albeit unsightly, towering monster designs, that have been readily sprouting in massive wind farms all over this country and other parts of the world. Finally, your correct on one thing, Dunlite did eventually introduce a much cheaper light duty 5KVA cast aluminium housing generator with light tubular frame and mass produced petrol engine for the home “handy man”, to compete with the dubious, cheap international stuff that was being dumped in at the time. You obviously didn’t run your gen-set at full load for very long and must have prudently discovered the trick of staking the frame down to stop it from slowly drift, drift, drifting away to annoy the neighbouring camp site. These were nothing like the standard, proper diesel versions. So, surely you’re not suggesting using a cheap aluminium minnow for direct comparison with the heavier duty, “generously stainless” wind unit, which would continuously, reliably go on for many years longer? Sadly what is mostly missing, is the acceptance that we must find alternatives, (preferably “cleaner”) to replace and slow down the current use of finite coal, oil and gas reserves, because they are being consumed and will eventually run out. What will we burn in our coal and gas power stations then? In terms of this conservation objective, I still say that even only part “clean”, part coal compromise must be more desirable than 100% Coal fired!
Mr T | Saturday, June 2, 2012, 4:53 PM
Lou - you still haven't defined what you mean by "clean". And the whole "clean energy" debate revolves around this definition. I never used my "home handyman" Dunlite on a campsite - only on my farm.
kengoldy | Sunday, June 3, 2012, 9:20 AM
Lou, coal reserves are claimed to be, and probably are, good for another 200 years. Mr T has tried and failed to get you to define "clean", so I am assuming you think CO2 is "pollution", and mankind's emmissions of it must be stopped, whatever the cost to humanity. Even "Flim flam" Flannery admits that it would take hundreds, perhaps a thousand, years, to achieve an only just measurable temperature reduction, if all of mankind's emissions ceased immediately. This "manmade CO2 drives climate change" belief has now been totally discredited, but costs of the fruitless "abatement" process continue to accumulate. One of the greatest costs is the detraction of resources for cleaning up REAL pollution, another is detraction of attention to a viable response to "peak oil". Virtually all of the "cost saving private systems" installed to date have been heavily subsidised by both tax payers and electricity users. "Distributed production" does reduce demand on the supply network, up to a point, already reached in most metropolises. That point is when "distributed production" exceeds the network's capacity to control voltage and frequency. There are ways to get around these problems, but again, it is a lot of trouble to go to for no reason.
Lou Furbadamo | Sunday, June 3, 2012, 11:10 PM
Dear Ken and Mr. T, seeing you’ve taken the interest to “enlightingly” persist. and only because it’s you! My definition of a clean process is one that doesn’t produce hazardous or damaging by-products. With regard to power generation, preferably one that doesn’t produce by-products at all! Much confusion is made about pollutants produced in the initial manufacture of generating devices. So what? If it’s a miniscule quantity compared the tonnes of fuel that would otherwise need to be burnt to provide the necessary energy longer term. Energy, which could’ve been at least significantly provided by solar, wind, hydro and geothermal etc. without further combustion pollutants. Ie. Environmentally free energy from then on, without worries about $/litre of $/tonne, nor shipping and handling etc. We know that CO2 is naturally occurring and is necessary in nature for plant photosynthesis. But at what concentration does it contribute to the glass house effect for global warming and breathing problems etc? Irrespectively, it’s not the only by-product of carbon fuel combustion that greatly concerns. Indisputably, a cocktail of other dangerous contaminants are also emitted into the environment and the air we breathe. In particular carbon monoxide, sulphur dioxide, benzine, gaseous lead, traces of mercury and other harmful residual chemicals in fuels. So why would you want to release these mostly cancerogens, prematurely or at all into our atmosphere? Another contentious comment is your iffy “coal reserves are claimed to be, and probably are, good for another 200 years”. Presumably you suggest that we have plenty of time to “burn” before worrying about running out. But that doesn’t make it safe nor better and most importantly, what gives us the selfish right to consume all the world's carbon fuels, formed over millions of years, in just circa 300 years. A mere blink of an eye. We must really think we’re ultra special or the end of the world is near to inconsiderately, recklessly think so little ahead? I am Special, Special! cause “Mr.T’s” cute little teasing dust Pixie told me so, and even I manage to minimise my consumption and carbon footprint! Best regards, for a cleaner, healthier and sustainable mythical world, Lou.