Honi Soit is electorally obliged to print this opinion piece on the referendum regarding fossil fuel divestment.
A recent report by Professor Sinclair Davidson found that the divestment case rests on false premises and unsubstantiated claims, and may breach Australian law.
The divestment campaign is environmental activism dressed up as investment advice, and anyone choosing to take investment advice from environmental activists do so at their own financial risk.
This submission will prove the importance of fossil fuels, demonstrate the flawed logic behind the divestment campaign and recommend that the University of Sydney should not divest from its fossil fuel assets.
The importance of fossil fuels to NSW, Australia and the world
The International Energy Agency predicts that overall energy demand will increase approximately 30% by 2035 and that China and India will account for half that growth. If NSW and Australia can capture this rising demand it will mean more jobs and more support for local businesses and mining communities like the Hunter.
Cheap abundant energy drives economic growth, it is the main reason why America eclipsed Europe as the strongest economy in the 20th Century. It is also largely the reason why over 500 million people have been lifted out of poverty in China since 1978.
Yet today world energy poverty remains widespread. 1.3 billion people still live without electricity and 2.7 billion live without clean cooking facilities. In India 600 million people cook with wood and organic material, putting their lives at risk through respiratory diseases.
Cheap energy is a necessary condition to alleviate global poverty and coal is the cheapest, most abundant and most reliable energy source available. It is also easier to store and transport than many other energy sources. It is baffling that those who scream loudest about inequality and global poverty are often the first to condemn the coal industry.
Coal mining is not a short term industry that can simply be phased out. Australia’s first ever export was a shipment of coal from Newcastle to India in 1799. It is an industry that keeps the lights on in NSW and Australia and makes a significant economic contribution, even weathering us from the full force of the global financial crisis. Australia’s three largest exports are now iron ore, coal and gas, delivering a huge economic windfall for our nation. Coal is NSW’s single largest export with 167 million tonnes of coal exported in 2013/14 worth over $15.2bn to our economy. Around 93% of this coal is exported from the world’s largest coal export port at Newcastle. Royalties from coal also provide the NSW Government with around $1.3bn of revenue each year, the equivalent of 12 regional hospitals or 12,000 nurses. Across Australia the coal industry paid over $38.2bn in company tax and royalties between 2006-07 and 2012-13.
In 2012/13 mining companies directly spent over $12 billion on wages, salaries, community contributions and purchases of goods and services with businesses across NSW, around half of this was spent in the Hunter. This represents over a third of the entire Gross Regional Product of the Hunter, benefiting over 4,800 local businesses and supporting over 70,000 direct and indirect local mining jobs. Behind these figures are real local people who depend on mining for their livelihoods. If taken to the full extent, the divestment campaign would see coal mining regions like the Hunter, Illawarra and Western NSW shut down and face an economic depression.
The flawed logic of the divestment campaign
The divestment campaign is an answer seeking a question, as most of the assumptions behind the campaign are simply incorrect. Professor Sinclair Davidson highlights that most governments are making little or no progress on climate targets and that “the divestment campaign logic ignores technological improvements that could vary the maximum amount of CO2 emissions”. He also notes that “the World Wildlife Fund has not divested its fossil fuel exposure, but rather hedged that risk, following the practice of ordinary investors, who are indeed pricing the risk of climate change, but just not as highly as the environmental movement would like.”
The divestment campaign may also contravene the letter or the spirit of the Corporations Act, in particular section 1041E. Professor Davidson explains that the divestment campaign could be classified as an unlawful secondary boycott by ASIC since the campaign aims to stigmatise the fossil fuel sector and restrict coal mining in Australia by targeting a critical supplier to the sector.
However, even if the divestment campaign were to succeed in Australia by destroying our coal and gas industries, Australia’s international customers would simply substitute our resources for poorer quality coal from international competitors. Australia is in the fortunate position of exporting high calorific, low to medium ash, low sulphur content coal. Our coal burns cleaner and that means less pollution and higher energy efficiency. Indonesia is one of our main competitors in the coal market. Most of their product is rated around 3800 to 4400 kcal/ kg. In comparison, Australian coal is usually exported with values higher than 5500 kcal/kg. As the IEA figures show, none of our trading partners are planning on using less coal in the future, so our product will probably be quickly replaced by less energy efficient, dirtier coal. It is also likely the coal from our competitors won’t be extracted and developed to the same rigorous Planning standards. They won’t have our requirement for biodiversity offsets; comprehensive Environmental Impact Assessments; water protections; safety standards and rehabilitation plans. Divestment in our Liquefied Natural Gas industry is even more ludicrous, since both conventional gas and coal seam gas emit about two-thirds the Green House Emissions of coal.
Divestment not in the best interest of the University of Sydney
In particular the Greens have called on the University of Sydney to divest from its very modest holding in Whitehaven Coal’s Maules Creek project claiming that it will somehow damage the institution’s reputation. The Leard Forest is not ‘pristine wilderness’, as the extreme activists claim, but a patch of timber assessed in detail by the Federal and State Governments and under an Act of Parliament in 2005 zoned for forestry and mining – the lowest of all zonings. The project is already delivering significant economic benefits to the Gunnedah region and will provide over 400 long term local jobs. Whitehaven have also made a commitment to provide over 40 local jobs for indigenous Australians.
Demands from the Greens to end investment in this project are completely out of touch with reality. Most Australians already invest in mining directly through shares or through resources stocks held as part of their superannuation funds.
This piece is intentionally truncated as it exceeded the allotted space.