Australia signs huge China coal deal

[AnotherNormal]

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Harvesting the resources of the world to fuel their economy.

China don't seem serious about carbon emissions but we knew that.

[elsdfr]

They don't seem serious about carbon emissions.

Who, Australians the Chinese or the Queensland Government?

[Wien1938]

The Chinese are not stupid. They need the coal to expand their electricity production in order to continue economic expansion.
"Aren't you worried about future generations?"
"Of course, we're worried about future generations; we're even more concerned about this generation."

[Warrior]

Coal (and oil, natural gas, and other fossil fuels) will continue to be a large part of the world's energy supply for decades to come. I'm not surprised that countries that rely on them today continue to look for more supply. I don't think this would change even if China was 100% serious about reducing carbon emissions.

[lurk]

And, of course, they've got scads of US$ that they're only too glad to trade for natural resources. They've been doing similar stuff in South America and Africa for months.

[zibber]

Awesome. Let's burn some fucking coal!

[Thinker]

Coal (and oil, natural gas, and other fossil fuels) will continue to be a large part of the world's energy supply for decades to come. I'm not surprised that countries that rely on them today continue to look for more supply. I don't think this would change even if China was 100% serious about reducing carbon emissions.

This is the reality.
85% of Australia's power generation comes from coal.
Coal is Australia's largest export industry.
Transition takes time.....don't waste time complaining that things aren't happening fast enough. It will take a generation at least.

China does have a substantial "clean energy" program.
It is difficult to get much information as the programs are government run and they don't issue press releases to the international media. They are very reluctant to share information like this.

No-one can blame the Chinese for purchasing the cheapest form of accessible energy.
Note that China has very large reserves of coal. Australia (up until this contract) did not export much coal to China (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.).
Coal powered electricity generation has a significant cost benefit over alternatives....given the current cost structure.
If any form of tax is to be applied to carbon emissions, the taxes will need to be substantial before there is a cost benefit in moving to alternatives.

The transition to new clean forms of energy is not just as simple as turning everything off and building clean energy plants. It all takes time to change and we are only at the beginning of that transition.

If you want to do something positive.....turn off your computer....or plant some trees.

[DavidHasselhoff]

Coal will make up approximately 50% of our energy supply in 2030. The Obama initiative for cleaner energy will reduce emissions but will more than likely be felt by end users. The majority of US Coal comes from the Montana/Wyoming in the powder river basin.To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts. One large measure to lower energy cost would be to break the trust by the railroads, and provide real competition between carriers. Coal makes up a large amount of the business of Burlington Northern Sante Fe and other carriers and they continually use the power of only one provider to overcharge power companies.

[AnotherNormal]

One large measure to lower energy cost would be to break the trust by the railroads, and provide real competition between carriers. Coal makes up a large amount of the business of Burlington Northern Sante Fe and other carriers and they continually use the power of only one provider to overcharge power companies.

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Warren Buffett's Berkshire Hathaway buying Burlington Northern ... wonder if this will shake things up a little.

[Thinker]

My naive understanding of Berkshire Hathaway's investment model is to pretty much leave things as they are in their acquisitions....management, business model etc etc.

Warren Buffet typically does not buy something with the intention of making changes....or trying to actively "shake things up".

Happy to be proven wrong.

[ArtistTyrant]

Buffett just finds companies on the upswing and is very good at timing purchases based off of buying when popular consensus is undervaluing the core business of the company he wishes to purchase...not that hard with all the insider data he has

[DavidHasselhoff]

I meant to include that. Mr. Hathaway just made his opinion known on the future of energy.

[LaoTzu]

Every week to 10 days, another coal-fired power plant opens somewhere in China that is big enough to serve all the households in Dallas or San Diego. (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)

Coal plants require coal...


The Aussies had best be careful how they spend that 60Bil... it's short-term money. If they start living like it's always going to be there, they'll be in a shit-storm come 20 years from now.

[elsdfr]

Coal plants require coal...


The Aussies had best be careful how they spend that 60Bil... it's short-term money. If they start living like it's always going to be there, they'll be in a shit-storm come 20 years from now.

Hmm, my guess is when no one wants our coal any more we'll start digging up the Uranium.

Aus could have taken a moral stand but really it would be like shooting yourself in the foot. If China can't get it from us then they will just go somewhere else.

If Chinalco ("China Corp.") had managed to get the big stake in Rio Tinto that it wanted I think the situation would be a lot worse.

[AnotherNormal]

60 Billion on coal, how much will they pay for health care ?

Asthma, cancer ... they have the most polluted cities in the world. What will be the health costs for the Chinese people ?

[Thinker]

The Aussies had best be careful how they spend that 60Bil... it's short-term money. If they start living like it's always going to be there, they'll be in a shit-storm come 20 years from now.

This is part of the Australian problem in coming to grips with climate change. We have huge reserves of coal.
This means it is not short term money (without a significant tax on carbon emissions - see my post above).

Also, the $60bn is over 20 years and the annual exports to China through this new contract represents less than 5% of current annual exports.

A large part of our competitive advantage is that we could sell $60bn coal to China for the next 200 years.....or more.

Yes.....a tax on carbon emissions will change that equation, but we are in a similar position to all high carbon emission, low cost energy nations (e.g. US/Canada).
Change the equation and each of these countries will suffer economically. Then the coal importers (japan, Taiwan, India etc) just get coal from Indonesia.
The solution is not easy.

I should also point out that 50% of Australian coal (roughly) is used to produce steel (mainly Japan, Taiwan and Korea) - (i.e. metallurgical coal). Stop buying cars...and Australia will stop sending coal to steel mills.

I am not advocating that change isn't necessary....just that the solution isn't straightforward.

[Krazy P]

50% - roughly - of the energy used in this country is coal. It is the basic physics of energy density.

And a solution to what? You don't like your car? Your cell phone? Your food and electricity?

Australia and NZ export lots of coal to China and Japan. It's called world trade. Increases the standard of living everywhere.

Perhaps a brief perusal of human history is in order here. Just over 100 or so years ago famine and pestilence were common - common - events in every country on the planet.

[Thinker]

Australia and NZ export lots of coal to China and Japan

Not quite right.
Australia exports very little coal to China at the moment....around 2% of its total coal exports.

The media (in Australia) keep making this mistake as well.

China has significant coal reserves of its own.
I don't know the specifics of the current coal deal with China, but I am guessing the delivery will be of a highly specified product.

NZ has very little coal.

[Discombobulate]

For those knowledgeable in game theory, I view this whole issue of to use or to not use our coal deposits as somewhat of a prisoner's dilemma (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.). Yes the best outcome for everyone would be to greatly reduce emissions, but to make a moral stance like refusing to export coal as a country individually is quite irrational.

Ultimately though, if I were in a position of power here I would heavily tax carbon usage, with the intention of investing it in compulsory carbon sequestration (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.) and further R&D for this and related CO2 storage technology. May be a large cost in the short term for infrastructure, but would well pay itself off long term, especially with exponentially increasing energy demand. Personally I think all those wanting to go around shutting down power stations (and sadly in my University this is a lot of people) are complete nutcases.

(BTW vote for me for PM ;D)

[Tristan]

50% - roughly - of the energy used in this country is coal. It is the basic physics of energy density.

And a solution to what? You don't like your car? Your cell phone? Your food and electricity?

Australia and NZ export lots of coal to China and Japan. It's called world trade. Increases the standard of living everywhere.

Perhaps a brief perusal of human history is in order here. Just over 100 or so years ago famine and pestilence were common - common - events in every country on the planet.

I agree with the sentiment. Coal provides general well-being. People in the OECD sit in Copenhagen and wring their hands in guilt over carbon emissions, while places like China blaze on ahead of us with aggressive pro-growth policy and trade. THEY are doing what it takes to raise the standard of living. Cheaper goods, like energy, are the best hope for poor people. Green technology, on the other hand, is added expense, and it is no trivial expense either. Presently you can either be an environmentalist or a humanitarian; unfortunately, there is no middle ground right now.

[Causa Mortis]

People in the OECD sit in Copenhagen and wring their hands in guilt over carbon emissions, while places like China blaze on ahead of us with aggressive pro-growth policy and trade. THEY are doing what it takes to raise the standard of living.

...

There's little in Chinese policy that's particularly pro-growth. Their economic "miracle" is the result of shifting to a market economy and from eliminating facepalm-worthy activity that was restraining growth.

Only looking at GDP would (radically (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)) overstate the improvement in China's standards of living. While their material standard of wealth has clearly risen, there are significant externalities to this growth that GDP doesn't adequately count for. I'm anything but a green nan, however I don't think you can seriously assert that the environmental damage pictured doesn't constitute a significant externality.

Also, I'm beginning to grow suspicious of Chinese GDP figures. Despite a host of issues that would suggest a serious downturn (ie the ghost fleet sitting off the Chinese coast), their statistics never showed a substantial drop in real GDP. They're also showing an uptick in short-run real GDP in an unstable-deflationary environment (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.) - that's (very) sketchy.

Furthermore, we're basically in Solow's steady state in the OECD. That is, there are few profitable opportunities for investment given current technology levels. Growth on the cutting edge is very different from going from subsistence agriculture to industrialized growth - that limited environmental restraints in China promote industrial production and growth does not mean that limited environmental restraints in the US - where growth can only occur with innovation and conceptualization - will promote growth.

[DavidHasselhoff]

There are going to be future incentives for business' to be open at night, with the intention of making the work day at night, and the day time personal time. Who said we should sleep at night?

We have to get cost controls on rail freight. About 60% goes to transportation costs.

[Aronnax]

There are going to be future incentives for business' to be open at night, with the intention of making the work day at night, and the day time personal time. Who said we should sleep at night?

We have to get cost controls on rail freight. About 60% goes to transportation costs.

Your argument would make sense if:

a) Rail freight was generating enormous levels of profit, demonstrating a clear abuse of their market position.

b) Electricity was expensive, imposing a heavy load in the economy.

Neither of these are true, rail shipping has a low profit margin and electricity is very cheap.

[Pandemonium]

[url]
China don't seem serious about carbon emissions but we knew that.

Actually they are pretty serious when it come to emitting carbon dioxide. Building a 1 to 2 coal fired power stations a week. The great thing about it is that they are using the best and cheapest technology at hand to raise the standards of living of their populous. Who are we to say they can't?

The world has dawned on a new era. Those once great empires of the west are crumbling. Thousands years of economic activity has left their lands empty of the riches they seek. Coveting the rising empire of the new world and idea struck. An idea of impeding the resource and market affluent nations and continents. The impediment would be one of moral obligation. For not adhering would bring forth the rage of dear mother earth. To enable that idea to propagate they needed a trial. They had their trial run with their first invisible enemy known as CFCs. In astonishment the trial was an astounding success. They managed to ban the gas group by placating it as being 6 times more potent than it was and hid the fact that the hole in the ozone layer was a naturally occurring phenomena that increases and decreased in regards to solar cycles. Yes, CFCs exacerbated the issue by 60km but who cares enough to let science get in the way? Their next target was their main agenda, the greater threat; an entirely harmless gas that is the crux of our economies and the standard of living that we all enjoy. Through distorting reality about the climate a new enjoyment for the populous will be implemented. One of poverty and mud brick houses. So I say, let us not be duped once again by those who have no resources! Let us not be fooled by the ones who think they know better than us! Let us no compromise our affluence by those who are in decline!

I am now amused.

[ArtistTyrant]

lol the Europeans will beat these North-East Asians, all they do is steal our technology :)
after there are a couple of revolutions in the West and it is once again united (not talking about the sham called the EU), it will be like 1880 all over again, with Europeans never giving up power again to appease some foolish humanitarians :)

and global warming is a hoax <3 here BNP chairman and Member of the European Parliament for North West England, Nick Griffin, speaks about the issue of climate change: To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

[Tristan]

...

There's little in Chinese policy that's particularly pro-growth. Their economic "miracle" is the result of shifting to a market economy and from eliminating facepalm-worthy activity that was restraining growth.

Only looking at GDP would (radically (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)) overstate the improvement in China's standards of living. While their material standard of wealth has clearly risen, there are significant externalities to this growth that GDP doesn't adequately count for. I'm anything but a green nan, however I don't think you can seriously assert that the environmental damage pictured doesn't constitute a significant externality.

Also, I'm beginning to grow suspicious of Chinese GDP figures. Despite a host of issues that would suggest a serious downturn (ie the ghost fleet sitting off the Chinese coast), their statistics never showed a substantial drop in real GDP. They're also showing an uptick in short-run real GDP in an unstable-deflationary environment (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.) - that's (very) sketchy.

Furthermore, we're basically in Solow's steady state in the OECD. That is, there are few profitable opportunities for investment given current technology levels. Growth on the cutting edge is very different from going from subsistence agriculture to industrialized growth - that limited environmental restraints in China promote industrial production and growth does not mean that limited environmental restraints in the US - where growth can only occur with innovation and conceptualization - will promote growth.

Well... I agree a lot of this, too. China's industrial revolution is evocative of the Western one. It is very smoky. And the Chinese government downplays the smoke in the same breath that they exaggerate their economic gains, because their pollution problem is reaching epic status, and they want to keep the drum-roll going :rolleyes: Chinese activity accounts for the fundamental rise in oil prices because they are gobbling up cheap fuels and disinterested in green technology.

The "pro-growth" policy may be relative as you say, but in my view: China's pursuit of cheap fuels, nurturing of capital markets, and continued support of their big manufacturing capacity (primarily through the controversial move of allowing wage levels to remain... um, really cheap) is all pro-growth. Barring their environmental problems, these would all lead to a wealthier society in the long run. Such is the nature of growth without restraints: the winners win, the losers fail, and eventually, we end up with the most power. Nietzsche's Master Morality, in a nutshell.
By contrast, we could take the Western world overall- our minimum wages, licensing regimes, regulations, widespread government & private investiture on green tech, tight reign on pollution, general "feeling" of reluctance to drill and burn cheap fuel, and desire for sustainability are not pro-growth. Present security always delivers at the price of future growth. Nietzsche's Slave Morality, in a nutshell.

As for Solow's steady state, we are closer to it in the OECD perhaps but not really near it. If GDP was ever useful, it's the per capita aspect, which shows a 50-plus-year trend of productivity growth outpacing growth in consumption of raw materials. This is just as you say, the gains have to be technological. Or at least it appears that way. I just think that restructuring would also be possible if voters had balls. But we want safety-nets & entrenched systems, and seem willing to pillage our growth for them.

[AnotherNormal]

China isn't buying just coal but a mountain of iron as well: To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

poured into the longest and heaviest train in the world -- 336 freight cars pulled by six locomotives. It chugs 300 miles to Port Hedland, where it is loaded onto ships bound for the unquenchable steel mills of the People's Republic.

Ton by ton, including more than 300 million tons of ore per year and vast quantities of liquid natural gas, China is buying Australia. One of the world's most staggeringly huge transfers of natural resources has both enriched and alarmed Australia, prompted a determined response from Washington and illustrated both China's savvy and ungainliness as it aggressively expands its influence around the world.

[Causa Mortis]

Ton by ton, including more than 300 million tons of ore per year and vast quantities of liquid natural gas, China is buying Australia. One of the world's most staggeringly huge transfers of natural resources has both enriched and alarmed Australia, prompted a determined response from Washington and illustrated both China's savvy and ungainliness as it aggressively expands its influence around the world.

The US held China's hand through the WTO process, and is allowing them to run insane surpluses each year and to peg their currency to ours. To claim that the US is in any way doing anything that harms Chinese growth is simply wrong.

Its been that way since Deng/Friedman/Greenspan in the 1970s on the premise that markets will lead to demands for liberty. I'm skeptical, because a trebling of real per person income appears to have increased Chinese nationalism and not caused any significan demands for democratic institutions, and also because prosperity in other places has not necessarily generated demand for democracy (Chile).

As for Solow's steady state, we are closer to it in the OECD perhaps but not really near it. If GDP was ever useful, it's the per capita aspect, which shows a 50-plus-year trend of productivity growth outpacing growth in consumption of raw materials. This is just as you say, the gains have to be technological. Or at least it appears that way. I just think that restructuring would also be possible if voters had balls. But we want safety-nets & entrenched systems, and seem willing to pillage our growth for them.

If we aren't in or very near to Solow's steady state then I'm skeptical that it exists. There are no industries that I am aware of that await risk-adjusted investment that would be profitable at lower intreest rates.

I agree that shielding productive activity from, to use Greenspan's term, the "gales of creative destruction" makes no sense. Society benefits when one industry collapses and another rises in its place that fits consumer demands better or that uses fewer resources. For those who aren't economists and and are reading this, the social benefit from a factory of horse and buggies going out of business because people are now demanding goods from the factory is very clear.

I'm skeptical that the same principle needs to apply to individuals - it seems to me as though Norway, Sweden and Switzerland are doing just fine in terms of allowing creative destruction to take place in firms without wrecking havoc in the lives of individuals. Maybe I'm delusional that their standards of living are not that different from our own?

The countries that have seen stagnation in real per person GDP - namely France and Germany - have basically prevented creative destruction from taking place at the level of the firm since the late 1980s. They're propping up buggy makers so to speak. The UK stagnated during the 1970s with the same principles, and since the Thatcher reforms has done quite well.

[Thinker]

Going back to the OP...
I understand there is also considerable doubt over the status of this coal supply "contract" between Resourcehouse (Clive Palmer) and China.

I believe the agreement is an early stage "Memorandum of Understanding", which is definitely not a contractual commitment for supply. The MOU is for 30 million tonnes p.a.

China produces 2.33 billion tonnes of thermal coal per annum and 42 million tonnes of metallurgical coal. In the totality of China's coal requirements, it is insignificant.

[elsdfr]

I think it does bring up an interesting topic. So many in Australia think and see that China is obviously polluting its own country but ultimately we are partly responsible. 'Feed the Dragon food and don't expect to be burnt' seems to be the mentality here. There has to be a lot more co-operation between nations in a global economy if we expect to see any progress. I think it might be happening on some levels but at what pace does it need to be done and who is actually responsible for it is a difficult question.

[Thinker]

I think it does bring up an interesting topic. So many in Australia think and see that China is obviously polluting its own country but ultimately we are partly responsible. 'Feed the Dragon food and don't expect to be burnt' seems to be the mentality here. There has to be a lot more co-operation between nations in a global economy if we expect to see any progress. I think it might be happening on some levels but at what pace does it need to be done and who is actually responsible for it is a difficult question.

I agree that we need to see more international co-operation.
One of the biggest problems we face is the difference between how the west and China view IP.
IP is becoming the most valuable "resource" in the west. In China IP is seen as something to copy and replicate without economic recognition to the developer/owner of the IP.
Who wants to share and co-operate in that sort of environment where there are obvious differences in the perception of economic value?

If GE or Mitsubishi manufacture a high efficiency coal fired power station with carbon capture and storage.....why should they give it to China to copy, when it has cost many billions of dollars to develop?

The problem comes down to the fact that the market based economic system does not deal with co-operation well. It takes a big shock and multi government willpower to lubricate the market into action.

---------- Post added 02-26-2010 at 09:19 AM ----------

China isn't buying just coal but a mountain of iron as well: To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

poured into the longest and heaviest train in the world -- 336 freight cars pulled by six locomotives. It chugs 300 miles to Port Hedland, where it is loaded onto ships bound for the unquenchable steel mills of the People's Republic.

Ton by ton, including more than 300 million tons of ore per year and vast quantities of liquid natural gas, China is buying Australia. One of the world's most staggeringly huge transfers of natural resources has both enriched and alarmed Australia, prompted a determined response from Washington and illustrated both China's savvy and ungainliness as it aggressively expands its influence around the world.

I am afraid a lot of this is the news media being emotive.

Why should Australia be alarmed about selling iron ore to China....the iron ore is for sale.
The iron ore is turned into steel and then used for construction and development in China.
China has tried to purchase a number of key Australian assets...and has typically failed.

Japan was in a similar position in the 70's and still holds significant positions in many coal and iron mine joint ventures in Australia. We have learned to live with Japan sitting on the boards of these joint ventures.

I am not sure why Washington should give a damn...other than there is an economic powerhouse being built.

What is the answer?......to restrict supply of resources to China?...because the US is worried?

[elsdfr]

The fox is raiding the hen house and there's nothing the owner can do about it. Its kind of funny because the 'hen house' is buying the chickens back... slightly moulded and ready for consumption!

What happens when China is a world leader and doesn't have anyone to replicate?