HOGSBACK

Heavy-handed governments will lead to lights being turned off

THE energy crisis engulfing China and the runaway prices of coal and gas at the moment are a wake-up call to the rest of the world of what can happen when central planning attempts to hijack the market forces of energy supply and demand.

Attempts by the US and OPEC governments to go to net zero by 2050 will see price of all forms of energy increase for everyone.

Attempts by the US and OPEC governments to go to net zero by 2050 will see price of all forms of energy increase for everyone.

The Chinese government's attempts to clean up air pollution before the Olympics, its over-ambitious emission reduction targets to show that it is serious about achieving net zero by 2050, and its ban on Australia's coal imports for geopolitical reasons have all backfired spectacularly.

The cost of thermal coal has skyrocketed, and now Chinese industry and consumers are enduring blackouts as power stations can not get enough coal to run at full capacity as their winter approaches.

The Chinese government has allowed power stations to buy coal wherever they can at vastly inflated prices and has been importing huge quantities of LNG to help alleviate the energy shortage.  

The net result of this debacle - and the attempts by the US and Organisation for Economic Co-operation and Development governments to go to net zero by 2050 - is that the price of all forms of energy has increased for everyone and the threat of inflation is now a serious threat to the stability of the global economy.  

While the COP 26 UN Climate Change Conference in Glasgow will re-iterate concern for the global environment and the need for governments to adhere to pre-determined emission controls of their industry, in the real world the need for reliable energy remains.

The wind power turbines and solar panels can not be built fast enough nor are they reliable enough to handle the growing need for energy in the developing world.

In the developed world, which is embracing the decarbonization challenge, the need for greater supplies of energy will be needed to build the new infrastructure.

These are issues that pre-pubescent protestors handpicked by renewable energy executives will not be interviewed about on national television during the Glasgow summit.

The massive distraction to the mining industry to stick to the growing list of Environmental, Social, and Governance requirements will also hamper its ability to increase production levels to keep up with the growing demand for energy.

A survey by Ernst and Young has found that miners now rate environmental and social issues and decarbonization as their number one and two business risk respectively. Meanwhile productivity and costs have slipped down to tenth place on the list.

This over-the-top posturing about concern for climate change and eagerness to have impeccable carbon zero compliance credentials could come at the cost of efficient and profitable mining operations.

Ironically, this could also lead to sub-optimal performance of operations and greater wastage of natural resources and capital in the mining process - which could ultimately lead to greater emissions.

Hogsback reckons that a free market for energy unfettered by controls by governments who are motivated by geopolitical or ideological reasons is the only way to help ensure the timely delivery to coal and other energy feedstocks for power generation.      

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