Compensating for coal's loss will cost billions

HOGSBACK reckons calls by some environmentalists to totally close down the Australian coal industry could end up costing taxpayers billions of dollars in the courts if Europe’s experience is any guide.
Compensating for coal's loss will cost billions Compensating for coal's loss will cost billions Compensating for coal's loss will cost billions Compensating for coal's loss will cost billions Compensating for coal's loss will cost billions

It is only in the past 10 years that Australian governments have done a big U-turn and decided coal is the root of all environmental evils.

Apart from the lost royalties and taxation receipts that would be foregone by dismantling Australia's second largest exporter, there could also be a massive compensation bill to deal with.

Finnish-owned Uniper - which owns a coal-fired power plant in Maasvlakte in the Netherlands - is filing a claim under the Energy Charter Treaty, saying the Dutch coal phase-out law, which was agreed to in December 2019, lacks adequate compensation for affected companies and contravenes international law.

This follows another claim by German energy group RWE against the Netherlands government in February.

Energy campaigner at Urgewal Sebastian Rötters said Uniper parent company Fortum was seeking Dutch taxpayer compensation for "Uniper's ignorant coal investment decisions of the past".

The Energy Charter Treaty allows European companies to seek redress in the courts over decisions made by governments in their haste to adhere to Paris emissions targets that they believe unfairly disadvantage them.    

The European Union and most European governments are major supporters of climate change action yet even they recognise there should be some justice for companies whose coal assets end up stranded because of drastic government decisions.

Having said that, Europe's coal mining and power generation industry is relatively small compared to Australia's. The burden to Australian taxpayers of the same thing happening here would be much larger.  

Australia does not have nuclear power and access to cheap Russian gas as they do in Europe. Its domestic power generation is based on abundant supplies of high energy coal.

That is why some of the engine rooms of the Australian economy are built around coal deposits - Wollongong, Hunter Valley and Newcastle in New South Wales and the LaTrobe Valley in Victoria.

To shut down the coal mining capacity and the infrastructure built around it over the decades and phase out the power generating assets is a huge cost to the economy overall as well as to the companies that have continued to invest in those regions and in the industry.   

Those companies would have a good case for seeking compensation for their accumulated investment that began at a time when governments appreciated the benefits coal brought to the nation.

It is only in the past 10 years that Australian governments have done a big U-turn and decided coal is the root of all environmental evils and must be banished - either totally or by varying degrees over time.

Hogsback reckons it could be the poor Australian taxpayers who will have to pick up the tab for the ongoing compensation of these coal companies as governments bite the hand that feeds them.