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| An oversupply of coal means the economics for new mines, like those planned in the Galilee basin, are not favourable. (AAP: Greenpeace/Andrew Quilty) |
The latest Global Coal Outlook from the world's peak energy agency says mining projects worth nearly $40 billion in Queensland's Galilee Basin are unlikely to go ahead.
The International Energy Agency's (IEA) forecast for the coal industry predicts demand for the fossil fuel will grow by less than 1 per cent a year for the next five years.
The fall-off in demand is largely a result of a declining Chinese market, with air pollution and climate change regulations reducing development of coal-fired electricity.
China currently accounts for around half of the global demand for coal.
The Minerals Council of Australia says Chinese demand will decline, particularly for low-quality coal.
But it says Australia's best coal exports are not likely to be affected.
"China's coal use overall may flatten out, but demand for high quality coal for high-efficiency, low emissions plants is likely to grow," the council's chief executive Brendan Pearson said.
"We know that there is 420 gigawatts of new, high efficiency, low emissions coal-fired power generation planned or under construction in China."
An oversupply of coal has led to rock-bottom prices, meaning the economics for new mines are not favourable.
"Just at the moment there will be a pause in investment in new mines," Mr Pearson said.
"We're still hopeful about the Adani mine [in the Galilee Basin]".
However the coal quality in the Galilee Basin is not premium. And IEA says it has doubts about the viability of the huge development planned for Queensland.
"The projects ... are highly dependent on availability of financing and adequate infrastructure. Despite support from Queensland's Government, there is also public opposition to the projects, and hence, the approval process is being challenged, with inevitable delays," the report says.
"In conclusion, it is not likely that the above listed projects will be operational in 2020, if ever."
Coal industry 'in denial' and 'drowning in debt'
Tim Buckley, an industry analyst for international energy think tank IEEFA, says that sends an important signal.
"The IEA has made a very important statement, that new greenfield capacity is not needed.
"You've got demand declining. You've got oversupply in the industry. You've got zero or negative profit margin and you've got an industry drowning in debt.
"In all of that how does adding more investment in more capacity to flood the market help anyone?"
Mr Buckley said the coal industry was entering structural decline and was not being realistic about its future.
"The first step is acknowledging they have a problem. The industry says it's all cyclical.
"That's just illogical, irrational, not supported by the facts. Effectively it's a coal industry in denial."
Benjamin Sporton from the World Coal Association said he remained optimistic that the industry will recover.
He also pointed to Australia's COAL21 fund which researches clean coal technology such as modern electricity plants and carbon capture and storage.
Capital flowing toward wind, solar, energy efficiency
In Australia, the industry has sunk more than $300 million into COAL21.This investment has been more than matched by a $544 million contribution from government and other industry partners.
Over the same period, the coal industry has spent more than $4 billion in exploration for new coal reserves.
Mr Sporton said governments should be doing more to support the industry's attempts to become cleaner.
"I think there is social value in investment in these technologies because it means we continue to get the benefits of affordable and reliable fuels like coal," he said.
However Mr Buckley said carbon capture and storage is so far off widespread adoption, the IEA does not even factor it into its predictions for the future.
"The capital is just not going to be deployed in these technologies to make them viable," he said.
"In contrast the capital is flowing at an ever faster rate towards wind, solar, battery storage, energy efficiency, and that is a permanent game changer in my view."
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