Some Chinese energy providers have been told to stop importing Australian coal amid trade conflicts between the two countries, Professor John Quiggin wrote.
The announcement that the Chinese government has ordered many state-owned enterprises to stop buying Australian coal should not have been a surprise to anyone.
China has already imposed a number of trade restrictions in response to political tensions with the Australian government on issues such as the Morrison government advocating an investigation into the cause of the COVID-19 pandemic. Conceptually about learning how to improve future response, the promotion of the investigation is the Chinese virus, Wuhan virus, which US President Donald Trump calls China in various ways. “Can influenza”..
However, to date, trade measures such as Australian barley import tariffs have been primarily symbolic diversity designed to cause local harm to influential groups without significantly impacting economic relations. It was sex. In fact, Australia’s exports to China have so far increased by 2020, reflecting China’s relatively rapid recovery from the pandemic.
To understand the changes in China, we need to look at another recent development. In late September, after the retreat of the last few years about the climate problem, Xi Jinping President, announced that China aims to achieve a carbon neutral by 2060.
This move anticipates the possibility of a change of government in the United States. Joe Biden will rewind the attack on Trump’s trade in general, but he has shown that he will apply carbon adjustments to countries that fail to meet their climate and environmental obligations. This policy applies to all countries that have no plans for decarbonization, but is clearly directed to China.
Combined with the desire to promote domestic coal consumption, this commitment represents a significant long-term reduction in imports of both steaming coal and metallurgical coal. As a result, it will be possible to use reduced coal imports as a weapon against Australia.
Coal proponents like Matt Canavan claim that they sell more coal to Japan and South Korea than to China, and that increased export demand from other countries will offset changes in China’s imported coal demand. ..
However, Japan has only two coal-fired power plants currently under construction, so it is unlikely that another will be built. The old coal-fired power plant is closed and this will continue for the next decade. Meanwhile, Japanese financial institutions are selling from coal (and other carbon-based fuels). The latest was Mitsui & Co., which announced its sale from a coal-fired power plant last week. This follows similar announcements by Nippon Life, Mitsubishi, Daiichi, Mizuho and others. Japan Bank for International Cooperation, Japan’s export financial institution, was a prominent lender to international coal projects, but is now being forced to curtail its activities.
The situation is similar in South Korea, where the government has announced a shift away from domestic coal-fired power. Companies such as KEPCO, Samsung and Doosan Heavy continue to promote international coal projects such as Vietnam’s Vung Ang 2 power plant, but pressure is steadily increasing to stop doing so. When Vung Ang 2 finally goes on, it looks very likely that it will be the last major coal project for these companies.
Despite Adani Corporation’s determination to promote the Carmichael mine, there are no major prospects for expanding exports to India. All Adani’s private sector competitors like Tata have abandoned thermal coal, and government-owned NTPCs are moving in the same direction.
Therefore, of the existing coal markets, China is the only market with realistic growth prospects for steaming coal. The same applies to the metallurgical coal used to make steel, where China dominates world production. More importantly, as divestment has become the standard for financial institutions around the world, China has become a major source of significant new funding for coal mines and coal-fired power plants. This includes developments related to Australian miners like Whitehaven and the Belt and Road Initiative.
The longer Australia depends on coal exports, the more we will depend on China. The current import suspension will probably pass, but it reminds us of our unpleasant position. There is a significant contradiction between the fierce debate about the Morrison administration’s national sovereignty and the energy policy that undermines that sovereignty.
John Quiggin is a professor of economics at the University of Queensland and author of “Zombie Economics and Economicsin Two Lessons.” Follow John on Twitter @JohnQuiggin..
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Place of originChina tightens Australian coal imports