AUSTRALIA:

Gillard accelerates climate effort; coal industry counters with TV blitz

The Australian government is pointing to the coal sector's $70 billion investment in new projects as proof that the powerful coal industry isn't as spooked by Prime Minister Julia Gillard's carbon tax as it claims.

"I can assure coal miners that their industry has a bright future under a carbon price," said Climate Change Minister Greg Combet, who is Gillard's top deputy charged with shepherding a climate bill through Parliament and making the case to a wary public.

Gillard's support in public opinion polls is below 40 percent. With everything at stake politically, Gillard is barnstorming across Australia to build support for a climate change policy that would set Australia on track to significantly cut its greenhouse gas emissions. Gillard said she and her ministers will spend $25 million in the coming months selling the plan.

Through an email blast to reporters yesterday, Combet tried to head off a TV advertising campaign launched by Australia's coal producers asserting that 4,700 coal mining jobs would be lost once a $23-a-metric-ton price on carbon emissions is put in place. Coal producers are making their biggest push yet to kill a carbon tax plan they say puts their grand plans for profitable coal exports to China in peril.

The price of producing coal would jump because of the carbon tax, the industry asserts, making it harder for Australian coal to compete with coal shippers in Indonesia and the United States.

Broad economic calamity is the message being driven home by Gillard's critics. But when push comes to shove over climate policy -- as it has in Australian politics -- the future of the world's biggest coal-exporting business occupies the center lane in the climate wars.

The Australian government has considered major policy changes to begin cutting carbon emissions for the past six years. Nearly 80 percent of Australia's electricity is generated by burning high-carbon coal, and its export economy is dominated by coal, iron ore and other commodities that produce emissions during extraction.

Public supports climate measure

Despite pressure from these industries to go slowly, the Australian public has tended to support climate measures amid a decadelong drought that just ended and concern about coastal populations. Labor-led and conservative coalitions both have been tossed from power in part because of their failure to address the issue.

That hasn't made it any easier. Gillard took office last summer on the promise she could get a climate bill through Parliament, but the prime minister raised the hackles of some by reneging on election-season suggestions that her Labor-led government would not tax carbon emissions. Gillard's political enemies and coal- and industrial-sector critics have dug in their heels and pounded away at one public message: Gillard lied.

On July 10, Gillard rolled out some of the specifics of a plan to impose a fixed carbon price starting in 2012. The tax would last for a three- to five-year initial period and then transition to an emissions trading program. Parliament must pass the proposal this year for it to go into effect next July.

The climate debate swirling around Gillard's government has increasingly mirrored aspects of the U.S. debate. Just as it does in the United States, the debate ebbs and flows until a real prospect of government action emerges. It then boils over into vitriol that appeals to base segments of the political right and left and distorts scientific consensus and economic realities.

In both countries, coal miners are used as visual aids in the battle for political leverage.

The planned series of TV ads sponsored by the Australian Coal Association will feature miners from the Hunter Valley, a coal-rich region west of Sydney that feeds the world's largest export terminal in Newcastle.

In Australia, as in the United States, organizations representing big industries have marshaled "independent" findings that regulations forcing big industries to cut carbon emissions would result in massive job losses. Gillard's government has accused the industry of exaggerating the impact and using false assumptions, such as an extremely high carbon price, to inflate the cost of compliance.

Groups representing mining giants such as BHP Billiton and Rio Tinto say they are really concerned about the effect on small businesses. Government ministers say that's hogwash, and in recent weeks the Gillard government has emphasized that only the 500 largest polluters would be directly affected by the carbon tax.

A mirror for the U.S. debate?

Government scientists have continued to issue warnings that climate change poses a significant threat to food, water and energy and to people living in coastal cities. Coal producers amiably agree that climate change is important and carbon emissions should be cut, but they have yet to support any government proposal to cut carbon emissions.

"The government knows there is a better way to introduce a price on carbon," Ralph Hillman, executive director of the Australian Coal Association, said in a statement describing its emerging TV campaign. "In the case of coal mining, the carbon tax should be phased in at the same time as our international competitors, ensuring that we don't hurt Australia's long-term economic interests."

Gillard's argument has continued to be that, while Australia is vulnerable to rising sea waters and drought, it will also fall behind other industrial economies in the region unless it becomes more efficient, "greener" and less carbon-intensive.

In a March paper for the think tank Resources for the Future in Washington, Frank Jotzo, director of the Center for Climate Economics and Policy at Australian National University, guessed at how the debate might play out.

"Predictably, interest groups are lining up to maximize their returns," he wrote. "Emissions-intensive, trade exposed industries (such as aluminum, steel and concrete) are likely to get free permits, on the basis of activity-specific benchmarks of emissions intensity of production."

"This structuring would preserve incentives to reduce emissions, but a significant share of permits -- perhaps around one-quarter -- would be given for free to export-oriented industries," he said.

The trading piece of the policy is still being worked out. Still, there have been significant concessions already made to coal producers and coal burners with an export business.

Coal and jobs

Under a "coal sector jobs package," the Gillard government proposes about $1.3 billion in assistance to companies and employees.

In the Hunter Valley of New South Wales and in Queensland, in the northeastern region, domestic and international coal producers are spending billions of dollars to expand mines, ports and railways. All of that is in anticipation of rising exports to China, India, Japan and other parts of Asia. Combet, the climate minister, noted in his email blast that the nation's coal producers made about $15 billion in profits last year.

Counting in the $1.3 billion in government assistance, the carbon price would cost miners about $2 a metric ton. Highly valued metallurgical coal used for producing steel is selling for about $300 a metric ton. Thermal coal for power plants goes for $120 a metric ton.

Combet also noted that Peabody Energy, based in St. Louis, announced a $4.7 billion bid for Macarthur Coal, a mid-sized Australian coal producer with strategic coal reserves. He characterized that as "a clear vote of confidence in the future of the industry with a carbon price."

This is the second time Peabody has pursued Macarthur, after Macarthur turned away several bids by Peabody last year. Peabody, the world's largest private-sector coal company, is attempting to significantly expand its Australian assets and sees Macarthur's coal assets in the northeastern Queensland region and its significant export business as a boon. Peabody is banking on coal sales to Asia to boost sagging U.S. sales as power generators turn to natural gas.

Peabody CEO Greg Boyce said in the July 11 announcement that there is "significant value" in managing Macarthur's assets.

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