Faster coal decline risks catching Australia off-guard
If China and India begin to favor their domestic industries over imports, overseas demand for Australian coal could set the sun sooner than expected.
Australia’s fossil fuel exports have long been expected to decline as the world pursues global climate targets to limit warming to 1.5°C above pre-industrial temperatures or well below 2°C.
An analysis by modeling firm Climate Resource suggests thermal coal exports could fall by almost 80 percent within a decade compared to 2024 levels.
Metallurgical coal used in steelmaking is expected to decline more slowly, but could still decline by 54 percent by 2035.
The 78 per cent reduction in demand for Australia’s thermal coal by 2035 is based on a 1.8 degree warming scenario; modelers say this level is consistent with countries meeting their short- and long-term emissions reduction targets.
This figure also assumes a “low demand” situation, where China and India begin to prefer local coal supplies rather than purchasing coal from Australia.
Climate Resource decarbonization lead Anita Talberg said higher demand was also modelled, but the lower demand scenario was realistic given the indications given by major customers of Australian coal.
“We need to plan for this low-demand case because there is a real possibility,” he told AAP.
India has announced its intention to completely stop importing coal by 2026.
China has not made a clear statement that it will give up imports; However, researchers suggest that as demand declines in line with decarbonization, it may turn more towards the local coal mining industry.
Australia is already bracing for a decline in its coal export industry; Treasury modeling suggests the value of coal and gas exports could fall by 50 per cent by 2030.
To replace fossil fuels, promoting clean industries such as critical mineral mining and green metals is the main play, and demand for these products is likely to increase as the world decarbonises.
Dr Talberg warns Australia risks not preparing quickly enough, including by helping coal regions transition from fossil fuels.
“We need to plan to phase out quickly, not gradually,” he said.
Transition timelines should also reflect the mix of coal mined in different regions, dominated by thermal coal in NSW and Queensland metallurgy.
Momentum is building behind a global plan to divest from coal, gas and oil; Australia is one of more than 90 countries that support the Belem Declaration, which supports a just and rapid transition away from fossil fuels.
Australia has the opportunity to play a decisive role in the phase-out after securing the role of “chairman of negotiations” at the next COP conference in 2026, but will have to grapple with its status as a major coal and gas exporter.
Brazil, a signatory and host of the last COP summit, has since ordered its ministries to accelerate guidelines for a national roadmap away from fossil fuels, setting a high bar for others to follow.
Also at climate talks, South Korea, another major thermal coal customer of Australia, has pledged to phase out coal in electricity generation by 2040.
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