Our reply to the Minerals Council of Australia after open letter to the G20

Our reply to the Minerals Council of Australia after open letter to the G20

Correspondence between ARRCC and the Minerals Council of Australia.

1. The Minerals Council of Australia letter in response to the open letter published in the Courier Mail newspaper on 12 November 2014.

Click this link to view the MCA Response to Multi-faith open letter 12 Nov 2014
(Eratum: The year in the first paragraph of the letter from the MCA should be 2014 not 2015)

2. ARRCC response to the Minerals Council of Australia, 25 November 2014.

Mr Brendan Pearson

Chief Executive,

Minerals Council of Australia

Level 3, Walter Turnbull Building

44 Sydney Ave

Forrest ACT 2603

Dear Mr Pearson,

Thank you for your response to our open letter, as published in the Courier Mail on 12 November 2014. We appreciate the time you have taken to respond.

We are a diverse group from a number of different religious traditions in Australia. As leaders in our faith communities, we feel strongly compelled to highlight in our letter the vital issues concerning climate change. Our views are informed by the science and we draw on the extensive research of experts in a range of fields. We firmly believe that there is a moral imperative to act urgently to address climate change, including transitioning rapidly away from fossil fuels and into renewable sources of energy. As such, we have taken some time to consider and respond to your letter.

Whatever the current contributions made to the Australian economy by the minerals and energy sector, research by the Carbon Tracker Initiative and the International Energy Agency shows humanity has a constrained “carbon budget” within which to work. We must leave around 80% of fossil fuel reserves in the ground if we are to avoid even the internationally agreed limit of two degrees of global warming.¹

We are left with a collective moral challenge. It means that those who have been benefitting most from the use of fossil fuels must make necessary but difficult changes, particularly in diversifying the sources of our energy and in energy efficiency.

We suggest that these changes need not harm our economies. Indeed, it will harm our economies in the long-term if we do not make the changes. This is amply spelled out in the New Climate Economy report of the Global Commission on Economy and Climate.² The Commission is made up of former heads of government and finance ministers, and leaders in the fields of economics, business and finance.

We understand that interest groups such as yours work to present information to the benefit of their members. We believe, however, that it is necessary to consider the broader interests of all human and animal life, both today and into the future. Your claim that mining contributes to “vibrant communities throughout Australia” seems to overlook the destructive impacts of mining in many parts of Australia. Just a few examples:

• Bulga, in the Hunter Valley, NSW, is going into the fourth year of its fight against Rio Tinto over plans to mine an area the company had previously signed an agreement not to expand into.
• Maules Creek, near Narrabri, is a location where a number of sacred sites of Gomeroi Traditional Custodians were destroyed and for many months the people were not allowed to perform spiritually significant ceremonies in the Leard Forest.
• Camberwell, also in the Hunter Valley, NSW, now has few of its original residents, is surrounded on three sides by open cut mines and is in court fighting the expansion of another.
• Acland, in the Darling Downs, Queensland, now has only one resident who refuses to be removed from his home by New Hope Coal.
• Gloucester, NSW, is bitterly divided over coal seam gas and plans for a mine that has destroyed the value of retirees’ homes.
• More generally, there is the legacy of thousands of abandoned mines across Australia.³

Regarding purported benefits to the Australian economy, your letter references “A Reserve Bank of Australia Discussion Paper”. Yet the same paper highlights that the mining boom has increased the value of the Australian dollar by 44%, leading to reductions in manufacturing and agricultural employment by 20% and 30% respectively. So while the Australian economy overall has benefited, this has not been shared with “all sectors of the economy” as you suggest. Labour-intensive sectors have suffered while capital-intensive mining has prospered.⁴ As leaders of diverse faith communities, we are committed to equality and we advocate for sustainable economic opportunities for everyone, not just investors and staff of mining companies, foreign companies and those with access to substantial capital.

Quite aside from the local impacts, we are greatly concerned at the enormous additional emissions being produced from our coal and gas when shipped and consumed overseas.

We note your discussion on the issue of energy poverty: however there are some fundamental flaws in your reasoning. The data you have provided fails to address the geography of energy access. For example, 84% of those without energy access live in rural areas. Therefore it is necessary to include the cost of the grid infrastructure, which makes coal more expensive.⁵

We also draw your attention to the latest data and analysis on this issue that clearly demonstrates that coal is not distributed well to serve Africa’s energy poor.⁶ Around half of those currently without energy access (48%) live in Sub-Saharan Africa. Only 7% of the people in Sub-Saharan Africa who lack access to energy live in coal producing countries. African coal production is concentrated in the very south of the continent. This suggests that many African countries with energy access issues are unlikely to follow the coal-based industrialisation seen historically in other parts of the world.⁷

It is commendable that some fossil fuel producing companies, including some of your members, have programs that address energy poverty. Recent research, however, tellingly shows that these companies do not use fossil fuels in their own energy poverty programs,opting instead for renewables such as solar and hydro. BHP Billiton uses solar panels to help with energy poverty in Southern Pakistan. Rio Tinto connected villages near its Peru copper mines to a grid predominantly powered by hydro-electricity. Adani Mining provides solar-powered streetlights to villages in India.⁸

We note the fact that wind and solar power are rapidly approaching price parity with fossil fuels on a utility scale. Although fossil fuels may still be used for some time, future electricity generation will not look the same as twentieth century generation. Developing countries have a great opportunity to leapfrog fossil fuels and move straight to renewables. Australia risks being left behind by the fantastic opportunities of a clean energy economy.

Your optimism regarding carbon capture and storage (CCS) is understandable, as it would benefit many of your members who profit from continued use of coal. However, we believe your optimism is unjustified. CCS projects need heavy subsidies and high carbon prices to be viable. They are unproven on an industrial scale - there are no truly large-scale CCS projects operating. According to the Global CCS Institute (the CCS industry body), there are only 13 CCS projects operating in the entire world, despite substantial investment over many years.⁹ The total capture capacity of these projects is a mere 25 million tonnes per year, a tiny fraction of even Australia’s emissions. Indeed, the Global CCS Institute itself notes “a consistent lack of confidence by some members of the CCS community in CCS playing an increasingly important role in mitigating future global emissions.”¹⁰ Further, factoring in the added cost of CCS to a coal plant makes it even less competitive with renewables. Even in urban areas in South Africa, renewables are already comparable with coal without CCS. In India, recent renewables projects are similar in cost to generating electricity from imported coal, and have won contracts against Australian coal.

Subsidies for the fossil fuel industry operate as perverse incentives to destroy the biosphere. The MCA continues to insist that the Australian energy production sector does not receive subsidies. This is simply not true. In addition to well-known Federal government subsides such as fuel rebates and reduced tax payments, the sector also receives significant assistance from State governments including direct cash payments, assistance programs and provision of capital assets. The day after the G20 Leaders’ Summit, the Queensland government announced it would spend hundreds of millions of dollars to fund a rail line to a proposed coalmine in the Galilee Basin. This is just the latest in billions received by Australia’s minerals and fossil fuel industries from State and Federal governments. The most recent analysis shows $18 billion over 6 years from State governments and $4.5 billion last year from the Federal government.¹¹ Indeed, Queensland Treasury itself notes that:

Governments face budget constraints and spending on mining related infrastructure means less infrastructure spending in other areas, including social infrastructure such as hospitals and schools. For many projects directly related to assisting mining industry development, such as land acquisitions for state development areas, the expected timeframes for cost recovery are extremely long (sometimes decades). The opportunity cost of this use of limited funds is a real cost to government and the community.¹²

On subsidies, WA Treasury similarly says:

State expenditures [that] support resource development, particularly provision of infrastructure (including both multi-user/economic and social infrastructure) …
This incurs a significant subsidy cost, reflecting the opportunity cost of ‘in-advance’ provision.¹³

We greatly appreciate your engagement with our group on this important issue. We believe climate change is the most pressing issue of our time and as leaders in faith communities, we must respond in the face of ecological destruction and worsening social injustice as a result of the continued expansion of the fossil fuel industry. A sustainable future for the planet, its peoples and environment requires transitioning to renewable sources of energy. The fossil fuel industry has not demonstrated the required moral imagination and courage to set aside self-interest and join the wider community to address climate change for the sake of the common good. In fact it has steadfastly set itself against the direction of the tide and appears to be ignoring its responsibility for the well-being of the earth and its inhabitants. Our Open Letter was a call to all Australians on the matter of climate change and a plea to the wealthy and powerful to exercise their moral will and actively promote the transition to renewable energy.

Yours sincerely,

Thea Ormerod, President, Australian Religious Response to Climate Change

Rt Rev’d Professor Stephen Pickard, Executive Director, Australian Centre for Christianity and Culture, Charles Sturt University (Anglican)

Jacqui Remond, Director, Catholic Earthcare Australia

Mr Kim Hollow, President, Federation of Australian Buddhist Councils

Rabbi Jonathan Keren-Black, Environmental Adviser to the Council of Progressive Rabbis

Professor Raja Jayaraman, Vice-Chair, Hindu Council of Australia

1. Carbon Tracker Initiative, “Unburnable Carbon 2013: Wasted capital and stranded assets,” 2013.
^2. The New Climate Economy, “Better growth, better climate,” 2014.
^3. _{Pepper, Roche and Mudd, “Mining Legacies – Understanding Life-of-Mine Across Time and Space,” 2014, published by the Mineral Policy Institute: http://www.mpi.org.au/publications/}
^4. Downes, Hanslow and Tulip, “The Effect of the Mining Boom on the Australian Economy,” 2014, Figure 20, page 28.
^5. The International Energy Agency, Africa Energy Outlook, 2014 at p128.
^6. See for example Capilano and Leaton, Carbon Tracker Initiative, “Energy Access: why coal is not the way out of energy poverty,” 2014 and Campbell, Amos and Scarlett, “All talk, no action: the coal industry and energy poverty,” The Australia Institute, 2014.
^7. Capilano and Leaton, Carbon Tracker Initiative, “Energy Access: why coal is not the way out of energy poverty,” 2014.
^8. Campbell, Amos and Scarlett, “All talk, no action: the coal industry and energy poverty,” The Australia Institute, 2014.
^9. Global Carbon Capture and Storage Institute website, accessed 24 November 2014.
^10. Global Carbon Capture and Storage Institute, 2013.
^11. Peel, Campbell, and Denniss, “Mining the age of entitlement,” The Australia Institute, 2014 and Grudnoff, “Pouring more fuel on the fire,” The Australia Institute, 2013.
^12. Queensland Treasury submission to the Commonwealth Grants Commission, 2013 at page 15.
^13. Government of Western Australia, GST Distribution Review – WA Submission 2011 at page 20.