In Paris this weekend a landmark agreement was reached in the world’s climate change negotiations. It has long-term implications for the Hunter and we need to start preparing now.
For the first time there was universal agreement to keep global warming below 2 degrees Celsius over pre-industrial levels, and aim for 1.5 degrees. It was the product of two weeks of talks by 20,000 delegates from 196 countries, building on years of preparation and decades of scientific research.
The agreement isn’t perfect. While everyone now agrees that we need to limit warming, they haven’t agreed how to do it. Based on current pledges the temperature will rise by around 3 degrees. This still means a serious risk of droughts, melting glaciers and rising sea levels. But, every five years the pledges will be revised.
Despite its shortcomings, the Paris accord has important implications for the Hunter: a risk of “stranded assets”. Stranded assets are natural resources, like coal or oil, that mining companies plan to extract, but end up leaving in the ground. A 2013 study by the London School of Economics shows that if we keep global warming to 2 degrees then 60-80% of coal, oil and gas reserves that are currently on the books of listed companies can never be burned.
This is no surprise to mining companies, and they are getting ready now. BHP supports a goal of 2 degrees and in September reported on how this would affect them. Meeting this goal will lower the value of their portfolio by 2 per cent if the transition is orderly, and 5 per cent if it happens quickly.
So, BHP will be OK because BHP doesn’t have all its eggs in one basket. As well as coal it owns oil, gas and uranium which it can mine instead. The Hunter doesn’t have that luxury.
Mining in the Hunter is mostly coal, and 90 per cent of NSW coal is exported. Of the coal leaving Newcastle Port about 88 per cent is thermal. Our thermal coal is relatively efficient so may benefit in the short run, but it is at risk of being stranded in the long run.
We should not be alarmed, but it would be sensible to take precautions to protect workers now. 17,000 people, or 6 per cent of the Hunter’s workforce, is directly employed by mining. Thousands more work in businesses that rely on miners for their livelihood. Record amounts of coal are currently being shipped from Newcastle Port. However, climate change may mean that our coal does not last for another 100 years, but only 50, or 20.
As they say, the stone age didn’t end for lack of stones.
How can the Hunter prepare? The first is to raise awareness, and build public and private support to help us transition. The second is to keep diversifying our economy, as was started under the last Labor government. Fund retraining in TAFEs and universities. Let young workers know that mining might not be a job for life. Attract new businesses to use our brilliant natural assets.
I’m optimistic that we can do it. When BHP’s steelworks closed in 1999 there was public support and a major push to re-train workers to find new jobs. It worked because we were prepared. The result is that Newcastle is now a cleaner, more diverse, bustling city. After Paris, even Tony Abbott and Bob Baldwin cannot deny that climate change is happening. For the sake of the Hunter families that rely on mining we should start preparing now.
Dr Sam Wills lives in Hawks Nest and is a Research Fellow in Economics at Oxford University.