Climate action won't dent demand for quality coal, says Whitehaven

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Climate action won't dent demand for quality coal, says Whitehaven

By Nick Toscano

Mining giant Whitehaven has argued transitioning to a lower-carbon world will not drastically weaken demand for Australian coal because of its higher quality and energy content compared to coal mined elsewhere.

Whitehaven on Wednesday became the first pure-play coal miner to voluntarily report its business prospects against risks posed by climate change under a set of globally accepted climate-reporting guidelines, and determined that it would remain "resilient" in the event of a range of climate policy challenges.

Whitehaven Coal says its business will remain resilient in a lower-carbon world.

Whitehaven Coal says its business will remain resilient in a lower-carbon world.Credit: Reuters

The guidelines call for consideration of the potential impacts of a transition to a low-carbon future, including the impact of government policy changes such as carbon prices that would affect heavy emitters and fossil fuel producers. Formulated in 2017 by the Financial Stability Board, an international group of financial regulators, the guidelines have won the backing of a growing number of investors and companies worldwide.

Under a scenario whereby the world acts to limit global warming to 2 degrees above pre-industrial levels, in line with the goals of the Paris climate accord, the miner said, the "future of the Australian coal sector and high-quality coal producers such as Whitehaven is expected to remain robust over the longer term".

"All Whitehaven mines and projects continue to have positive valuations and economic lives consistent with current life-of-mine planning," it said. "The risk of Whitehaven's assets being stranded in a more carbon constrained world is low".

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In its newly released sustainability report, Whitehaven said global consumption of thermal coal – the type of coal burned to generate electricity – would fall as much as 4.5 per cent in the coming 20 years under the 2-degree scenario. But demand for Australian coal would not slump by as much, it said, due to developing countries in Asia which would seek coal with higher energy value and lower ash and sulphur content.

"Demand for higher-quality coal among developing economies in the Asian region, for example, will continue to grow, driven in part by the electrification and new policy settings sensitive to the need to reduce carbon emissions and atmospheric pollutants," the report said. "This is especially advantageous for Australia as a key producer of high-calorific value, low-ash, low-sulphur coal, and for our business, which is specifically oriented to supplying demand in our region for coal meeting these specifications."

The report said Whitehaven's coking coal – coal used in steelmaking – was also low in impurities and had "significant exposure to India ... which is forecast to experience strong growth in coking coal imports over the coming decades".

Listed companies worldwide are coming under pressure from investors and regulators to disclose how climate change could impact on their businesses. Pressure ramped up following the 2017 release of guidelines for climate-risk disclosure by the G20's Taskforce on Climate-related Financial Disclosures, known as TCFD, which were based on the Paris agreement's pledge to keep global warming to well below 2 degrees

Mining analyst Glyn Lawcock, of investment bank UBS, earlier this week said developed countries would continue to diversify away from coal with an increased penetration of gas and renewable energy but "emerging economies will continue to seek out the most cost-effective sources of energy to help drive their economic prosperity".

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