LAUNCESTON, Australia: If you were the chief executive of a major corporation and three of your top customers said they intended to buy substantially less of your products, it would probably spur a re-think and a shift in strategy.
Being the elected political leader of a country is a different role than that of a business executive, but the same principles ought to apply, or at least have relevance.
Apparently not to Australia’s Prime Minister Scott Morrison, who gave a bellicose reaction to an appeal by his British counterpart, Boris Johnson, for bold action on climate change, and news that China, Japan and South Korea have set targets to achieve carbon neutrality.
Morrison and Johnson spoke by telephone on Oct. 27, with the British leader stressing the need for ambitious targets to reach net zero carbon emissions.
On Wednesday, South Korean President Moon Jae-in pledged that his country would be carbon neutral by 2050, joining a similar undertaking two weeks earlier by Japanese Prime Minister Yoshihide Suga.
China has also pledged to reach carbon neutrality, with President Xi Jinping telling the United Nations last month that this would happen before 2060, and that the world’s largest polluter would see a peak in emissions by 2030.
While these targets are some way off, they should be particularly relevant to Australia, given that China, Japan and South Korea are the country’s major buyers of coal, liquefied natural gas (LNG) and iron ore, which uses coal to be made into steel.
But Morrison was apparently unfazed, telling reporters in Canberra on Oct. 27 that he isn’t concerned about Australia’s future exports.
“Australia will set our policies here. Our policies won’t be set in the United Kingdom, they won’t be set in Brussels, they won’t be set in any part of the world other than here,” the Sydney Morning Herald reported Morrison as saying.
One difference between politicians and business leaders is that politicians play far more to their domestic audience of voters, and at least part of Morrison’s response should be viewed that particular prism.
But it would seem to also a case of putting one’s head in the sand and pretending that the problem will somehow go away.
Australia’s exports of natural resources were worth A$290 billion ($205 billion) in the 2019-20 fiscal year, according to government data, with iron ore at A$102 billion, LNG at A$48 billion, coking coal used to make steel at A$35 billion and thermal coal used in power plants at $20 billion.
All of these exports are at risk in a carbon-neutral world, with coal being the most vulnerable.
Although LNG is cleaner-burning than coal, in order for China, Japan and South Korea to achieve carbon neutrality it’s likely that even LNG will have to make way for zero-emissions energy, such wind and solar, and so-called green hydrogen, which is made used renewable power sources.
Even iron ore may be somewhat at risk if countries limit the amount of coking coal that can be burned in steel-making.
It’s possible that new technologies such as hydrogen can keep iron ore export volumes high, but it’s also likely that countries will seek to increase the share of scrap in steel-making, using renewable energy to power electric arc furnaces.
While Morrison will likely have either lost office or retired long before coal and LNG exports from Australia are hit by the pledges of carbon neutrality, it’s hard to believe that a sensible government wouldn’t be preparing for such an eventuality.
What makes the inaction of Morrison’s conservative government even more surprising is that Australia is extremely well placed to be a major exporter of the minerals needed in the energy transition, as well as clean fuels such as green hydrogen.
It could even start work now toward making its production of LNG carbon neutral, by using more renewable energy in the chilling process, capturing emissions and by offsetting remaining emissions through other programmes.
If there is a positive, it’s that Australia’s resource companies are likely to embrace a carbon-neutral future, even if it is without support from the federal government.
There are several green hydrogen plants under consideration, along with major solar developments, including some aimed at providing electricity generated in northern Australia to countries as far away as Singapore.
Investment is likely to flow into carbon-neutral projects and away from coal and LNG no matter what Morrison and his government say or do, as the market has largely decided that the opportunities, potential returns and social licence are embedded in carbon neutrality.