ESG Focus: Coal Showdown At The ESG Corral – Part Two

ESG Focus | Apr 24 2019

FNArena's dedicated ESG Focus news section zooms in on matters Environmental, Social & Governance (ESG) that are increasingly guiding investors preferences and decisions globally. For more news updates, past and future: 
https://www.fnarena.com/index.php/financial-news/daily-financial-news/category/esg-focus/

Consensus is that it’s not a matter of 'if' for coal's decline but 'when'. In this second part, FNArena reviews direct impacts from regulators, court cases, new taxes and changing public opinion.

-RBA has now identified climate change as an important factor for its policies
- Rocky Hill coalmine refusal in NSW court a global first
-Nearly 1,000 climate change related cases have been filed globally across 25 countries
- adoption of global carbon tax will change the economics of coal generation

By Sarah Mills

Regulations and legal precedents start to bite

The global economic-political scene is beginning to be marked by a weird schizophrenia, as governments, investors, and companies try to conduct business as usual and promote trade, while palming off billion-dollar carbon risks to each other – all while sidestepping the not insubstantial political risk – in a dangerous game of musical chairs.

Earlier in March, Western Australia’s Environmental Protection Authority announced new unlegislated guidelines for carbon dioxide emissions at all new LNG projects emitting more than 100ktpa of carbon dioxide. The government has since quashed guidelines, responding to pressure from miners.

But what was interesting about the EPA announcement is that it gave the WA Labor Premier Mark McGowan an opportunity to call for a national solution to the issue. Heading into a Federal election, this is significant. Federal Labor plans to create a Federal Environmental Protection Authority and Climate Change Action Plan with a legal cap on pollution and carbon offsets.

On March 12, the Australian Reserve Bank Deputy Governor Guy Debelle, speaking at the Centre for Policy Development, issued a warning about the risks that climate change posed to the economy.

Debelle initially focused on drought and weather risks, but he eventually got to the elephant in the room and singled out energy, pointing to the transition to renewables under way in the energy sector now that they have become a “cost-effective source of generation”.

See also: https://www.fnarena.com/index.php/2019/03/22/esg-focus-changing-climate-has-rbas-attention/

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Domestic court cases

The other major front to heat up in 2019 domestically and globally was that of legal precedent.

Last month, Australia’s most senior environmental judicial officer Justice Brian Preston declared the Rocky Hill coalmine near the picturesque NSW tourist town of Gloucester to be unlawful on two counts: that it contributed to global warming; and that it is too close to Gloucester.

The company can appeal but even if a higher court ruled against the climate ruling, there is a strong chance the court would uphold the point that the mine is too close to Gloucester, which will have major ramifications for other mines.

It is the first time an Australian court has ruled on a mine’s contribution to carbon dioxide emissions. It is also the first time that evidence of a global budget of carbon dioxide emissions to avoid climate change to justify the refusal of a new coalmine has been brought before an Australian court.  

The implications of this landmark ruling are far reaching. It will set a precedent with domestic and international reach and elevates the risk of stranded assets. 


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