Korean imports of Australian coal have dived and the outlook is not positive
Link copied to
Australian thermal coal exports to South Korea were down 21 per cent in the first quarter of 2020 and there are signs that this will be a continuing trend.
The recently elected South Korean government came to power pledging to reach net zero emissions by 2050, end financing of overseas coal plants, and introduce a carbon tax.
It has now just unveiled a $US62bn “New Deal” that consists of a “Digital New Deal” and the first stages of its “Green New Deal”.
While Reuters reported critics as saying that the plans appear to focus on protecting jobs rather than addressing President Moon Jae-in’s pledge to slash emissions, parliamentarian Lee So-young says lawmakers are drafting more detailed laws to boost the economy and society in more sustainable ways.
She added that a longer-term plan will need to be drafted to regulate and end financing for coal plants, impose phased carbon taxes, increase “energy welfare” for people suffering from the effects of climate change, and to reduce overall air pollution.
In a draft of its ninth basic electricity plan released last month, South Korea indicated that it would switch 12.7 gigawatts (GW) of coal-fired power generation over to liquefied natural gas. State-owned utility KEPCO, which currently operates 33.7GW of coal capacity across 56 units, is also under pressure to explain its fossil fuel investments.
Global fund manager Blackrock, which pledged in January to make climate change a priority across its investment funds, turned up the pressure on KEPCO by asking for “a clear strategic rationale for its investments in coal energy”.
This followed KEPCO writing off its $642m investment in Bylong Coal in 2019. Leading global pension fund APG has also said that it was divesting its holdings in KEPCO based on the company’s continued investment in overseas fossil-fuel power projects.
The Institute for Energy Economics and Financial Analysis (IEEFA), a pro-renewable think tank, added that the impact of the COVID-19 pandemic on Australian coal mines was giving the sector an early look into the long-term, permanent decline that is coming.
It noted that power sector planners in Indonesia, Vietnam, and the Philippines are all cutting demand forecasts.
Separately, the US Energy Information Administration (EIA) has further lowered its coal production forecasts for 2020, predicting a 25 per cent drop in US coal production from 2019 levels.
It also forecast that thermal coal exports are expected to drop 30.2 per cent to 26.3 million tonnes.
The EIA had previously noted that the US is on track to produce more energy from renewables than coal for the first time on record.