An international agreement on carbon reduction will be essential to the longevity of the mining industry, Queensland Resources Council chief executive officer Michael Roche has told Australian Mining.
“Finding and implementing an effective carbon reduction scheme is just another challenge the resources sector must face,” Roche said.
“In recent months, the costs associated with underground mining have risen by 34% while open-cut costs have risen by 60%.”
Roche said the Federal Government’s Carbon Pollution Reduction Scheme (CPRS) will create a level of uncertainty in the minerals industry.
According to the CPRS report released by the Federal Treasury, aluminium and refined petroleum are at the most risk of suffering under the proposed scheme and are therefore eligible for assistance.
“Ultimately, just exactly how the scheme will affect the mining industry is yet to be determined as we wait for the final design for implementation, including transitional arrangements for emissions-intensive, export-exposed industries,” Roche said.
“The Federal Government’s choice of trajectory for reductions — particularly how deep the cuts in emissions will be – will drive the carbon price. If setting the target gets too far ahead of the economy’s capacity to reduce emissions, then in the short term, the trading scheme will simply function as a tax on production.
Importantly, the QRC is concerned by the prospects for Queensland developing a liquid natural gas (LNG) industry.
“LNG produced in Queensland has the potential to make a major reduction in global emissions by displacing more carbon intensive energy sources, but the current scheme deals only with the domestic emissions resulting from that LNG production, not the potential emissions benefits offshore.
Responding to the release of the Federal Treasury’s economic modelling of the scheme’s impacts, Roche endorsed the finding that the future of coal was linked closely to the commercial application of carbon capture and storage technologies (CCS).
“It’s an important wake-up call for governments and industry that the Treasury is saying that without carbon capture and storage technologies, Australia’s coal production could fall below current levels,” he said.
“However, with the successful rollout of carbon capture and storage technologies in key sectors such as electricity generation, coal has a bright and growing future.
Roche said that all mines will face an increase in energy costs, particularly hard rock mining which requires a lot of crushing and grinding of ore.
“For all coal mines the impact will be magnified by their release of methane (a potent greenhouse gas),” he said.
“These are the so-called fugitive emissions from disturbance of the coal seam. For open cut mining, it is still very difficult to accurately estimate or measure these fugitive emissions, so industry will be paying on the basis of an average figure which is little more than a rule of thumb.
It’s too early to be definitive about the impacts, but it will obviously place an even higher premium on energy efficiency measures that the mining sector has adopted as a cornerstone for reducing production costs.
“What the QRC would like to see is the broader community embracing energy efficiency as a key complement to the CPRS and there’s a critical role for governments in promoting that embrace of energy efficiency.