Abstract
At the turn of this century, coal mining firms in Australia believed they had a bright future ahead. China’s economy was headed into overdrive, and its leaders looked overseas for energy to fuel the unprecedented growth. Australian coal miners jumped at the opportunity. By 2013, Australia had become the largest supplier of coal to China, accounting for more than 30 percent of China’s imports. Australian companies drew up plans to pursue 89 new mining projects that would more than double their country’s coal output, largely for overseas markets like China’s.
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Notes
- 1.
Ben Caldecott, James Tilbury, and Yuge Ma, Stranded Down Under? Environment-Related Factors Changing China’s Demand for Coal and What This Means for Australian Coal Assets (Oxford, U.K.: Smith School of Enterprise and the Environment, Oxford University, 2013).
- 2.
Ibid.; The White House, “U.S.-China Joint Announcement on Climate Change,” press release (Washington, DC: November 11, 2014).
- 3.
Smith School of Enterprise and the Environment, Oxford University, “Stranded Assets Programme: Introduction,” www.smithschool.ox.ac.uk/research/stranded-assets.
- 4.
Ibid.; Table 4–1 based on Ben L. Caldecott, Nicholas Howarth, and Patrick McSharry, Stranded Assets in Agriculture: Protecting Value from Environment-Related Risks (Oxford, U.K.: Smith School of Enterprise and the Environment, Oxford University, 2013).
- 5.
Carbon Tracker, Unburnable Carbon: Are the World’s Financial Markets Carrying a Carbon Bubble? (London: 2011); Bill McKibben, “Global Warming’s Terrifying New Math,” Rolling Stone, July 19, 2012.
- 6.
Carbon Tracker, Unburnable Carbon.
- 7.
Atif Ansar, Ben L. Caldecott, and James Tilbury, Stranded Assets and the Fossil Fuel Divestment Campaign: What Does Divestment Mean for the Valuation of Fossil Fuel Assets? (Oxford, U.K.: Smith School of Enterprise and the Environment, Oxford University, 2013); HSBC Global Research, Coal and Carbon. Stranded Assets: Assessing the Risk (London: 2012); Elad Jelasko, Carbon Constraints Cast a Shadow Over the Future of the Coal Industry (London: Standard & Poor’s Ratings Services, July 2014); Justin Gillis, “U.N. Panel Warns of Dire Effects From Lack of Action Over Global Warming,” New York Times, November 3, 2014.
- 8.
Lesley Fleischman et al., “Ripe for Retirement: An Economic Analysis of the U.S. Coal Fleet,” The Electricity Journal 26, no. 10 (2013): 51–63; P. Knight et al., Forecasting Coal Unit Competitiveness: Coal Retirement Assessment Using Synapse’s Coal Asset Valuation Tool (CAVT) (Cambridge, MA: Synapse Energy Economics, 2013).
- 9.
U.S. Environmental Protection Agency, “EPA Proposes First Guidelines to Cut Carbon Pollution from Existing Power Plants,” press release (Washington, DC: June 2, 2014); U.S. Energy Information Administration, Monthly Energy Review (Washington, DC: July 2014).
- 10.
Bloomberg New Energy Finance, 2030 Market Outlook (London: 2013).
- 11.
Fleischman et al., “Ripe for Retirement: An Economic Analysis of the U.S. Coal Fleet.”
- 12.
Barney Jopson and Ed Crooks, “Obama Proposes Biggest Ever US Push for Carbon Cuts,” Financial Times, June 2, 2014; Atkins quote from Mark Chediak and Jim Polson, “Obama Climate Proposal Will Shift Industry Foundations,” Bloomberg News, June 2, 2014.
- 13.
Knight et al., Forecasting Coal Unit Competitiveness; Thomas Tindall and Fabien Roques, Keeping Europe’s Lights on: Design and Impact of Capacity Mechanisms (London: IHS Cambridge Energy Research Associates, Inc., 2013).
- 14.
Louis-Mathieu Perrin, Benchmarking European Power and Utility Asset Impairments (Paris: EY, 2013), 5.
- 15.
Mark C. Lewis, Stranded Assets, Fossilised Revenues: USD28trn of Fossil-Fuel Revenues at Risk in a 450-ppm World (Paris: Kepler Cheuvreux and ESG Sustainability Research, April 24, 2014).
- 16.
Carbon Tracker, Unburnable Carbon, 32.
- 17.
Nafeez Ahmed, “The Inevitable Demise of the Fossil Fuel Empire,” The Guardian (U.K.), June 10, 2014; Mark Fulton and Reid Capalino, “Trillion-dollar Question: Is Big Oil Over-investing in High-cost Projects?” RenewEconomy.com.au, May 21, 2014.
- 18.
Goldman Sachs, 380 Projects to Change the World: From Resource Constraint to Infrastructure Constraint (New York: 2013), 126.
- 19.
Box 4–2 from Millennium Ecosystem Assessment, Ecosystems and Human Well-being: Synthesis (Washington, DC: Island Press, 2005), and from Trucost Plc, Natural Capital at Risk: The Top 100 Externalities of Business, prepared for the TEEB for Business Coalition (London: April 15, 2013).
- 20.
Caldecott, Tilbury, and Ma, Stranded Down Under?
- 21.
Brian J. Henderson, Neal D. Pearson, and Li Wang, New Evidence on the Financialization of Commodity Markets, updated November 18, 2014, http://ssrn.com/abstract = 1990828; Ing-Haw Cheng and Wei Xiong, The Financialization of Commodity Markets, NBER Working Paper No. 19642 (Cambridge, MA: National Bureau of Economic Research, November 2013); Troy Sternberg, “Chinese Drought, Wheat, and the Egyptian Uprising: How a Localized Hazard Became Globalized,” in Caitlin E. Werrell and Francesco Femia, eds., The Arab Spring and Climate Change: A Climate and Security Correlations Series (Washington, DC: Center for American Progress, 2013).
- 22.
Sternberg, 7.
- 23.
George Welton, “The Impact of Russia’s 2010 Grain Export Ban,” Oxfam Policy and Practice: Agriculture, Food and Land 11, no. 5 (2011): 76–107; J. A. Lampietti et al., “A Strategic Framework for Improving Food Security in Arab Countries,” Food Security 3, no. 1 (2011): 7–22; Index Mundi, “Wheat Imports by Country in 1000 MT,” 2013, www.indexmundi.com/agriculture/?commodity = wheat&graph = imports; André Croppenstedt, Maurice Saade, and Gamal M. Siam, “Food Security and Wheat Policy in Egypt,” Roles of Agriculture Project Policy Brief (Rome: United Nations Food and Agriculture Organization, October 2006).
- 24.
Table 4–2 from Trucost Plc, Natural Capital at Risk.
- 25.
World Bank, Global Economic Prospects: Commodities at the Crossroads (Washington, DC: 2009); Savills Research – Rural, International Farmland Focus 2012 (London: 2012), 4. Although converting to U.S. dollars per hectare can have an effect on annual growth rates in terms of domestic currency, it does allow potential investors a good starting point for comparable analysis.
- 26.
Intergovernmental Panel on Climate Change (IPCC), Climate Change 2014: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge, U.K. and New York: Cambridge University Press, 2014).
- 27.
Zbigniew W. Kundzewicz et al., “Chapter 3: Freshwater Resources and Their Management,” in M. L. Parry et al., eds., Climate Change 2007: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge, U.K. and New York: Cambridge University Press, 2007), 187; Eleanor Burke, Simon Brown, and Nikolaos Christidis, “Modelling the Recent Evolution of Global Drought and Projections for the 21st Century with the Hadley Centre Climate Model,” Journal of Hydrometeorology 7 (2006): 1113–25; T. P. Barnett, J. C. Adam, and D. P. Lettenmaier, “Potential Impacts of a Warming Climate on Water Availability in Snow Dominated Regions,” Nature 438 (November 17, 2005): 303–09; Bryson Bates et al., eds., Climate Change and Water, IPCC Technical Paper VI (Geneva: IPCC, 2008).
- 28.
Box 4–3 from Ben Caldecott, “The Solution to Coal Plants? Pay Their Owners to Close Them,” ChinaDialogue.net, September 19, 2014.
- 29.
* The corollary of this is that, in some cases, it might be better to “sweat” existing assets until viable long-term replacements can be found. In other words, instead of investing in an intermediate option that may need to be replaced relatively quickly, it could be better to defer investment.
- 30.
Gordon L. Clark, Andreas Feiner, and Michael Viehs, From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance (Oxford, U.K.: Smith School of Enterprise and the Environment, Oxford University, October 20, 2014).
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Caldecott, B. (2015). Avoiding Stranded Assets. In: State of the World 2015. Island Press, Washington, DC. https://doi.org/10.5822/978-1-61091-611-0_4
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