There’s been a lot of back and forth about economic reasoning and the EU. This article by Kevin O’Rourke, takes a different perspective, one that is well worth reading, exploring the consequences of economists’ handwaving over utility for the technocratic politics that we face today. I’ve seen other efforts to make this kind of case, but they haven’t been nearly as clear or accessible.

Beyond Galilee

by John Quiggin on July 24, 2015

If there’s to be any chance of stabilizing the global climate, a large proportion of existing reserves of coal will need to be left in the ground. The Galilee Basin in Queensland, estimated to contain 27 billion tonnes of coal, enough to raise atmospheric concentrations of CO2 by several parts per million on its own, is arguably the biggest test case in the world right now. Fortunately, the latest news is good.

The critical project is the Carmichael Mine proposed by Indian conglomerate Adani . To get the coal out Adani proposed a new rail line and a port expansion at Abbot Point. A Korean conglomerate, POSCO (originally a steelmaker)m was named as the builder of the railroad, with the prospect that POSCO would take an equity share and the Korean Export-Import Bank would lend money on favorable terms. If the rail line is built, other projects could go ahead. One such project, owned by Bandanna Coal (now in receivership) was just approved by Environment Minister Greg Hunt.

It now seems clear that Adani is mothballing the project. A month ago, the engineering design teams were told to stop work, and now Posco’s contractors have been sent home. Coincidentally or otherwise, Posco has announced the intention to return to its steelmaking roots, with aggressive cuts to its engineering and construction divisions.

Adani is still blaming regulatory delays, but this seems increasingly implausible. The sacking of the engineering teams will set the project back many months, if not years, and burning your primary equity partner doesn’t seem like a sensible response to regulatory problems. At this point, I’d say the strategy is to obtain and bank the regulatory approvals then hope that the price of coal increases in the future. This seems unlikely, given the collapse of demand in the US, declining demand in China and increasing Indian focus on renewables, in which Adani itself is a big player.

Moreover, with every year that passes, the obstacles to coal projects of any kind get bigger. Most international development banks will no longer lend to such projects, global banks are under similar pressure and institutional equity investors are being pushed to divest. It’s unlikely that the proponents of new coal projects in Australia will ever again see a government as favorable as the Abbott government, so if they can’t succeed now, they will probably never do so.

I got a new iMac. Awesome! Until last week I was using my old iMac, from 2009. I buy a good one so it will last. It’s amazing how one day in front of the retina display makes me think ‘yuck!’ looking at my tired old, burnt out 2009 display. But onward, to the future! [click to continue…]