Environmental compliance news for business

Special report: Rule changes mean $1bn clean-coal fund can push coal use

An industry fund supposed to raise $1 billion over 10 years for low emissions coal projects has so far provided less than $200 million, while fund members have unanimously changed its purpose to include "promoting the use of coal".

The black coal industry established the COAL21 fund in December 2006 to support low emissions coal projects, including carbon capture and storage.

But by March 31 this year – more than six years into its operating life – it has only distributed $184.1 million to projects.

Consequently, from December 2006 until June 2012, black coal mining companies paid into the fund a total of only $214.6 million, as members don't make their payments until the money is needed for projects that it has agreed to support.

In 2011-12 – when coal exports were worth more than $40 billion – members paid just under $1.1 million into the fund.

Besides the $184.1 million spent so far, the Australian Coal Association says the fund "has legally binding contractual obligations of $109.6 million".

Rule changes allow coal promotion
ASIC documents show that in December 2012 directors of ACALET – the tax-exempt body established to administer the fund – unanimously passed resolutions that significantly broaden the purposes for which fund money can be used.

The substantial changes to ACALET's constitution include the addition of a new object of "promoting the use of coal both within Australia and overseas".

Other new objects include "promoting the economic and social benefits of the coal industry to the wider community".

The changes also introduce a new requirement that "in making expenditure and funding decisions, the company is to have regard to what will best promote the development and interests of the Australian coal industry".

So far, ACALET's funding has gone almost entirely to low emissions research and development projects.

However, the 2011-12 ACALET financial statement obtained from ASIC indicates the fund is moving more toward advocacy activities, revealing that it will spend $50 million on an "energy literacy" project, with $20 million of that to be spent over the next five years.

The ASIC documents also reveal the Australian Coal Association in 2011-12 received $2 million in management fee payments from the fund – well up on the $200,000 in management fees it received in the fund's early years.

Large claims about fund's impact
The black coal industry has long described its COAL21 fund as a core part of its efforts to reduce greenhouse gas emissions.

For example, a 2009 submission to a Senate Select Committee on climate policy refers to potential COAL21 funding "commitments" up to that time of more than $500 million (hard copy page 17) and includes an illustrative graph on the "impact of COAL21" suggesting that it would begin delivering significant – although undefined – reductions in annual emissions from soon after 2015 (hard copy page 15).

CCS a 'slow and complex' undertaking
The failure of Coal21 to funnel previously anticipated amounts of money towards carbon capture and storage can in large part be attributed to the collapse of the Zerogen integrated gasification combined cycle project in Queensland, which at one point was expected to receive up to $300 million from the fund.

In a speech delivered in Beijing in March last year, Australian Coal Association chief executive Nikki Williams acknowledged that the task of researching, developing and deploying CCS had proved "slow and complex".

"In reality, an integrated CCS project will require a number of years of geological development before commencing the power plant development," she said.

"And this will extend the total project timeline to somewhere between 10 and 16 years."

However, Williams described the deployment of CCS as a vital undertaking for Australia.

"With emissions from the LNG sector set to grow to 19% of Australia's stationary emissions by 2020, the application of CCS to emissions from gas liquefaction alone will be vital to restrict Australia's greenhouse gas trajectory," she said.

Williams said ACALET was now focusing its efforts on regional searches for storage sites and demonstration-scale retrofit post-combustion capture projects.

Renewables, low emissions

Compliance news by jurisdiction

AustMap Tasmania Victoria South Australia New South Wales Australian Capital Territory Queensland the Northern Territitory Western Australia Federal