The Debate | Opinion | Oceania

NSW’s Coal Reforms are Ambitious, but Diplomatic Engagement is Needed

The state has shown that domestic change is possible at the sub-national level. Can Australia leverage that momentum to shape the sector’s regional transition?

Late in March, the New South Wales government, home to the world’s biggest coal port, quietly committed to ban new greenfield coal mines. At the same time, it introduced some of the world’s most progressive emissions mitigation requirements for coal producers, and progressed legislation to support coal workers and communities manage their pending transition.

While many (including myself) would argue that the state could have gone much further, it has now positioned itself as one of the most progressive coal producing jurisdictions in the world.

In the context of the ongoing energy crisis, that alone is worth recognizing. But in an interconnected market, domestic leadership alone is not enough. Even as one of Asia-Pacific’s oldest and largest thermal coal suppliers, the true test of these reforms will not just be whether they last, but whether or not they have an impact on regional markets. 

In the short term, coal demand in the region is surprisingly rising. In December last year, the IEA projected that regional demand was expected to contract, and in response, the Indonesian government reduced their annual production goal by 24 percent.

However, the current energy crisis has led to a race to secure fuel of all kinds. The coal price is up by around 40 percent since January, and we have already seen a range of shifts in coal phase-down policies from Thailand, South Korea and Japan. This has provided welcome returns for Indonesian and Australian exporters.

However, these short-term windfalls do not change the longer term trajectory, especially among the region’s biggest importers. China and India have significantly increased domestic coal production in the wake of the world’s last energy crisis, leading both countries to report record declines in coal imports last year. Vietnam is rapidly diversifying its supply also, expanding long-term LNG agreements and rolling out renewables. At the same time, Indonesia faces persistent oversupply challenges while the new South Korean government remains committed to structurally phasing down coal plants and ramping up nuclear and renewables over the next two decades. 

Here is where diplomacy becomes essential.

Australia and Indonesia together dominate regional thermal coal exports. If the two countries were to align on an agreement to restrict new coal developments or collaborate on supply........

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