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Floods and Coal – The Water-Energy Nexus Redux

A week and a half of torrential rains and arrival of a tropical cyclone on Christmas has inundated northeast Australia–causing flooding on what some commentators have called a “Biblical” scale, with water covering an area the size of France and Germany combined.

Floods in Australia cover an area the size of Texas. Source: NASA.

Miraculously, so far only nine people have died, a stark contrast to the nearly 2,000 Pakistanis who perished in last year’s flood there—a contrast some have pointed to as a cruel example of the difference between the way rich and poor countries experience natural disasters, and the significant difference the competent response of government makes. (Though to be fair, some 20 million people were directly affected by the Pakistani floods, compared to some 200,000 in Queensland, Australia—if you look at the death rate per capita, it would be slightly less than half in Australia, and there may be more Australian casualties to come).

Beyond the human toll, the floods in Australia have other repercussions, the most notable being the effect on the global coal market. According to Reuters, “Australia’s $50 billion coal export industry has been brought to a virtual standstill,” with floods closing major ports, washing out railroad lines and flooding coal mines themselves.

Rockhampton, Australia, underwater. Source: Sacramento Bee photoblog.

Australia exports about 40 percent of the world’s “coking coal” – that is, bituminous, or metallurgical high quality coal used to make steel. Some analysts think that coal prices could rise to $330 per metric ton, or some 30 percent over the next few months.

There are potentially bigger implications; as energy commentator Tom Whipple points out, China, whose coal demand has grown at about 10 percent per year for the last decade, is facing a wall in production. In November the Wall Street Journal reported that China, which depends on massive coal consumption to run its economy, may be facing its own “peak coal.”

Whipple speculates that given China’s need to begin importing coal, events like the Australian flood could have surprising consequences, including “an outsized impact on oil prices in the next few months, right down to what you pay for gasoline at your local pump,” given China’s history of increasing oil imports to keep factories running with emergency generators to make up for coal shortages.

All of this could, in turn, spur global inflation and threatening the already weak global economy. There is, of course, a dark irony in all this, given coal’s own outsized role in exacerbating climate change—which in turn makes catastrophic floods like those in Australia more likely over time.

On the other hand, China has also introduced feed-in tariffs to help spur the development of renewable sources of electricity, and the country is dramatically growing its renewable energy industry, causing some cleantech promoters to speculate that it won’t be long before alternative energy sources reach “grid parity” with coal—that is, finally making wind and solar power cheaper than coal production.

Let’s hope it happens soon—better we shut down coal production before the climate does it for us.

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Larry Quick
13 years ago

Congrats Lakis – what a great article. So succinct and combining so many key interdependencies usually lost in events like this and the debate on climate change.
As an Australian, I am mortified when events like this happen – as in Pakistan and Haiti. But as we all know, when it is your back-yard, the emotions and consequences run high.
Four things strike me, which may be better debated in Oz when the water recedes:
1. In Oz we are what I see as the ‘canary in a coalmine’ place that is able to see the world at scale through a local lense – from a whole systems view socially economically and environmentally – if we choose.
2. We have the capability and technology – so why do we allow ourselves to get away with comments like: no one could have reasonably forseen and acted ahead of these conditions?
3. How do we act ahead of further change when Oz has a two-way climate – drought and flood in sync?
4. Our opposition leader in the Fed government publicly stated that “climate change was crap” – that was early 2010 – post our Victorian bushfire episode. How long will we let statements like that come out of the mouths of our politicians and then allow them to stay in position? Imagine if he had said, domestic violence is crap – he would either be out of public office or locked away.