Insight - India and Australia AGL are two different sides of the same coal coin - The Star Online

Insight – India and Australia AGL are two different sides of the same coal coin – The Star Online

Two seemingly unrelated events demonstrated how uneven and vastly different the global trajectory of decarbonization is likely to be in developed and developing countries.

Australia’s largest energy producer pulled the plug on Monday over plans to split itself into a largely coal-fired powerhouse and retail electric company.

Meanwhile, India, the world’s largest coal miner by volume, is planning to import the polluting fuel for the first time since 2015, amid a domestic supply shortage that has raised fears of blackouts.

These two stories illustrate the dynamics of decarbonization and the difficulty of reaching a global goal of net zero emissions by 2050.

Australia’s AGL Energy accounts for about 8% of the nation’s carbon footprint, primarily through the operation of several large and old coal-fired power plants in the densely populated states of Victoria and New South Wales.

She had said her plan to split into a Jill company and retail arm made economic sense, but environmental activists have criticized the move as it allows coal-fired power plants to operate for decades to come.

One of these activists was tech mogul Mike Cannon Brooks, who, after rejecting his initial offer to buy AGL and seizing the private benefit, became the majority shareholder with an 11.3% stake.

His opposition to the demerger, along with opposition from some other shareholders, led the AGL’s board of directors to conclude that it did not have the 75% shareholder support required for the move; The plan was abandoned on Monday.

Not only did AGL spoil its proposal; CEO Graeme Hunt and Chairman Peter Putin said they would resign, and the company would review its strategic direction.

This strategic review is likely to show a faster path to decarbonization, especially if Canon-Brooks gets its way and secures two seats on the AGL board of directors.

Canada’s Cannon-Brookes and Brookfield Asset Management, in their initial bid for AGL, proposed faster shutdowns of coal-fired generators by 2030, rather than the company’s blueprint for 2045.

They also proposed investing A$20 billion ($14.3 billion or RM63bil) in renewable energy and storage solutions, which are timed to be online before the coal generators shut down.

In other words, Canon-Brooks wanted to speed up AGL’s shift to renewables without compromising electricity supply and security.

Doubts remain as to whether this can be profitably achieved, but, as AGL’s scrapping of its decoupling scheme shows, the pressure will increasingly be on companies to do more to decarbonise, at least in countries where there is access to capital. .

The argument made by environmentalists and the growing amount of green capital is that fossil fuels such as coal and natural gas are simply too expensive, unreliable, and inextricably linked to climate change.

This may well be the case, but India’s current dilemma shows how deeply entrenched coal is in some developing economies.

Coal India aims to import coal to supply generators in the third quarter amid fears of power shortages during the peak summer demand period, according to a letter to utilities from the Energy Ministry on May 28.

The move is a sign of desperation, given the near-record price of thermal coal in seaborne markets in Asia, where record Australian shipments from the Port of Newcastle on May 27 expire at $415.60 ($1,815) per ton, according to GlobalCOAL.

That’s more than triple the price it was at the end of last year, as thermal coal soared on the back of renewed demand from Europe as the continent tries to cut Russian supplies from its energy mix in the wake of the invasion of Ukraine.

What India is showing is that in an energy crisis it will use all the fuel it can, and now that’s coal.

The unknown is whether the current pain the country will feel from paying for coal imports translates into a new increase in investment in renewables and storage solutions, or whether India will seek to extract more coal domestically in an effort to end dependence on imports.

India may not have the luxury of committed billionaires like Cannon Brooks to fund faster decarbonization.

But if the world is to have any chance of getting to net zero in the coming decades, much of the transformation will have to be in countries like India, Indonesia, and China, those with large domestic coal reserves, large populations and growing energy needs. – Reuters

Clyde Russell is a columnist for Reuters. The opinions expressed here are those of the author.


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