Carbon tax fails to slow coal boom

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This was published 12 years ago

Carbon tax fails to slow coal boom

By Peter Ker/Adam Morton

The impending carbon price has done nothing to deter investment in the coal industry, with spending on exploration surging faster than any other mineral commodity.

Coal exploration spending in Australia leapt by 62 per cent last financial year as the industry dominated corporate activity in terms of both inbound investment and mergers and acquisitions.

Spending on coal exploration has jumped by 62 per cent.

Spending on coal exploration has jumped by 62 per cent.Credit: Glen McCurtayne

Investment in searches for new coal deposits reached $520 million, pushing it closer to rivalling iron ore and gold - both of which also grew significantly on the back of record high commodity prices.

The data, published by government agency Geoscience Australia, undermines Opposition Leader Tony Abbott's claim that the carbon tax would be the death of the coal industry.

Conversely, the extraordinary continuing growth in demand for coal for electricity and steel production in Asia challenges Prime Minister Julia Gillard's assertion the world is moving to cut greenhouse gas emissions.

Nearly $3 billion was spent on mineral exploration in Australia in 2010-11 - more than half of it in Western Australia. Victoria was the only state where investment fell.

Nearly a fifth of the total exploration expenditure was on coal. Spending on iron ore and gold exploration grew at a slower pace - by 27 and 13 per cent respectively, to reach $665 million and $652 million.

The growth in coal sector exploration coincided with it being easily the most active part of the Australian marketplace for mergers and acquisitions. One recent estimate put the combined value of last year's corporate deals over coal at $25 billion.

In a separate report released earlier this month, Ernst & Young's Paul Murphy said coal dominated inbound investment in 2011, attracting $US11.3 billion from overseas compared with $US8.2 billion for all other commodities combined.

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The coal exploration boom continued into the 2011 September quarter, when it reached a record $227 million - 167 per cent higher than for the same period in 2010.

Resources and Energy Minister Martin Ferguson said the 2010-11 exploration figures were good news and reflected the continuing strength of the mining industry.

Australian Coal Association chief executive Nikki Williams agreed the strong growth in exploration was ''very encouraging''.

''Exploration is critical to create a pipeline that will enhance Australia's reputation as an attractive investment destination,'' she said. ''The investment also highlights the enormous potential benefits that are available to the Australian economy through royalties, jobs and export revenue.''

But the Australian Conservation Foundation said it showed that, while the introduction of a carbon price was a step towards reducing Australia's domestic emissions, the government supported the country increasing its contribution to global climate change through boosted coal exports.

Conservation Foundation climate campaigner Claire Maries said much more needed to be done to move Australia away from a pollution-dependent economy.

''The government should … remove subsidies the mining industry takes from the public purse, like special exemptions for exploration, accelerated depreciation for investors and senseless concessions for fuel use,'' she said.

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