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Australia coal mining marks challenge for U.N. green push

* U.N. report calls for curb on coal-fired electricity generation

* But number of coal mines in Australia growing

* Coal remains most important fuel for global power generation


By James Regan

SYDNEY, Nov 3 (Reuters) - U.N. calls to curb greenhouse gas emissions by ending most electricity generation using coal will face some tough challenges, with coal mining going through a growth spurt in countries such as Australia.

The U.N on Sunday released a report saying governments could keep climate change in check at manageable costs but would have to cut greenhouse gas emissions to zero by 2100 to limit risks of irreversible damage.

Although coal is blamed for contributing to climate change and causing large amounts of harmful pollution, it remains by far the most important fuel for power generation at a global share of around 40 percent.

Australian production of thermal coal is forecast to rise by 8 percent over the next two years to 270 million tonnes, according to government figures, confirming the nation as the world's second's biggest-exporter after Indonesia.

By fiscal 2018/19, production will reach 290 million tonnes, says the Australian Bureau of Resource and Energy Economics, the government's forecaster.

Australian growth is expected to continue as companies including Rio Tinto , BHP Billiton and Glencore earmark capital to dig and acquire new mines.

Those companies are banking on projections that use of coal will rise, not fall, in coming decades, creating new markets for Australian collieries.

Glencore in particular is said to be eyeing an even greater presence in Australian thermal coal mining under its chief executive, Ivan Glasenberg, whose recent attempt at a merger with Rio Tinto was largely structured around combining the two companies coal assets, according to people familiar with Glencore's strategy.

The idea was rebuffed by Rio Tinto.

As coal is a plentiful resource, spread globally, and relatively easy to use in power stations, it is cheaper than other fuels and therefore particularly attractive for emerging economies with fast rising electricity demand.

And Australian Prime Minister Tony Abbott has been a strong advocate of coal, describing it last month as "good for humanity".


The Intergovernmental Panel on Climate Change (IPCC), established by the U.N., warned in its report of findings by 800 scientists that to keep a rise in global temperature below 2 degrees Celsius (35.6 Fahrenheit) fossil fuel power generation in the absence of accompanying carbon capture and storage (CCS) would need to be phased out by the end of the century.

"CCS represents a path of least resistance in balancing the developing world's burgeoning energy demand with the emission targets scenario presented by the IPCC," said Michael Roche at the Queensland Resources Council, comprising the nation's biggest coal miners.

But CCS is expensive and little tested. Last month, Canada's Saskatchewan Power opened the world's first big CCS unit at a coal-fired power plant after a C$1.35 billion ($1.21 billion) retrofit.

"Australia's power generators are nowhere near big enough to meet the costs associated with (CCS) development," said Alan Oxley, from trade and investment consultants ITS Global.

The size of the challenge is reflected in forecasts for energy demand growth across Asia, where coal is the fuel of choice and expected to meet almost 60 percent of demand growth over the next 20 years, according to Roche.

Already a major supplier to North Asia, Australia is emerging as a key source of thermal coal for India's growing population of electricity users, many of whom had been relying on wood and kerosene to cook food and illuminate their homes.

India's Adani Enterprises has hired consulting firm Parsons Brinckerhoff to manage contract reviews for its A$7 billion ($6.11 billion) Carmichael coal mine in Australia as it looks to start production in three years.

Meanwhile, India's GVK and Australian billionaire Gina Rinehart have obtained an environmental permit to build their Alpha Coal project in Australia, moving it a closer to signing off on a mine it estimates would cost $10 billion to construct.

Environmentalists have attacked the projects as unnecessary and a way to siphon off capital that might otherwise be channeled into renewable energy sources.

"The cruel reality is that Australian coal from Carmichael will not bring us light or power," said Debi Goenka of India's Conservation Action Trust, which has launched legal proceedings against Adani over development of the mine.

"Many are not connected to the electricity grid. Those who are, cannot afford electricity from Australian coal," he said.

But the International Energy Agency projects electricity demand in India will more than double in the next decade and that a continued reliance on coal power will require local supplies to be heavily supplemented with imports. (1 US dollar = 1.1460 Australian dollar) (Editing by Joseph Radford)

Published on:
November 3, 2014
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