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Surrendering to pressure from shareholders, the largest coal miner in Australia – Glencore, is putting the brakes on its coal production.
The Swiss-based giant, with production hubs in Africa and South America, sources nearly two-thirds of its material from Australian mines.
Glencore has had to make this concession despite mining nearly 130 million tonnes of coal in 2018, up 7% from 2017.
Going forward, Glencore will put a cap on its production.
The company also expects output to steadily decline over the next decade, as most of its Australian mines retire.
The move from Glencore is a massive win for climate action activists – especially considering how controversial Glencore has been over the years.
But what does this development mean for Australians? Keep reading to find out!
Significant shareholder activism, predominantly from a super-group named Climate Action 100+, has been stated as the motivation for this drastic shift.
Climate Action 100+ represents 300 of the world’s most influential investors who own trillions of dollars worth of assets.
It is perhaps no surprise that even a giant like Glencore had to eat some humble pie before their powers of persuasion.
Glencore will now look to follow recommendations set by the Paris Climate Agreement – which aim to keep global temperature increases below 2 degree Celsius.
Just last year, the Department of Industry, Innovation and Science said the largest export earner for Australia was coal, overtaking iron ore by earning nearly $67 billion last year.
Obviously, as export income dry up, the federal government may tax people more to cover the possible revenue gap.
However, if on the other hand, a supply crisis opens up and the price of coal goes up astronomically, then one of the largest users of coal – power stations – will be affected.
As the raw material for coal-fired power stations goes up in cost, the price of electricity could go up even further!
In a country where thousands of families are suffering from energy poverty, higher prices would be catastrophic!
Either way, as the world moves beyond coal, perhaps it is time that our nation did a complete overhaul and walked towards a low-carbon economy.
Naturally, with any major u-turn, it is important to scrutinise what the ulterior motives could be behind the move.
Just a few months ago, Glencore forecast that over the next few decades coal demand in Asia would double.
Over the last few years, Glencore has knocked Rio Tinto off their perch as the biggest Aussie coal producer by spending over $4 billion to buy assets.
Glencore purchased a 49% stake in Rio Tinto’s mine in NSW’s Hunter Valley.
Glencore also bought an 82% stake in the Hail Creek mine in Queensland.
Additionally, Glencore has also spent over a billion dollars in maintaining the coal assets in Australia it already owns.
Assuming all of this global demand, all of this may just be a ploy by Glencore to increase coal prices by restricting supply.
Given the significant investment that Glencore has made in Australia, it may only be protecting its own coal interests!
Perhaps we are being a little too cynical and the company does have good intentions in trying to reduce the carbon footprint of the planet – time will tell.
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