TJ Ryan Foundation Research Associate, David Peetz, and Georgina Murray write in The Conversation (3.5.17) that, as the cost of renewable energy falls, funding a new mine is a risky investment - as the Turnbull government is finding to its lasting frustration.
'The Australian government’s strident criticism of Westpac for not financing the Adani Carmichael coal mine is out of step with the economics. As the cost of renewable energy falls and its adoption increases, fossil fuels are becoming a riskier investment.
'It’s not just Westpac. This shift is reflected right across the finance industry. The big four Australian banks have all declined to finance this mine, as have many large international financial institutions. The Commonwealth Bank quit as the project’s financial adviser in August 2015. NAB ruled out financing the mine in September 2015. ANZ effectively ruled out financing in October 2015 and again, more firmly, in December 2016.
'Big overseas financiers Standard Chartered, Barclays, Royal Bank of Scotland, Citi, HSBC, Morgan Stanley, Société Générale, Crédit Agricole, JP Morgan Chase, Deutche Bank and BNP Baripas have also already abandoned or made clear their lack of support for the mine.
'Adani’s coal was to be used to generate electricity in India, recently seen as the future for the product given China’s shift away from coal. But Indian demand for coal is slipping. Its new National Electricity Plan has renewables rising from the current 15% to 56% of installed power capacity by 2027.
'The Indian government itself now thinks it may not need any new coal power plants for at least a decade. As mines require a huge initial investment that pays itself off over many years, this increases the risk that the Carmichael mine will become a “stranded asset”.'