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When Queensland posted a surprise $12bn surplus – the largest ever recorded by an Australian state – in this week’s budget, it was a testament to its progressive coal royalties system.
Introduced by the treasurer, Cameron Dick, in June 2022, royalties range from 7-40% of revenues depending on coal prices, and are immediately delivering beyond expectations for the people of Queensland.
The reform was designed to ensure an appropriate social dividend from private fossil fuel companies’ use of Queenslanders’ public resources in times of exceptionally high coal export prices. As a result, Queensland booked a massive record $18.3bn of coal and LNG royalties and land rents in 2022-23, double that of the previous year. Queensland will see more modest but still very welcome $6bn annual inflows over the forward estimates as coal prices continue to normalise.
Among other things, this has enabled the state to fund a $550 electricity bill rebate for all households ($1,072 for more vulnerable homes) – more than any other state across Australia – offsetting the fossil fuel-driven energy price crisis.
The government has also committed a staggering $19bn over four years for new wind and solar energy, pumped hydro storage and transmission expansions. This will put Queensland on the path to deliver on its 85% renewables by 2035 target, driving decarbonisation of the electricity grid and locking in deflationary, low-cost domestic energy supply. The only way to rid the community of the scourge of energy price volatility and hyperinflation is to decouple from expensive, polluting fossil fuels.
Queensland’s mining industry booked a record $140bn of exports in 2022-23. While prices for premium thermal coal have fallen from the US$400/t average of late 2022 to US$170/t in May 2023, this is still about 2.5 times the long-term average of US$70/t. Windfall profits are still being made.
It is time that the New South Wales treasurer, Daniel Mookhey, followed his northern counterpart’s politically courageous and fiscally responsible lead and acted in the interests of the people by putting in place a similar system. The flat 7-8% coal export royalty rate in NSW is overdue for immediate review and uplift. The $12bn 2022-23 NSW state deficit could have been a $5-10bn surplus if NSW had followed Queensland’s move to respond appropriately to coal industry superprofits and align these with citizens’ interests.
The NSW government continues to forgo billions in coal export royalties every month, favouring the interests of a handful of predominantly foreign tax-haven-based multinationals, which in many cases pay zero corporate tax and benefit from multibillion-dollar fossil subsidies, like the antiquated zero-strategic-purpose diesel fuel rebate for mining companies.
Currently, NSW coal export firms keep a record 92% share of coal export revenues. This allows companies like Whitehaven Coal to enjoy a remarkable annualised 68.9% gross cash return on assets in the six months to December 2022, all while externalising the costs of climate destruction on to the community.
Similar coal royalty reform could be invested in NSW’s enormous opportunities to lead in renewables and key projects such as the Dubbo critical minerals precinct, de-risking and attracting private capital and adding valuable jobs to ensure a smooth transition as coal plant closures accelerate.
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It could also provide a modicum of relief to the energy poverty smashing NSW citizens right now, with retail electricity prices set to rise another 20% in the state from 1 July as a direct result of the multinational fossil fuel cartel’s shameless price-gouging.
Beyond coal, Australian mining will play a key role in driving the world energy transition and delivery on net zero. It is important that Australians who fund the enabling industry structures and own these public resources also receive a fair share of the gains longer term. Given the importance of Australia’s world-leading critical minerals and lithium resources for the global energy transition, it would be sensible for governments to provide investor clarity by ensuring a fair progressive royalty system is in place now, even as we also advocate for public subsidies to incentivise value-added refining. This consideration should also be applied to iron ore, matched with a royalty exemption if onshore value-adding to green iron is done.
Queensland’s move demonstrates the political viability of policy ambition that delivers on the broader social good. It’s time for the fossil fuel dinosaurs to pay up, and for the NSW government to serve the people.
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Tim Buckley is the founder of Climate Energy Finance, an Australian public interest thinktank
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