The Institute for Energy Economics and Financial Analysis (IEEFA) has repeated its call for governments and the mining industry to take the climate change risk to the Australian coal industry seriously – and particularly for the Hunter – “and begin making sensible preparations for a transition”, after Mr Galilee criticised an IEEFA report last week warning NSW coal exports faced permanent, long-term decline.

The IEEFA report warned NSW was relying on “hopelessly out of date predictions” that could quickly leave the Hunter stranded as countries around the world, including the four big Australian coal markets of Japan, China, South Korea and Taiwan, show signs of responding to the call to limit global warming to two degrees.

The report was released nearly one year after the new chair of the Port of Newcastle, Professor Roy Green, said there was an urgent need for the Hunter to diversify from coal.

“Coal has been at the heart of the Hunter’s economy for the better part of two centuries, and it will continue to be central to the prosperity of the region and Port of Newcastle for some time to come,” Professor Green said in December, 2017.

“However, there is also an urgent need to diversify the Hunter economy and the port’s business.”

In an opinion piece after last week’s IEEFA report Mr Galilee compared the institute to “the boy who cried wolf”.

He cited an International Energy Agency report saying South East Asian coal consumption will more than double by 2040, and coal’s share in the region’s power mix will lift from 35 per cent to over 40 per cent.

“The future of the Hunter coal industry is linked to ability to meet this demand,” Mr Galilee said.

But in a response IEEFA said the IEA report scenario relied on by the Minerals Council – called the New Policies Scenario – was a prediction that assumed the world fails to deliver on the Paris Climate Agreement target of limiting warming to below two degrees.

“Not mentioned in the NSW Minerals Council press release is that under the IEA’s Sustainable Development Scenario, in which countries of the world work together to limit global warming to two degrees, the outlook for coal is very different,” IEEFA said.

Under its Sustainable Development Scenario IEA said the use of coal would be “vastly diminished, falling by around 30 per cent in the period to 2040, as renewables eat into coal’s share of the power mix”.

If countries respond to their Paris Agreement commitments, as required under the Sustainable Development Scenario, “70 per cent less coal is used… than in the New Policies Scenario”, the International Energy Agency said.

The Minerals Council also failed to acknowledge an even tougher scenario outlined by the International Energy Agency, the 66% 2ºC scenario, which provides a path by which global warming can be kept to under two degrees, but which requires an 80 per cent reduction in coal use in the power generation sector by 2050, IEEFA said. 

IEEFA said it was highly likely countries will try to meet their Paris Agreement commitments, “which has major implications for coal consumption”.

On Monday the Minerals Council described the New Policies Scenario as “the main scenario”.

The IEA said the New Policies Scenario “reflects the impact of existing energy policies in Southeast Asia as well as an assessment of the results likely to stem from the implementation of announced policy intentions, such as the country pledges made as part of the Paris agreement”.

IEEFA repeated its argument that the pipeline of new coal plants in Australia’s major Asian coal markets has experienced a 74 per cent decline since 2015, with more contraction expected.

IEEFA said the NSW Minerals Council’s reference to the US$114 per tonne being paid for Australia’s high grade 6000kcal/kg coal failed to note that a growing proportion of Australia’s thermal coal exports consists of lower grade 5500kcal/kg coal that’s recently been priced as low as US$65 per tonne.

The Minerals Council “also does not mention the likely short-term nature of current high prices”, IEEFA said.

“The Australian Government’s Office of the Chief Economist forecasts thermal coal prices will drop to a real price of US$73 per tonne by 2020.”

The NSW Minerals Council said a 2.4 per cent increase in thermal coal exports to Japan in the year to December 2017 was evidence of a strong future for coal, but the council did not mention total Australian coal exports to South Korea are down more than 10 per cent in the first nine months of 2018, IEEFA said.

The Minerals Council also did not respond to the announcement in September by Marubeni Corporation, one of the two largest coal-fired power plant developers outside China and India, that it will no longer develop new coal-fired power projects “as a general principle”, and was looking to sell existing coal-fired power holdings, lEEFA said.

The International Energy Agency’s new World Energy Outlook report will be released this month.

IEEFA predicted coal demand even under the agency’s New Policies Scenario will be revised down again, “as technology and policy changes are occurring much more quickly than previously predicted”.

IEEFA did not respond to Mr Galilee’s description of the institute as “impressively named but deceptively shallow”.

Author of last week’s IEEFA report and director of energy finance studies for Australasia, Tim Buckley, is an equities research analyst who held senior positions at global investment banking and financial services corporation Citigroup for nearly two decades, and two years leading Deutsche Bank’s institutional equities business from Singapore.

IEEFA is a US-founded institution with a mission to accelerate the transition “to a diverse, sustainable and profitable energy economy”, and away from a dependence on coal and other non-renewable energy resources.

Mr Galilee was chief of staff to the then NSW Treasurer Mike Baird until 2011 when he left to head the Minerals Council. Mr Galilee was a former staffer with the then federal Opposition leader Tony Abbott, and also worked for former Prime Minister John Howard.