modest increase in coal royalties offers little for the energy transition

modest increase in coal royalties offers little for the energy transition

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<p><figcaption class=Photography: Darren England/AAP

The Queensland government’s decision to increase royalties on record coal prices will inevitably be seen as a radical move.

At face value, it’s a brave decision. Plans to raise taxes on the mining sector have been – to say the least – historically worrisome. The resources sector has already posted full-page ads on Courier-Mail, signaling that it is ready to fight.

“They are making record profits,” Prime Minister Annastacia Palaszczuk told reporters before the state budget was released on Tuesday.

“Look, I understand they might want to set up a campaign. But I believe the Queenslanders are on our side. Queenslanders will see that some of these companies are making billions of dollars from coal exported abroad. And we can reinvest that money… into hospitals or schools and the Queensland region.”

Related: Now is the perfect time to increase coal royalties to finance Australia’s energy transition | John Quiggin

When it comes to execution, however, the royalty measures will do nothing but irritate the coal lobby.

The extra revenue raised – about $1.2 billion predicted – is small in the context of a state whose budget output is supported by coal royalties and whose finances will be most affected by a disorderly transition in the energy sector.

Coal prices are at record levels – Queensland’s finest coking coal is selling for over $500 a tonne. The state budget predicts that these high prices will earn the state an additional $12 billion in total coal and gas royalties over four years, compared to the same set of forecasts a year ago.

Changes to the royalty regime account for about a tenth of that amount. They are hardly the kind of move that will send miners over the wall or undermine their investment decisions. Not even close.

The loudest calls for royalty reform in recent years have come from those who understand the scale of the inevitable transition from fossil fuels.

They also know that when coal mines become unprofitable, resource companies will reduce their losses. It will be up to governments and policymakers to ensure that workers and communities, including Queensland’s coal mining areas, are insulated from the impacts of the transition.

The lifting of Queensland’s 10-year royalty freeze provided a rare opportunity to ensure that these coal companies help finance the transition, having made significant profits from exporting state-owned resources.

Politically, the Palaszczuk government has always been caught trying to run a complex state; where voters in regional areas often have conflicting priorities with those in cities.

The way Labor has managed this conflict has typically been to avoid it. He talks about a renewable energy transition, but conservation groups say it has been too slow to invest in or consider the need for coal power shutdown.

The latest state action on royalties fits into the same basket of intermediate policies. Just enough to send a signal to left-wing voters in cities that might be flirting with the Greens. Not enough to justify a campaign to scare the miners.

For all Palaszczuk’s talk about Queenslanders getting a fair share, the state has also gone out of their way to make it clear that the impact of the royalty measures is mild.

Treasurer Cameron Dick said the coal royalty measures would yield $400 million less – during a mining boom – than the last time royalties were changed by the Liberal National party in 2012.

“These changes mean coal producers can rest easy,” Dick said.

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