Monday, June 11, 2012

Mining boom: myths busted, but some questions still unanswered

Too Much Luck: The Mining Boom & Australia's Future
By Paul Cleary
Black Inc., 2011

Paul Cleary’s book Too Much Luck: The Mining Boom and Australia's Future, published last year, raises important questions, and provides much useful information for answers.

But the real elephant in the room, coal mining, is largely left untouched.

Cleary’s main arguments are ones we need to be familiar with. He carefully makes the case that Australia’s mining boom is not going to last forever (just a few changes in the Chinese economy could bring it to a sudden stop).

Australia, unlike many resource-rich countries, does not have a “sovereign wealth fund” to save the wealth of its resources boom. Norway does — an enormous fund which has strict rules meaning it can’t be spent in a hurry.

Income from the fund means that long after North Sea oil is gone, Norway will still have income coming in. The fund even practices a degree of ethical investment, staying out of companies that have bad environmental or human rights records.

Even northern neighbours East Timor and Papua New Guinea have some form of sovereign wealth fund (Cleary worked as an advisor to East Timor's government).

Cleary points out how Australia's mining boom is masking how weak the rest of our economy has become. Cleary says it’s not so much a two-speed economy, as three-speed: top gear, second and reverse.

Some (mainly service) industries are doing OK, or at least no worse than their international counterparts. Other industries are going backwards — such as manufacturing, tourism and agriculture — and the mining industry is partly to blame.

The minerals boom is sucking skilled labour and investment out of other sectors. The high Australian dollar is killing export industries and tourism.

And when the boom ends, we will be left with little more than a lot of dirty holes in the ground.

Cleary points out that foreign ownership is the norm in Australian mining: the really big miners are BHP Billiton, Rio Tinto and Xstrata — all multinationals. “Foreign ownership of Australian mining and energy businesses, now around 80 per cent and rising, means that some of these high profits leave the country,” Cleary writes.

One wonders whether enriching Gina Rinehart, Twiggy Forrest and Clive Palmer is any better for the Australian economy.

The book ends on a series of recommendations for developing policies to regulate mining so it can benefit Australia in an ongoing way. These are mild and sensible measures, for all that they are in direct opposition to the largest industry in the country.

Can even such mild measures be implemented? Are they more or less likely than belligerent “resource nationalism” of the kind that saw Bolivia nationalise its natural gas resource? That depends, perhaps, on how much outrage is generated against the mining industry to support government action.

This book certainly should be read in conjunction with Matthew Benns’ Dirty Money (also published last year), which catalogues many of the more outrageous deeds of Australian mining companies at home and abroad. Public outrage would be justified and Benns gives plenty of ammunition.

We do have the basic legal framework for publicly owned and managed mineral resources. As many farmers have found out, to their horror, they do not own anything below the topsoil: the state (the “commonwealth”) owns it, and can lease that ownership to miners.

But the outstanding omission is what to do with our coal exports in the era of climate change?
Cleary didn’t set out to answer that, so maybe it’s unfair to expect him to. But there is hardly a more important and urgent matter of public policy to get right — now, before another generation of fossil fuel infrastructure is built.

Cleary is good at weaving some important environmental issues into his account. He devotes a chapter, “Raiding the Food Bowl”, to the obscene rush to take over productive farmland for coal seam gas and coal production. The health effects of coal mines and the devastation of uranium mining are given a good mention.
Cleary wonders about the effects of climate change on water availability. He questions whether CSG developments should be able to threaten agricultural water supply given the threat of water shortages.
But he leaves untouched the issue of these fossil fuels causing climate change.

Australia is the world’s biggest coal exporter, and a major LNG exporter too, Current government projections are set to double, triple, quadruple these astounding figures.

As climate writer Guy Pearse has explained, the expansion of Australian coal mining will add about 1.75 gigatonnes of carbon dioxide annually to the atmosphere.

We already export more carbon emissions than Australia causes within it’s borders — and Australia already has the world’s highest per capita greenhouse gas emissions.

This is in a world already facing dangerous sea level rise (some island nations are contemplating evacuation of the whole population). Extreme weather events are rising, and tipping points to greater, catastrophic changes are happening right now in the Arctic.

What will the mining boom look like when the coal and LNG exports are stopped?

A responsible climate policy would close them in a few years. How would we redeploy the workers? How would we replace the export revenue?

Certainly, harnessing the wealth of the non-fossil mining that continues will be essential. Cleary gets the debate going on some of the options, and for that reason at least, this is an important book that deserves to be read.

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