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Australia Barnaby Joyce says fossil fuels are Australia's largest export. Is he correct?

01:16  21 october  2021
01:16  21 october  2021 Source:   msn.com

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Nationals leader Barnaby Joyce says coal and fossil fuels are Australia's biggest export. (ABC News: Nick Haggarty) © Provided by ABC Business Nationals leader Barnaby Joyce says coal and fossil fuels are Australia's biggest export. (ABC News: Nick Haggarty)

The claim

The looming Glasgow climate summit has intensified the focus on the Coalition's plans to reduce greenhouse gas emissions.

Some Nationals MPs have expressed concern about the impact that cutting emissions to zero in net terms by 2050 would have on Australia's resources industries, particularly coal.

In an interview with ABC TV's Insiders program, Nationals leader Barnaby Joyce suggested Australia could not afford to "shut down" fossil fuels.

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"You've got to remember, fossil fuels are your nation's largest export," Mr Joyce said.

"If you take away your nation's largest export ... then you have to accept the lower standard of living."

Is it correct that fossil fuels represent Australia’s largest export? RMIT ABC Fact Check investigates.

The verdict

Mr Joyce's claim doesn't stack up.

By treating fossil fuels as a single category of export, Mr Joyce is making an arbitrary distinction.

Fossil fuels represent a type of carbon-based energy product derived from the fossilised remnants of plants and animals.

They include coal, liquified natural gas (LNG), oil, liquified petroleum gas (LPG) and other refinery products.

To state the obvious, these are all very different products. They are traded at different prices, used for different purposes and subject to different forces of supply and demand.

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Moveover, as the Reserve Bank concluded in a recent discussion paper, global efforts to cut greenhouse gas emissions to zero in net terms by 2050 would affect these export products in different ways.

Taking the combined value of fossil fuel exports and comparing this to individual commodity exports such as iron ore – as Mr Joyce did in his interview – does not represent a like-for-like comparison.

In Fact Check's view, Mr Joyce should have compared either individual exports or categories of commodities.

There are many ways to categorise exports. The Department of Industry, Science, Energy and Resources, for example, uses a category it calls "resources", to cover mining products such as iron ore, gold, copper, bauxite, alumina and nickel, among other things.

On this measure, "resources" exports significantly exceed fossil fuel exports. In the most recent (pandemic-affected) financial year, iron ore exports exceeded the value of fossil fuel exports. On this basis alone, Mr Joyce's claim is problematic.

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Alternatively, if the question is viewed on the basis of specific export products, Australia's iron ore exports have in recent years been greater than any individual fossil fuel (or any other product for that matter).

Coal represents Australia's second largest export if metallurgical and thermal coal are counted together.

However, if metallurgical and thermal coal are counted separately, recognising these products are used for different purposes and are subject to different world prices and trading conditions, LNG represents Australia's second largest export.

In 2020-21, that was followed by travel services, education services and gold, with metallurgical coal in seventh position and thermal coal in eighth. However, these rankings tend to change from year to year depending on global trading conditions and prices.

Background to the claim

Some Nationals MPs have expressed concern about the idea of signing up to global emissions reductions targets, warning this would inflict excessive pain on the resources and agricultural sectors.

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In his interview, Mr Joyce compared fossil fuel exports to beef, barley and iron ore exports. He said it was "bleeding obvious" that Australia's "biggest export" – fossil fuels – could not be "shut down" without undermining living standards.

"Our beef exports are less than 40 days, 40 days of fossil fuel exports," Mr Joyce said.

"Your barley exports are less than three days of your fossil fuel exports. It is like fossil fuels, iron ore, daylight, daylight, daylight ..."

He also referred to coal, shortly after claiming fossil fuels represented Australia's largest export.

"You would believe the world is moving on from coal, and if that's the case, there won't be any demand for the product and of course, you clearly understand, the listeners understand that that is our biggest export," he said.

“If you start shutting down your biggest export, the government has less money.”

What are fossil fuels?

Geoscience Australia defines fossil fuels as "combustible materials derived from the long-term decomposition of organic matter in geological formations".

It says this includes crude oil, coal and natural gas.

Coal exports are often divided into metallurgical coal, used for steel making, and thermal coal, used for power generation. These are very different products, subject to different prices and different markets.

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Thermal coal is typically burned to produce steam to drive turbines for electricity.

On the other hand, metallurgical coal is burnt at high temperatures without oxygen to produce coke, a carbon product that is a key ingredient in steel making.

Grattan Institute Energy Program director Tony Wood told Fact Check metallurgical coal was arguably not a "fuel", but rather a feedstock, or input, used in steel production.

Fossil fuel exports

The Department of Industry, Science, Energy and Resources publishes data on Australia's commodity exports in its publication Resources and Energy Quarterly based on monthly trade data from the Australian Bureau of Statistics.

In an email the department told Fact Check the Resource and Energy Quarterly publication "does not provide any specific reporting on the value of fossil fuels as a singular commodity class".

Rather, it includes various individual fossil fuel products in a category it calls "energy", along with uranium.

However, it said the value of fossil fuel exports could be estimated by "taking an agreed definition for fossil fuels", including coal, oil and gas.

At the time Mr Joyce made his claim, the ABS monthly trade data was available up to July 2021.

As set out in the Resources and Energy Quarterly, in 2020-21 Australia exported about $80.7 billion worth of fossil fuels. That included $23.4 billion worth of metallurgical coal, $16.0 billion of thermal coal, $30.5 billion of LNG, $7.4 billion of crude oil, $1.4 billion of LPG, $1.8 billion of bunker fuel (used in shipping) and $387 million worth of other refinery products.

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That was down sharply from $114.8 billion in 2019-20, and $132.0 billion in 2018-19.

[graph 1]

In 2020-21, Australia exported $152.6 billion worth of iron ore. That was almost double the combined value of the nation’s fossil fuel exports ($80.7 billion).

On this basis alone, Mr Joyce's claim is problematic, given he used the present tense when he said "fossil fuels are your nation’s largest export".

In its response to Fact Check, the department said while the export value for iron ore exceeded a combined value for fossil fuels in 2020-21, "historically this group has typically represented a larger share of Australia's total export value".

"This reflects the significant impact COVID-19 has had on global energy demand over the last 18 months."

Categorising exports

Tim Buckley, director of energy and finance studies at the Institute for Energy Economics and Financial Analysis, said Mr Joyce was effectively treating a diverse range of commodities as a single entity that will shut down.

"Coking (metallurgical) coal is completely different to thermal coal," Mr Buckley said.

"One is used for steel production, and the other is used for power generation."

Mr Buckley said thermal coal power generation was becoming obsolete, whereas coking coal would continue to be used in steel production.

"Coking coal could just as easily be lumped together with iron ore because it is used in steel manufacturing."

"The reality is that this is going to play out over 20 years, and it's going to happen regardless of what Australia does, because of a profound global shift," he said.

The Grattan Institute's Mr Wood said Australia's exports of commodities such as iron ore, coal and gas were all significant, with sometimes dramatic fluctuations in prices and volumes making a debate about which is biggest "a waste of time".

But Mr Wood said it was "nonsensical" to suggest fossil fuel exports represented a single export that would be shut down, with some products affected more than others by global greenhouse mitigation efforts.

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He said they would be gradually replaced with other sources of revenue, including exports of critical minerals such as nickel, cobalt, lithium and rare-earth elements used in clean energy technologies.

As experts consulted by Fact Check noted, any grouping is arbitrary. Fossil fuel exports can, for example, be compared to a broad category the Department of Industry, Science, Energy and Resources calls "resources", covering mining products, including iron ore, copper, nickel, gold, silver bauxite, alumina, zinc, tin, lead, and gemstones, among other things.

On this score, fossil fuels were not Australia's largest export.

[graph 2]

What about comparing individual exports?

The Department of Foreign Affairs and Trade (DFAT) publication Trade and Investment at a Glance includes a table comparing Australia's top export commodities.

It ranks iron ore as Australia's biggest export in 2019-20 (the latest available), followed by coal, which it counts as a single product.

Fact Check analysed the latest ABS data to produce a similar list, comparing the past three financial years.

[graph 3]

On this basis, iron ore is Australia's largest export. If coal is treated as a single product, it ranks second, although metallurgical coal and thermal coal slip down the list to seventh and eighth respectively if they are treated as separate products.

What is the outlook for Australia's fossil fuel exports?

The Department of Industry, Science, Energy and Resources is predicting Australia's exports of coal, oil and gas will recover lost ground, rising to $123.8 billion in 2021-22 before falling back to $109.5 billion the following year.

In its email to Fact Check, the department said as part of the ongoing recovery from the pandemic, it was predicting the combined value of fossil fuels would exceed the total export value for iron ore by the 2022-23 financial year.

Individual fossil fuel exports are likely to be affected in different ways as countries move to curb emissions.

In a September 16, 2021 discussion paper, the Reserve Bank said the impact of net-zero emission targets adopted by major trading partners, including China, Japan and South Korea, was uncertain.

But it predicted Australia's coal exports were likely to fall by about 80 per cent by 2050 if these countries follow through with their net zero targets.

On the other hand, it said LNG exports were likely to prove more resilient as developing countries substitute from coal to gas to curb their emissions.

It predicted LNG exports would fall to about half their current levels by 2050 if various countries were to deliver on their net zero pledges.

But the discussion paper concluded that overall, the effect on Australian GDP "is expected to be relatively small and gradual".

"We find that Australia's coal exports could decline significantly by 2050, with a more modest effect likely for liquefied natural gas exports; both may be offset to some degree by increases in green energy exports."

Principal researcher: Economics and Finance Editor

factcheck@rmit.edu.au

Sources

  • Barnaby Joyce, Interview, ABC Insiders, September 26, 2021
  • Department of Industry, Science, Energy and Resources, Resources and Energy Quarterly
  • Geoff Cockfield, The net-zero bandwagon is gathering steam, and resistant MPs are about to be run over, The Conversation, October 13, 2021
  • Geoscience Australia, Australia’s Energy and Commodity Resources, 2021, Appendix 1, Glossary
  • Reserve Bank of Australia (Jonathan Kemp, Madeleine McCowage and Faye Wang), Towards Net Zero: Implications for Australia of Energy Policies in East Asia, Bulletin, September 2021
  • Department of Foreign Affairs and Trade, Trade and Investment at a Glance, 2021
  • Department of Foreign Affairs and Trade, Trade Statistical Pivot Tables
  • Australian Bureau of Statistics, International Trade in Goods and Services

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