This article is more than 2 years old

This article is more than 2 years old

Surging coal prices will help to underwrite the upcoming Queensland budget. The state is expected to announce it has earned about $1bn more than initially forecast from royalties.



The windfall will help the Palaszczuk Labor government pay for infrastructure spending and handouts in next week’s budget, and will likely speed up the state’s projected return to surplus.



But it will also bring into focus the extent to which the state remains reliant on royalties from mining – one of the “pillars” of the Queensland economy – while the government also pushes forward with a transition to renewable energy sources.

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Queensland has set an ambitious renewable energy target of 50% by 2030 and is taking steps towards achieving that goal, including by backing an array of large-scale clean energy projects.

At the same time it continues to offer new coal exploration licences – releasing six new areas to the market last month – and last year approved a royalties framework designed to actively encourage the development of new coal tenements in the Galilee and Surat basins.

The state treasurer, Jackie Trad, told Guardian Australia the resources industry was diverse and would continue to play an important role in the Queensland economy.

“However, we know that the long-term global trend is away from thermal coal as countries begin to adapt their economies to address climate change,” Trad said. She said the government wanted to ensure “a just transition for workers in the resource industry”.

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“Fortunately, Queensland also has a highly diversified economy where no single industry accounts for more than 10% of the economy,” she said.

“It has been a key goal of our government to continue to diversify our economy by stimulating new industries and ensuring people have the skills to be employed in these industries. We’re growing advanced manufacturing, innovation and research, health and community services and renewable energy, because that’s where we know the growth in jobs will be.”

The Griffith University economist Liam Wagner said coal contributed about 90% of the state’s total resource royalties.

“There’s almost been a doubling of price since the lows of December 2015,” Wagner said. “I would say that an extra billion [dollars on top of budget forecasts] is highly likely.”

Wagner and Tim Buckley, an energy market analyst at the Institute for Energy Economics and Financial Analysis, both point to a recent study by the International Energy Agency that predicted “the end of the boom years for coal” and a halving of global demand by 2040.

Both point out that Queensland is partly insulated from that expected drop in demand because it is the world’s largest supplier of coking coal, which is used to produce steel.

But regardless, Buckley said the currently high coal prices represented a “golden opportunity” to invest in assisting communities and workers affected by the wind-down of the coal industry.

“It’s critical to put the windfall gains of the current coal price spike into the context of the dramatic decline that is coming for global coal consumption,” he said. “This is the perfect opportunity to fund the retraining of those workers and redeploy them, whether it’s in coalmine rehabilitation ... or renewables.”

Buckley said in light of the IEA’s prediction that coal demand would halve, any moves to develop new coal resources would hurt existing miners.

“If we myopically expand new capacity, that will only inevitably mark the end of high prices,” he said.

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“It’s in our national interest to have an orderly retreat from coal. Ironically, it’s in the interest of the incumbent industry too. It’s in Queensland’s interest not to flood the market ... because the only result is it will drive down prices.

“That maximises the royalties to the Queensland government. It maximises the profits to coal companies. It also allows decent wages to the workers. Now that prices are high, money needs to be set aside.”

The Queensland Resources Council said it wanted “no surprises” in the budget. The QRC chief executive, Ian Macfarlane, said additional coal royalty revenue “would provide additional funding to reinvest in services and infrastructure for Queenslanders”.

Macfarlane said plans to develop the north-west minerals province would help to drive an advanced manufacturing boom by opening up deposits including copper, which he says will be needed in increased volumes to build electric cars.

In December, when the state government announced its mid-year results, which flagged a significant boost in royalties, Macfarlane said the state needed to acknowledge coal’s “fiscal value” to the budget.