Undermined or overburdened? Victoria's brown coal: an economic perspective

Power resources Coal Victoria
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The Victorian Government has announced its intentions to undertake an allocation of brown coal from the Latrobe Valley in 2012-13. The Valley’s coal is abundant and cheap to mine, with probable reserves of 65 billion tonnes. Currently 13 billion tonnes of ‘economic’ coal in the Latrobe Valley is unallocated, while 20 billion tonnes has been allocated to power stations and projects proposed in 2002 that received coal allocations but have not proceeded from Australia. Environment Victoria has commissioned Economists at Large to undertake a study of the economics of Victoria’s brown coal resource and its potential uses, with an emphasis on the prospects of establishing an export brown coal industry. This is the stated aim of a number of the companies seeking a coal allocation from the State Government and of the State Government itself. During a mining boom where coal exporting states and companies have enjoyed increased revenues and profits, it is not surprising that Victoria’s government and developers would want to explore opportunities to develop the coal resource. However, this study concludes that there is no compelling economic case for a further coal allocation given the amount of allocated coal already in the market and the limited commercial interest in developing the resource. Furthermore there are substantial external costs associated with developing the coal resource, including impacts on local environments, health and the global climate that may outweigh the financial benefits of developing the resource.

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