The latest Climate Commission report warns that 80% of the world's fossil fuels need to stay in the ground, if the planet wants to avoid the dangerous consequences, of climate change.
That includes the majority of the world's coal, which is a major contributor to pollution. The Federal government says the industry is vital to the global economy despite the warnings. Federal Resources Minister Gary Gray says he acknowledges the need for clean energy, and while Australia can turn to natural gas, we still should export our coal reserves.
"There is no solution to global baseload energy generation that does not figure a big contribution by coal," he has told ABC News. "It's also important for us to have investments in smart coal technologies to ensure that we can capture CO2 in the flue." He says that Australia's coal is helping to bring hundreds of millions of people out of poverty in countries like India and China. The Opposition have also ruled out closing the coal industry in a bid to reduce carbon emissions.
Minerals and fuels represented more than half of Australia's exports in 2011, with coal our second most valuable export, bringing in $46 billion, while petroleum and natural gas were also major contributors. BHP Billiton (ASX:BHP) and Rio Tinto Limited (ASX:RIO) are our two largest coal exporters, with pure play coal companies New Hope Corporation (ASX:NHC) and Whitehaven Coal (ASX:WHC) also playing their part.
The Climate Commission has noted several climate change factors due to increased use of fossil fuels such as coal, including increasing duration and frequency of heatwaves across Australia, rising risks of bush fires, changing rainfall patterns and rising sea-levels.
Foolish takeaway
Balancing the needs of the economy to bring in revenues and the consequences of burning fossil fuels is a tough task, but it is likely to become much more of a problem for our major resource exporters, especially coal in future. Foolish investors should bear that in mind when considering an investment in coal and other fossil fuel exporters.
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Motley Fool writer/analyst Mike King owns shares in BHP.
