Coal exporters from Australia reaped as much as $45bn in windfall gain in the 2021-22 year, with a similar bonanza likely this year, offering governments a budgetary boon for those willing to grasp it, the Australia Institute has said.
In a report released on Thursday, the institute’s economists said Russia’s invasion of Ukraine and subsequent disruption to energy markets alone had delivered between $13bn and $23bn of gains to coalminers. All up, those gains totalled between $39bn and $45bn.
Exports of thermal coal used in power stations and coking coal used to make steel tallied 359m tonnes in 2021-22, slightly lower than the previous year and the lowest in at least seven years. Surging prices, though, meant the value of those exports almost tripled to $112bn.
With little proof of substantial increases in production costs, the $73bn jump in coal export earnings last year offered a reasonable estimate of the windfall gain to the industry from those higher prices, the institute said. A similar approach to the gas industry found LNG exporters were beneficiaries of windfall gains nearing $40bn.
“This research shows it’s not just gas exporters who have been reaping the benefit of Russia’s invasion of Ukraine,” said Richard Denniss, executive director of the Australia Institute. “Coal companies have also been making a killing while households and businesses are slugged with surging prices for Australian energy.
“A windfall profits tax could collect almost 100% of this money for the public,” Denniss said. “That’s why a wide range of experts including Nobel laureate Joseph Stiglitz describe it as a ‘no-brainer’.”
Higher energy prices for consumers prompted the Albanese government to release plans for one-year domestic coal and gas price caps.
That scheme, expected to be approved in parliament on Thursday, will not collect extra tax for the government and will cost at least $1.5bn in subsidies for energy bills. Compensation to the coal sector, most of which will likely be paid to electricity generators, could cost $500m or more.
The thinktank’s paper noted the windfall gains for the coal sectors were divided between profits to coal companies, royalties and company tax. Changing prices and also government decisions, such as the Queensland government’s announcement last week of a big uplift in expected coal royalties in 2022-23, meant some numbers were dated.
Still, such changes “will affect the exact size of windfall gains, but the key points will remain: the profit windfall to coal companies is enormous, ongoing and similar in size to estimates of the natural gas windfall”, the report said. “Without policy changes, the vast majority of the windfall goes to multinational energy companies.”
Applying futures prices for coal rather than conservative estimates used by treasuries – which would imply a halving of prices or more – a similar windfall is on the cards for 2022-23, it said.
“The Queensland government change to its coal royalties will see some of the future windfall gains directed to government revenue,” the report said. “Extending the Queensland scheme to NSW and mildly uplifting the rates in a way to ensure profits are maintained at average coal prices could generate an additional $19bn in government revenue. A bonus all Australians would be a happy with.”
