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Coal becomes battle ground in Australian election as environment meets economics

If you want to understand Australia's ambivalent relationship with coal, just go to Queensland.

As the country prepares to go to the polls for a federal election on May 18, Queensland's Labor government is struggling to balance the need to create jobs and its commitment to protecting the environment.

Over the past month, the state government has rejected plan to manage a proposed mine's effects on an endangered species of finch and delayed another plan to manage harm against a nationally significant spring nearby. Yet federal Labor leader Bill Shorten, currently predicted to be Australia's next prime minister, has said he does not want to create "sovereign risk" by opening up another review of the project's permits if he wins.

Coal was Australia's most valuable export in 2018, and the federal government said in December it will earn A$67 billion fiscal 2019. Queensland Resources Council forecast that royalties on both thermal and metallurgical coal mining in the state would set a record of A$4.46 billion this year. Adani Enterprises Ltd.'s proposed Carmichael coal mine in Queensland would bring A$2 billion investment to the state.

At a federal level, Labor is overtly against new coal-fired power stations and has proposed a national emissions reduction target of 45% below 2005 levels by 2030, far more aggressive than Coalition's current target of 26% to 28%.

Coalition, an alliance of the center-right Liberal and National parties, has been openly supportive of the development of new coal mines for export, while members of the federal government have also been pushing for a new coal-fired power station in Queensland to be among the projects shortlisted for a government subsidy.

Slowing economy

Supporters of both parties, within Queensland and across Australia, are also split on the issue. MPs in central Queensland claim their constituents are backing the project because of the jobs it would generate, while MPs in state capital Brisbane say residents have similar attitudes to climate change as those in Sydney or Melbourne and oppose Carmichael in the majority.

While plentiful coal, iron ore, copper and gold have helped Australia record one of the longest stretches of uninterrupted growth in the developed world, the economy grew more slowly than predicted last year — 2.3% versus 2.5% — as slowing growth in China and a domestic housing downturn weighed on sentiment.

Association of Mining and Exploration Companies CEO Warren Pearce said the adoption of Labor's more ambitious emissions goals would clearly impact miners, which are among Australia's biggest energy users.

"If either party in government was prepared to put substantive restrictions on the coal industry, they're really messing with the national economy," he said in an interview.

Reputation crisis

A recent poll by Roy Morgan Research puts Labor ahead of the Liberal National Coalition on a two-party preferred basis with 52% of the vote. However, a Labor strategist recently told the Australian Financial Review that the apparent contradiction over Adani in the Labor Party between state and federal levels is hurting the party's chances of winning the federal election.

Pearce said doubts over Carmichael are "blowing over the rest of the mining industry," in terms of sentiment towards miners.

ABC reported May 14 that market research commissioned by the Queensland Resources Council found the mining industry's reputation is "nearing crisis," with perceptions of the state's resources sector "almost entirely based on strong negative perceptions of open-cut coal mining."

Whomever is in power following the election, they will likely have to continue to balance the economy with growing environmental concerns.

"If growth is slowing across the world, you can't just turn off one of your major exports like that," Fairmont Equities Managing Director Michael Gable said in an interview.