Big cost risk in cleaning up coal

CLEAN coal technologies designed to cut greenhouse gas emissions could drive up electricity prices for consumers.

Preston Chiaro, chief executive for energy at global mining giant Rio Tinto, said miners would come under increasing pressure to keep power costs down as the industry and government ploughed billions of dollars into the development of clean coal technologies.

Coal, particularly brown coal used in places such as Victoria's Latrobe Valley, is one of the cheapest but dirtiest sources of energy. Its competitiveness could come under threat, given the potential cost of reducing emissions and calls for imposts on carbon producers, such as taxes and credit trading schemes.

"There may be cost increases but at the same time there will be pressure from our shareholders, customers and from society generally to push costs down," Mr Chiaro told The Australian outside the Asia-Pacific Partnership on Clean Development and Climate meeting in Sydney. "The question is, can we offset the increase that will be necessary to install these new technologies by cost reductions through mining smarter?" He said the real prices of commodities tended to fall over time as minerals were produced more efficiently.

Mr Chiaro said that given estimates from the International Energy Agency for global energy demand to treble by the end of the century, the world would keep needing power from all its primary energy sources, including fossil fuels, nuclear power and renewables.

He said the option of simply "sweeping away" a primary power source, such as coal or any other, would have grave implications for reducing poverty in developing nations and could undermine energy security.

Mr Chiaro said that after years of denial, the coal industry as a whole accepted that man-made carbon dioxide was contributing to global warming, and was actively working to develop the technologies needed to dramatically cut emissions.

He warned that any moves to impose costs on carbon producers would need to be globally enforced or pollution would simply migrate to countries that did not put a cost on carbon.

He said that imposing a carbon cost on Australia's aluminium industry, for example, would simply make Australia uncompetitive and force the industry offshore.

And he warned that it could be 10 years or more before technologies to cut fossil fuel emissions become commercially available. "We have to avoid creating false expectations that we can solve this problem immediately."