It wasn't that many years ago that Australia exported next to no thermal coal to China. Those exports now account for 13 per cent of all Australian exports.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
That's what's at risk if China returns to where it was less than a decade ago and imports no thermal coal.
As it ramps up its use of nuclear, wind and solar power it may well be in a position to do it.
It would take the shine off Tony Abbott's boast that Australia's coal industry had a "big future, as well as a big past" and render out of date the business models of Australia's thermal coal producers.
China's coal use will have to decline in order for its greenhouse gas emissions to stabilise. That's because its use of other fuels is set to climb; petrol as more Chinese use cars and move things by truck, and natural gas as China switches to cleaner sources of heat.
The agreement between the US and China won't merely lead to a decline in the use of thermal coal in relative terms. It'll be a decline in absolute terms.
"We are no longer talking in terms of emissions intensity relative to GDP or anything like that – this is absolute, presuming China goes through with it, and China doesn't just make this commitment to look good, it means it," says climate change and energy specialist Frank Jotzo at the Australian National University.
It needn't mean the end of Australia's thermal coal exports to China, but it could. That'll be up to China. In Australia's favour is the quality of Australian coal. It is low in sulfur and high in heat. The coal in China's west and northwest is worse, and must be transported to major cities on congested roads and railways. China might well decide to keep importing even if it doesn't need to.
Minerals Council chief Brendan Pearson was stressing the possibility of "clean coal" on Wednesday. If it can work anywhere, it will be in China. Carbon capture is almost prohibitively expensive to add on to existing power stations, it's much cheaper to install new ones.
Mr Pearson says China has 12 carbon-capture and storage projects either planned or under way.
Australia's budget will be hit whatever China does. Less demand for coal will mean a lower price and lower tax revenue. Its possible that India's demand for heating coal will fill the gap. Many in government and industry will be hoping that it does.
Peter Martin is economics editor of The Age.
Twitter: @1petermartin
