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ARELJ Article- Market Substitution, Climate Change and Coal Royalty Revenue in Queensland and NSW: Filling the Void

Dr Jonathan Fulcher and Ms Erin O’Shaughnessy
Dr Jonathan Fulcher is a partner at HopgoodGanim Lawyers in Brisbane, where Ms O’Shaughnessy is a graduate lawyer.

Until very recently the Queensland Land Court has repeatedly applied the market substitution argument (MSA) in a series of cases approving coal mine proposals. The argument posits: “if we don’t mine it, someone else will”. Outside Queensland, however, the MSA has been challenged in both domestic and international jurisdictions with New South Wales (NSW) and United States (US) courts rejecting the argument.  Further, as global consensus towards net zero emissions grows and renewable energy sources become more viable and cost effective, a defence reliant on the demand-driven nature of coal markets is increasingly open to criticism.
First, this paper seeks to answer the question: why have there been such different results in these cases, particularly between Queensland and NSW? Second, the paper suggests that approving coal projects in both States is ultimately a matter for the relevant Minister in each jurisdiction. Ministers are the guardians of the public purse, and royalties and indirect economic benefits from coal provide a significant amount of money to consolidated revenue in each State (not to mention income tax to the Commonwealth). Last, the paper considers the arguments that justify coal as part of the energy mix. It may be a paradox, perhaps, but the justification for continued coal mining has a moral as well as a fiscal dimension, a dimension not often discussed, but it may be one of the reasons coal remains a vital part of our energy mix. When considering the fiscal dimension, the problem for State Governments is that climate change cannot now be ignored. 

In addressing our future energy mix and phasing coal out, the replacement of coal royalties and more general economic benefits from coal mining with newer revenue streams might instead be the great moral and political challenge of our time. This paper encourages public debate regarding the balance between the economic and environmental impacts of coal mining. It is ultimately a debate about the equity to be assessed between the welfare of this generation and ensuing generations. With the latest decision of the Queensland Land Court in Waratah Coal Pty Ltd v Youth Verdict Ltd & Ors (No 6) (Waratah), the weighing up of this balance has been brought into even sharper relief. 

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