NSW coal royalties could increase by 400 per cent this financial year, leaving billions more to support regional communities undergoing energy transition, if a progressive royalty system that better reflected record coal prices was introduced.
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The thermal coal export price is presently $US400 per tonne ($A569), a record brought on by Russia's invasion of Ukraine and ongoing supply pressures associated with the COVID-19 pandemic.
Climate Energy Finance has called on the state government to conduct a mid-year budget review in order to capitalise on the unprecedented opportunity to earn more from coal royalties.
This would involve the introduction of a progressive coal royalties system that would require coal companies to pay more as the coal price increased.
A similar system was introduced with bipartisan support in Queensland in June.
When coal prices are low the industry will pay 7 per cent of revenues in royalties to the Queensland government. However, the figure ratchets up to 40 per cent for every dollar above $A300 per tonne.
The changes could take the state's income from coal royalties from a forecast $7.3billion to $18billion this financial year.
The change has been strongly opposed by the fossil fuel industry.
NSW continues to receive a flat royalty rate of 7-8 per cent despite the fossil fuel sector's windfall profits.
CEF estimates a move to progressive-based royalties in NSW could take projected royalty income from $4.05billion to between $20 and $26billion if coal prices stay at similar levels over the next year.
"There is no reason why NSW couldn't do a mid-year review. It would be really difficult and unprecedented, but, at the end of the day, we are talking about a $26 billion windfall gain for NSW." CEF director Tim Buckley said.
"We know it's likely to be a one off. Why not put $20 billion into a trust and fund regional development across NSW to make sure that communities most affected by the energy transition are looked after."
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The office of NSW Treasurer Matt Kean did not respond to questions about the introduction of a progressive royalty system.
NSW Minerals Council said the introduction of a Queensland-style system would be counterproductive to the industry and the wider community.
"Royalties are just one of many taxes paid by mining companies as well as corporate tax, payroll tax, land tax and many other fees, charges and levies. NSW already has a royalty system that delivers benefits from strong global coal prices," a spokesman said.
"NSW coal royalty rates are already close to double the rate for all other minerals, and recent high coal prices have seen royalty revenues more than double over the last two years. This has been achieved without sudden, dramatic changes that would damage the investment reputation of NSW. Imposing a Queensland-style increase in NSW would likely only deliver a short-term revenue gain, while inflicting great damage to the reputation of NSW as a place to invest.
"This would have flow-on impacts across the NSW economy. Japan's Ambassador to Australia has publicly expressed concerns over future investments in Queensland."
CEF will release a report today that recommends strengthening existing measures to close fossil fuel loopholes and tax avoidance, and reform existing tax structures that are no longer fit for purpose or failing to deliver on the expected revenues promised.
It recommends four policy adjustments to address the energy crisis impacting consumers and industry, whilst reducing subsidies and closing tax loopholes, which will in turn accelerate the energy transition and decarbonisation of the Australian economy.
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Matthew Kelly
Matthew Kelly has worked as a journalist for more than 25 years. He has been working as a general reporter at the Newcastle Herald since 2018. In recent years he has reported on subjects including environment, energy, water security, manufacturing and higher education. He has previously covered issues including the health and environmental impacts of uncovered coal wagons in the Hunter Valley, the pollution of legacy of former industrial sites and freedom of information issues.
Matthew Kelly has worked as a journalist for more than 25 years. He has been working as a general reporter at the Newcastle Herald since 2018. In recent years he has reported on subjects including environment, energy, water security, manufacturing and higher education. He has previously covered issues including the health and environmental impacts of uncovered coal wagons in the Hunter Valley, the pollution of legacy of former industrial sites and freedom of information issues.
