NSW Government consultation on coal cap and royalties

27 July 2023

NSW Government consultation on coal cap and royalties

Statement from NSW Minerals Council CEO Stephen Galilee 

The NSW Minerals Council notes the NSW Government’s intention to commence consultation on policy options beyond the current temporary coal cap.

The coal cap is poor public policy. It was designed and implemented with undue haste and with inadequate consultation. It has done nothing to reduce power prices, which continue to increase. The coal price cap should not be extended beyond its legislated 30 June 2024 end date. 

The NSW Government’s examination of other policy options to deliver energy price relief is welcome. Critically, this should include measures to ensure generation capacity can meet demand during the energy transition currently underway. 

In relation to NSW coal royalties, the existing arrangements should be maintained. 

The existing arrangements deliver increased royalties when coal prices are higher, as seen last financial year when a record $5.5bn in royalties were collected during a time of record high coal prices. The existing arrangements also generally maintain the global competitiveness of the NSW coal sector – protecting jobs, investment and the NSW economy. 

However, noting the NSW Government’s intention to consider changes for when the coal cap concludes, the consultation process is positive and appreciated. 

The coal industry directly employs nearly 30,000 people in NSW and supports 180,000 indirect jobs. Nearly 7,000 NSW businesses are part of the mining supply chain. Coal remains NSW’s most valuable export commodity by far, and continues to deliver over 70 percent of electricity used in homes and businesses across NSW. 

Coal prices have fallen dramatically since the record highs of last year, and are expected to fall further over time. Since 2020, coal production costs have significantly increased. Other policy measures, including the Commonwealth’s Safeguard Mechanism, will impose even more costs on coal producers.  

It is therefore vital that the right balance be maintained between a fair royalty return to the NSW budget and the ongoing competitiveness of the NSW coal sector.