Australia Could Pay for China's Drive for Clean Air (SBS World News) - Jessica Bae

Australia could pay for China's drive for clean air

The Australian economy could fall victim to China's attempts to clean up its cities

(Transcript from SBS World News Radio)

The Australian economy could fall victim to China's attempts to clean up its cities.

There are fears China's new coal import rules could mean Australia's product is dumped.

Zara Zaher reports.

China's major cities often choke in smog, but its government is taking steps to control the pollution.

Now, Macquaire analyst James Rosenberg says China is looking to restrict its import of low quality coal.

"It's really an issue about smog, particularly the health problems with cardio-respiratory issues. So it's not a ban on coal, per se, but, rather, coal that has high content of pollutants, such as ash and sulfur."

The Minerals Council of Australia's Greg Evans says coal is Australia's second biggest export behind iron ore.

"It's the largest export earner for both New South Wales and Queensland, so a critical element of the economy. It earns some $47 billion in export income, so it's central to jobs, economic growth, and forms a large part of our national income."

Australia mainly exports two types of coal -- metallurgical coal, used in steel production, and thermal coal, used for electricity.

It is the import of some thermal coal that China's proposed changes may affect.

Global demand has risen over the past decade -- volumes are up -- while prices have weakened in recent years.

At most, China only demands around one quarter of the total thermal coal exports.

Macquaire's James Rosenberg says, at the strictest end of China's proposed multifaceted rules, there would be some impact.

"Approximately half of Australia's thermal coal exports would not make the cut off. But let's remember that some of that can be alleviated by things such as washing ash, which has got a financial cost, of course. But it also creates opportunities for other, lower-emission coal and also, eventually, other forms of energy, such as gas."

The Mineral Council's Greg Evans adds some of the new rules will not apply.

"The guidelines, as we see them, they have been speculated on for some time, but our understanding of these guidelines is they predominantly actually apply to lignite, or brown coal, which, of course, Australia doesn't export. To the extent to which they focus on black coal, we believe the Australian industry can provide coal well within those quality tolerances. The most restrictive element of those particular guidelines, or requirements, as we understand them, is for coal going to some northern parts of China where Australia doesn't predominantly serve."

Some exporters are not worried.

BHP Billiton Coal says it does not anticipate a material impact to its business.

Rio Tinto says there will be little, if any, impact.

And Whitehaven Coal says the move would have a positive impact for it because its coal meets the requirements already.

The proposed changes are set to be implemented on the 1st of January.