Alumina industry says time right for carbon tax, but formula must keep industry here

Monday, 28/02/2011

Australia's alumina and aluminium refining companies say the Federal Government has to get the carbon tax formula right or the industry here will shut down.

According to the Alcoa head of climate strategy, that simply means it would move to China where carbon emissions are triple those of here.

Tim McAuliffe says 60,000 people are employed in some way by alumina in the Northern Territory, Western Australia, Queensland, NSW and Victoria.

He says it's time to implement some sort of carbon tax or trading, but it just needs to be 'done right'.

"We're happy with the fact that we need to respond to climate change," he said.

"We've been doing it as an industry and it should happen on an economy-wide scale.

"The key for us, and it should happen for a whole lot of trade exposed industries and employees in Australia, is that the detail's got to be right so that we have an incentive ,so that it doesn't cost jobs and doesn't cause carbon leakage."

Carbon leakage is a term used the situation where a company or industry moves from somewhere like Australia to a country that has much less strict carbon rules and emissions control. Therefore the CO2 isn't being saved, it's just moving somewhere else.

The concern for refiners like Alcoa, BHP, Rio Tinto and other alumina and aluminium producers is that they are so-called 'emissions intensive trade exposed industries'.

"Emissions intensive means you have a pretty big carbon footprint, so a carbon tax could cost add an enormous cost to your bottom line.

"Trade exposed means you can't past the cost on to your customer because the price for the commodity is set globally, and you have no control over it. .

"So if the cost increases to a level that favours overseas competitors, the Australian businesses will dry up."

A couple of years ago, a Senate committee hearing into an emissions trading scheme travelled Australia to meet with key stakeholders.

At the time, committee chair Senator Christine Milne told me it would probably be preferable for aluminium companies to go overseas, as they would likely relocate to countries that use lower emissions trading energy technology such as hydro energy.

This is a point of view that doesn't make sense to Tim McAuliffe.

"Countries that have hydro, like Canada, don't move quickly on these things.

"For a start, if you're a pot room worker at a smelter in Geelong, then the last thing you want to see is your job disappear.

"The other thing is, the high growth area in alumina and aluminium at the moment is China, and I'll give you an example: in 2000 China had about 12 per cent of global production of aluminium.

"In 2010, it's more than 40 per cent and the vast majority of that is on coal.

"If a smelter closes here in Australia, that production would be picked up by the rapid growth area of China. It wouldn't see fewer emissions, it would see more emissions.

"(There would be) more emissions in terms of greenhouse gases, but also more emissions in other noxious substances. It would just be crazy to see the jobs leak offshore for no tangible benefit."