New Zealand plans annual subsidy for aluminum smelter
Wednesday, 04 Nov 2009
Protecting Rio Tinto's Tiwai Point aluminium smelter from the full impacts of the emissions trading scheme will cost New Zealand USD 225,000 per year for every job at the smelter.
Mr Kent Duston of Wellington based Autonomic Consulting said that the subsidy will cost USD 209 million per year. It would be cheaper for the New Zealand taxpayer to pay every single Tiwai Point worker and contractor USD 200,000 per annum for the rest of their lives to simply stay home.
Mr Duston bases his calculation on the USD 14.13 million per year worth of free carbon credits Rio Tinto will get a year under proposed changes to the emissions trading scheme, plus the opportunity cost of using the Manapouri hydro power scheme to power the smelter instead of using it to replace the Huntly coal fired power station.
He told Carbon News that he did the numbers after hearing Climate Change Issues Minister Mr Nick Smith say during his road show to set New Zealand's 2020 emissions reduction target that subsidies were need to protect New Zealand jobs.
Mr Duston said that "Anybody with access to the internet and a pocket calculator could have performed the same calculation and I'm astounded that nobody has. We keep hearing that it's jobs, jobs, jobs, but nobody is asking the questions about the cost of those jobs."
He said that based on a formula of 1.9 tonnes of carbon dioxide for every tonne of the 330 kilo tonnes of finished aluminum the smelter produces each year, the plant has an emissions profile of 627,000 tonnes per annum.
He added that "At the proposed capped price of NZD 25 per tonne, these emissions represent a liability to the smelters' owners of USD 15.675 million per annum. Under the proposed changes to the ETS, 90% of the emissions units would be given to the smelter free of charge, subsidizing its operations by USD 14.13 million per annum courtesy of the New Zealand taxpayer."
Mr Dustan said that the smelter's emissions level is artificially low because it gets subsidized electricity from the Manapouri hydro power scheme. However, if this electricity were to be diverted to the national grid, the 850 MW produced by Manapouri would be sufficient to decommission the coal burning Huntly power station which produces up to 15% of New Zealand's electricity. He said that replacing the emissions-intensive Huntly with Manapouri would result in a net decrease in liabilities to taxpayers of USD 209 million per annum, made up of the non payment of the Rio Tinto subsidy and the non payment of the Huntly subsidy.
He added that "There are 800 staff and 130 contractors employed at Tiwai Point. The Government argues that subsidization of the carbon emissions for export industries is necessary to protect jobs. However it is obvious that the cost of retaining these jobs is exceptionally high a stunning USD 225,000 per job per annum."
