MAC: Mines and Communities

New Zealand: Rio Tinto scores a double whammy

Published by MAC on 2009-11-02

For the past 35 years, New Zealand/Aotearoa's intrepid CAFCA (Campaign against Foreign Control of Aotearoa) has called for the closure of the country's largest industrial plant, on environmental, health & safety and economic grounds.

During that entire period, Rio Tinto's Comalco subsidiary (now Rio Tinto Alcan) has benefited from billions of dollars of publicly-subsidised electricity, provided to its aluminium smelter at Tiwai Point. See:

Earlier this year, Rio Tinto was indicted by CAFCA for applying "outrageous" pressure to a parliamentary committee on carbon emissions trading. See:

Now, the UK company looks like having scored a "double whammy" - with its climate change mitigation costs also being shouldered by New Zealand taxpayers.

The country's former Labour government came up with a carbon emissions trading scheme that would have seen Rio Tinto pay around NZ$16 million a year towards these expenses.

But the succeeding National government proposes allowing the company to escape footing as much as 90% of this liability.

When factoring in other subsidies to Rio Tinto, one consultant declares:

"It would be cheaper for the New Zealand taxpayer to pay every single Tiwai Point worker and contractor $200,000 per annum for the rest of their lives to simply stay home."

Climate subsidies worth $225K for each Tiwai Pt job

New Zealand Press Association

27 October 2009

The cost of government protection of Anglo-Australian mining giant Rio Tinto from carbon and electricity charges means taxpayers will pay the equivalent of $225,000 for each job at the Tiwai Point aluminium smelter, says a carbon expert.

"It would be cheaper for the New Zealand taxpayer to pay every single Tiwai Point worker and contractor $200,000 per annum for the rest of their lives to simply stay home," said Kent Duston of Wellington-based Autonomic Consulting.

A specialist carbon market information service, Carbon News, reported Duston based his calculation on free carbon credits Rio Tinto will get, plus the "opportunity cost" of using the Manapouri hydro electricity at the smelter instead of using it to replace the Huntly coal-fired power station.

He calculated the costs after hearing Climate Change Issues Minister Nick Smith say that subsidies were need to protect New Zealand jobs.

"We keep hearing that it's jobs, jobs, jobs, but nobody is asking the questions about the cost of those jobs," said Duston.

The Rio Tinto Alcan (New Zealand) group has a 79 per cent stake in New Zealand Aluminium Smelters which runs the Tiwai Point aluminium smelter near Bluff.

Representatives of the smelter operation earlier this year told a select committee Tiwai Point would be the first smelter in the world to come under an emissions trading scheme (ETS).

However, the National Government has revised the previous Labour government's ETS and taxpayers will subsidise polluters to a greater extent during a transition period .

Duston said the plant produced 1.9 tonnes of carbon dioxide for every tonne of its 330,000 tonnes of aluminium production -- an emissions profile of 627,000 tonnes a year.

At the proposed capped price of $25 per tonne, these emissions would cost the smelter's owners $15.675 million a year, and under the proposed changes to the ETS, 90 per cent of the emissions units - worth $14.13m - would be given to the smelter free.

The smelter's emissions level was artificially low because it already had subsidised electricity from the Manapouri hydro power scheme.

"If this electricity were to be diverted to the national grid, the 850MW produced by Manapouri would be sufficient to decommission the coal-burning Huntly power station, which produces up to 15 per cent of New Zealand's electricity," said Dustan.

Replacing Huntly with Manapouri would result in a net decrease in liabilities to taxpayers of $209m a year, made up of the non-payment of the Rio Tinto subsidy ($14m) and the non-payment of the Huntly subsidy ($195m), he said.

There were 800 staff and 130 contractors employed at Tiwai Point, but the annual cost of retaining these jobs was "exceptionally high -- a stunning $225,000 per job".

Rio Tinto Alcan (New Zealand) accounts show it made a profit of $19.1m in 2008, down from $204.5m in 2007. Revenues from continuing operations fell to $1.06 billion from $1.13 billion. A dividend of $575.6m was paid.

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