Thursday, July 29, 2021

Climate Change: The other Tiwai scam

Newsroom has a good piece this morning about the government's consultation on industrial free allocations, revealing that Fletcher Building is getting an extra $5 million a year ($7 million at today's prices) due to miscalculated carbon subsidies. That's bad, and it needs to be stopped by resetting emissions baselines to a credible level. But while we're talking about industrial over-allocation, we should talk about the elephant in the room: Rio Tinto.

In 2019, New Zealand Aluminium Smelters received 1.7 million tons of carbon as a free allocation for being emissions intensive and trade exposed (EITE). But its actual emissions were only 663,000 tons. The difference - 150% of its actual emissions - was the Electricity Allocation Factor, basicly "compensation" for the effects of the ETS on electricity prices. Except Rio Tinto doesn't pay those higher prices like the rest of us peasants - they got themselves a sweetheart deal which sees them pay a fifth of what us peasants pay, and less than a quarter of what industrial users are paying now. So they're being "compensated" for nothing. The financial cost of this unnecessary "compensation" is $50 million a year at current carbon prices - and triple that on the government's books. (The real cost is that it allows a million tons a year of unnecessary pollution into the ETS, which neither we nor the planet can afford).

Meanwhile, at the same time it is getting this compensation for being a vulnerable, struggling industry, Rio Tinto is telling its shareholders that it is hugely profitable. It can't have it both ways. If they're that profitable, they clearly don't need any subsidies at all, and we should cut them off.

As for the Electricity Allocation Factor, this was apparently recently reviewed by the government. Hopefully this will result in it being cut, or in it not being given to polluters who pay less than the market price for electricity. Not that there's a lot of other polluters eligible for it - it really is a special purpose subsidy for Rio Tinto. So we might as well just phase it out entirely.