The owners of New Zealand's only aluminium smelter have warned that the plant could close, putting 3500 jobs at risk, if the Government's emissions trading scheme passes in its present form.
Rio Tinto Alcan, which owns nearly 80 per cent of the Tiwai Pt smelter in Southland, told MPs hearing the emissions trading bill that the scheme was likely to make the operation unviable.
The multinational flew in regional president Xiaoling Liu to warn the select committee considering the bill that such a move could force the operation overseas, threatening the jobs of the 900 people working at the smelter and the 2600 indirectly employed.
"Rio Tinto, as an international business, will continue to support the New Zealand operation for as long as it is a cost-competitive location. Frankly, you need to be aware it may not remain the case if this bill is passed in its current form."
The general manager of the New Zealand operation, Paul Hemburrow, said if the bill was not changed to soften the blow till aluminium smelters overseas faced similar costs, the smelter would be "on a path to closure".
The bill in effect taxes all greenhouse gases and will be phased in across the economy. But the smelter is the country's biggest electricity user, and aluminium production creates the greenhouse gas carbon dioxide.
Power companies will be brought into the scheme from January 2010 and will pass on the cost to customers.
The smelter has a deal with generator Meridian to use power from Lake Manapouri, but must buy extra at much higher spot prices.
Though it will be given free carbon credits to cover its emissions trading costs, these will be phased out from 2018.
Mr Hemburrow said Rio Tinto wanted the phase-out of allocations delayed till the international application of emissions trading.
Climate Change Minister David Parker said the Government was aware of the risk some industries faced from countries with no emissions trading, which was why it had protected them with free allocations and last week extended the phase-out by five years.
"But at some stage industry has to start paying for its greenhouse gas emissions, because the cost doesn't go away, it just gets paid for by taxpayers instead of emitters."
The smelter was one of several industries that predicted dire consequences from the scheme.
The Timber Industry Federation's executive director, Wayne Coffey, said that up to 29,000 jobs could be lost as forest owners stopped logging to cash in on carbon credits. Lack of supply could cause the price of wood to jump 40 per cent, leaving sawmillers unable to compete internationally and undermining the Government's affordable housing drive.
Federated Farmers and state-owned Landcorp said that the scheme would hit profitability hard when agriculture was brought in from 2013.
But the Environmental Defence Society said the business sector was overstating the impact.
Labour MP Paul Swain noted that nearly every industry group appearing before the committee supported emissions trading but said that, if its sector was covered, "we're all stuffed".
- With NZPA
- The Dominion Post
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