Are Kyoto aims being comprised by a subsidised aluminium industry?

New Australian research suggests that the dominance of the international aluminium industry by a small group of multinational companies has enabled the industry to secure highly favourable energy subsidies despite its relatively high greenhouse gas emissions.

Focussing on the situation in Australia, a study by the Australia Institute points out that the country’s aluminium producers are enjoying subsidised energy based largely on coal-fired electricity supplies, and this has led to Australia emitting 2.5 times the world average of greenhouse gas per tonne of aluminium produced.

According to the Institute, the country’s aluminium industry receives subsidies amounting to around AU$250 million (£90 million) per year through discounted electricity, or AU$40,000 (£14,400) per job in the smelting industry. The industry accounts for around 15% of the country’s electricity consumption, and in 1998-99 was responsible for around 5.9% of Australia’s total emissions – excluding land-use change. This was equivalent to 27 million tonnes of CO2 greenhouse gas emissions.

Australia is not alone in subsidising the aluminium industry, according to the study, particularly in the west, where around ten companies control 75% capacity. It also states that there is evidence that “multinational smelting companies attempt to exercise undue power during negotiations with governments eager to promote industrial development in their country or region. A common negotiating tactic being used by the industry is to threaten to relocate elsewhere or withhold investment from a particular area if governments do not guarantee them low-priced power”.

The study suggests that provision of cheap energy may constitute a form of subsidisation that can be challenged under the WTO Agreement on Subsidies and Countervailing Measures.

In response, the Australian Aluminium Council (AAC) refutes claims that it is a burden on the Australian public, saying that it has provided a strong foundation for national electricity infrastructure development, which has enabled all consumers to have the opportunity for lower electricity prices.

The Council also challenges the Institute’s profile of greenhouse gas emissions for the global aluminium smelting industry, pointing out that it fails to highlight the level of nuclear and hydroelectric power in the apparently low CO2 per tonne of aluminium produced in North America, Europe and Latin America.

The AAC pointed out that hydro and nuclear projects are facing problems, including site availability, planning permission and the reassessment of their greenhouse gas emission contribution in some locations. The Council questioned whether the Australia Institute would support the scale of future developments of large-scale hydro and nuclear plants globally that would be necessary to support the report’s thesis on greenhouse gas emissions.

As an indication of its support for the principle of greenhouse gas abatement, the Council pointed to the industry’s reduction of its total emissions by 22% per tonne of production from 1990 levels, under Australia’s Greenhouse Challenge.

The International Aluminium Institute acknowledges that it faces a challenge in reducing its relatively high-energy consumption and greenhouse gas emissions, and says energy efficiencies are being addressed in the production process.

The Institute’s figures record total world emissions from the aluminium industry in 1997 of 110 million tonnes of CO2 equivalents, of which 45% originated from the more potent perfluorated carbon (PFC), mixed with CF4s and C2F6s. However it points out that the recycling of aluminium saves up to 95% of the greenhouse gas emissions generated by the production of the metal from bauxite, and that 55% of the industry’s international power supply is from hydro-electric power.

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