Australian Carbon Tax Threatens Aluminum Industry's Future -Lobby

CANBERRA, May 17, 2011 (Dow Jones Commodities News Select via Comtex) -- The government's plan to impose a tax on carbon emissions threatens the future viability of the domestic aluminum industry as it would push up costs and limit future investment, Miles Prosser, Executive Director of Australian Aluminium Council, an industry lobby, said Tuesday.

Working on a theoretical cost of A$20 a metric ton for carbon dioxide emissions in Australia, the council found that the cost of aluminum produced in Australia would rise by A$100/ton. The carbon cost is only 85 cents a ton in China, which is enough "to materially shift investment and production decisions," Prosser told a Senate Select Committee on Scrutiny of New Taxes.

"The overall cost could be become large enough to shift investment decisions and push Australian facilities further up that global cost curve, not just losing potential future investment but putting those facilities in a place where they may be subject to curtailment or shutdown if the market price drops," he said.

Three-month aluminum was quoted Tuesday around US$2,550/ton.

Australia is the world's top bauxite producer and fifth-largest producer of aluminum, and one of the two producers of alumina along with China.

The aluminum industry is the country's biggest processed-export earner, generating more than A$11 billion a year, competing chiefly against China and countries in the Middle East, he said.

The council is the national lobby for companies mining bauxite, refining alumina, producing aluminum and producing and distributing semi-fabricated products.

Australia's minority Labor government is planning a carbon tax from July 2012 with the aim of cutting emissions and pollution and boosting investment in renewable energy and low-carbon industries, subject to the federal parliament passing the legislation.

Details haven't been finalized yet and will be known before ahead of formal legislation in the second half.

But there is widespread public and industry opposition to the plan, with critics, including the political opposition, accusing the government of breaking a key election promise by introducing a carbon tax.

They say it will put heavy industry and sectors such as aluminum at a disadvantage as Australia runs the risk of moving out of step with the rest of the world, especially developing nations.

Separately, the uncertainty around Australia's future environmental policies is hindering the development and implementation of corporate carbon-reduction strategies, according to a survey of Australian companies issued late Monday.

Almost two thirds, or 64% of respondents to the survey of 131 senior executives, consider the unclear regulatory environment the primary barrier to progress in reducing carbon emissions, the Economist Intelligence Unit said in the report commissioned by GE.

A carbon tax would make low-carbon technology more attractive, but the lack of certainty on the issue is weighing on companies, who fear purchase of emissions-heavy capital equipment and infrastructure would turn out to be poor investments.

So, it is important to resolve the current impasse over carbon pricing, Sudhir Vadaketh, editor of the report, said in a statement.

Meanwhile, a Multi-Party Climate Change Committee held its seventh meeting in Canberra Tuesday, in part to discus the timelines and processes for their work on a carbon price mechanism, the committee said in a statement.

Greens Party Deputy Leader Christine Milne, who attended the meeting, said there was much discussion and engagement with legislators on options.

Greens Leader Bob Brown said no decision has been made on the final carbon price.