Dear Matthew,

Good article and I agree with most of it but I'm wondering if you can expand a little on the following section?

"The smelter gobbles up nearly a quarter of the state's energy at a price heavily subsidised by all Victorians."

"For electricity, it uses the Anglesea coal mine and power station, which Alcoa operates, and for another of the input materials, bauxite, it can access that from one of its own mines in Western Australia."

If Alcoa uses the electricity it produces itself from the plant it owns in Anglesea then how do they end up getting subsidies from Victorians for power? 

I accept that they do but am unsure of the mechanism.

I agree on some key points but disagree on others. I wouldn't call Germany a success story as in recent years (ie not going back to the Berlin wall era) emissions have increased and GDP has declined. The bit about bailing out Greece is an excuse they will trot out. Secondly non-hydro renewables wind and solar are of little use to a process that requires steady baseload power to prevent the molten metal from solidifying in the electrolytic cells or 'pots'.

If Anglesea power station closes that will reduce Victoria's exorbitant CO2 emissions from brown coal. That is just the start since presumably the workers will seek re-employment in other energy hungry industries. Nuclear power albeit free from carbon tax cannot provide the cheap electricity rates smelters have come to expect. What irks me is that China may fill the gap using aluminium made with the help of Australian bauxite or alumina and electricity partially from Australian coal, yet they pay no carbon tax. Clearly there should be a carbon tariff on aluminium imports with the presumption they use mainly coal fired electricity.

We could also increase the recycling fraction from about one third to two thirds. A refundable deposit on soft drink cans seems to work in SA and could go national. When we swig a can of drink on a hot day we're ignoring the energy that went into it. Lastly we could simply pay more for aluminium which has always been underpriced.

Matthew Wright

I have no disagreements with the rent seeking accusations but you've left out vital points.

First - the upswing in Germany's aluminium industry and apparent downswing in Australia's much larger smelting industry has to do with changes in the exchange rate. The $A is way up, hence the downswing in the local industry. These changes would completely swamp any affect due to any imposts due to carbon. Obviously a carbon tax is meant to be an additional cost designed to drive behaviour, otherwise what is the point of it? To pretend that it won't have a major effect is absurd. In this case the affect is overwhelmed by other factors.

Second - where is the assurance that the Germany industry is not subsidised on power prices as ours is? I'd be very surprised if the industry over there had to buy power at ordinary, industry prices. When the Europeans build vast, nearly useless wind farms and PV plants, they tend to throw the cost on the private consumers. This is certainly the cast in Denmark, but I don't know about Germany. You need to establish this.

Your analysis of power prices in Victoria has some merit but you've wrecked your article with unjustified international comparisons.

Isn't the phasing out of industries like the aluminium industry the whole point of the carbon tax? The Brown-Gillard government has determined that Australia is to have a low carbon economy so Alcoa and companies like it will be phased out. Whatever one thinks about industries that rely on government support to survive, it cannot be denied that a large component of Alcoa's difficulties is a result of deliberate government policy.The confusion at the heart of government thinking is revealed when the Prime Minister meets Alcoa workers, expresses sympathy with their plight and promises to help.

Fortunately, the Australian economy is restructuring reasonably effectively and, after a brief spike, unemployment can be expected to decline again later this year or early next year.

Alcoa is subsidized with $300 / ton output for power. They were supplied 95% of carbon credits free. Alcoa is a dead horse and been dead for some time. The high dollar is too much.

Good article, Matthew. Aluminium smelting in Victoria is the 'carbon dirtiest' industry in Australia, producing some 4% of our carbon emissions from subsidized brown coal fired electricity at less than 3 c / kWh. It's the obvious first candidate to close if we are reduce CO2 emissions.

The carbon tax is not behind this latest move though as they'll get 95% of their emissions Scot free for several years yet, under the over generous compensation given to these 'trade exposed' industries.

Agree with Taswegian, we should lead the world in putting a carbon tax on aluminium and other imports that are more emissions intensive than an accepted benchmark. The notion of free trade will have to be turned around in order to get recalcitrant nations up to speed up their action on carbon.

PS Curm - 'nearly useless wind farms and PV plants'- negative and unsubstantiated statement. Many European nations including Spain and Germany and indeed our own state of SA have more than 20% of this generation in the grid already. How can fuel free power that contributes to energy security and reduces emissions be 'useless'?