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The Forum > Article Comments > It just smelts your heart > Comments

It just smelts your heart : Comments

By Simon Cowan, published 6/7/2012

Is there any purpose to the Alcoa bailout other than '#cashforyou' to shore up vulnerable seats in Geelong?

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The aluminium industry is a great case study for the political issues around reducing emissions, our ‘clean energy future’, foreign investment, governments picking winners, propping up local manufacturing, and all the rest of it.

The facts are that a carbon price puts marginal smelters at risk. Smelters in Australia all belong to multinational businesses. China buys Australian raw materials and has built the world’s largest smelting capacity to turn such materials into metal, about half the total global production. Despite optimistic emissions policy announcements, China uses and continues to use fossil fuels to generate the power to run its smelters. No-one can run a smelter on renewable energy unless it is hydroelectricity, and that has reached its limit in most places. Small changes in China’s own aluminium demand can cause the price of the metal to rise and fall by large amounts. Right now it’s seriously down and the whole industry is in trouble, even though it makes an absolutely essential and useful product. The Australian public wants to see value added to its own mineral production. It doesn’t like mining or the idea of ‘quarries’. Indeed, the further left or green one goes politically the more one hears the ‘adding value’ slogan.

Those are the issues. I certainly don’t know the answers. But I lean towards Simon Cowan’s theme, that the market has to be the only place to sort this out. I would not rely on any government to pick winners, especially this one. Their expertise is in picking losers.
Posted by Tombee, Friday, 6 July 2012 9:19:54 AM
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I think we should carbon tax aluminium made in China and see if that helps local producers survive. Supposedly a tonne of aluminium ingot requires 15 megawatt hours of electricity. Call that 15 tonnes of CO2 from coal power so the carbon tariff is 15 X 23 = $345. The recent aluminium price was about $2,000 per tonne so imports would become 17% more costly. If that doesn't save Alcoa maybe they should fold.

Aluminium aside the whole carbon tax thing is riddled with giveaways that undermine the stated objectives. Steel, glass, aluminum and zinc already get 94.5% exemption from carbon tax plus ad hoc cash assistance. Now Swan is talking about bringing in a European style ETS early presumably so fraudulent carbon credits can lower the carbon price to $10 not $23. As pointed out there is also the fact that some of the steel and aluminium we will henceforth buy from China and India will be made with the help of Australian coking and thermal coal. In other words designed to avoid carbon pricing. You have to wonder what is the point.
Posted by Taswegian, Friday, 6 July 2012 11:58:26 AM
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Taswegian,

The whole problem is that all the trade agreements we have forbid arbitrary tariffs, so that would be illegal and expose us to retaliation.
Posted by Shadow Minister, Friday, 6 July 2012 4:10:28 PM
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SM I'm no lawyer but I surmise that Australia's antidumping laws are more than adequate to impose carbon tariffs
http://www.customs.gov.au/webdata/resources/files/antidumpingbooklet.pdf
The case would revolve around lack of carbon penalties anything like $23 in China or India being an effective subsidy compared to Australia.
Posted by Taswegian, Friday, 6 July 2012 6:02:12 PM
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Of course bailing out the Alcoa smelter - keeping a non-viable, maximally polluting industry going for a few years when it must inevitably close - just doesn't make sense.

Politics in democracies seems to always entail these 'pork barreling' efforts to retain seats seen as 'marginal'. What should they do - scrabble by all means to stay in power or stick to sane principles and hope voters will appreciate this? I think the latter, but it would probably result in loss of the seat. It's a diabolical dilemma.

I think that if conservatives aided by their lying mainstream media allies do win the next election, then it'll be what the nation deserves. But it will put the whole clean energy imperative pack a decade and unfortunately it will be our grandchildren who will pay the cost of that.

Re sane alternatives; I agree with your suggestion Taswegian, 'radical' though it is. The free trade principles of the last several decades will eventually have to be re-examined and import taxes re-visited. Carbon pricing will be the incentive to do it - preventing recalcitrant nations who don't price emissions from profiting at the expense of those who do.

Logically, at least part of the carbon price should also be levied on the coal we export to nations without one, and the money put into renewable energy aid for those nations. Yes and the industry would contract, which in the interests of the world it should.
Posted by Roses1, Friday, 6 July 2012 7:26:02 PM
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Taswegian,

The anti dumping legislation has a requirement to prove that the goods being sold in this country are being sold at a cheaper price than elsewhere in the world, or below cost price.

None of this applies to foreign imports that are cheaper because of no Australian carbon tax penalty
Posted by Shadow Minister, Friday, 6 July 2012 10:28:11 PM
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