Rich polluters stand to rake in $3b

Sydney Morning Herald
Monday 20/10/2008 Page: 2

A NEW report estimates the Rudd Government could hand almost $3 billion to some of the richest companies in Australia in free carbon pollution permits when its scheme to cut greenhouse gases begins in 2010. The report released by the Australian Conservation Foundation found much of the assistance, an estimated $825 million, would go to big aluminium producers, including Rio Tinto in Australia and Britain, the American company Alcoa, the Norwegian company Norsk Hydro and the Australian company Alumina Ltd.

Other beneficiaries would be the Chinese trading company CITIC, says the report, which was produced by the financial advisory company, Innovest. If the Government also agrees to protect the export coal industry, almost half the assistance could go to foreign companies including the Swiss giant Xstrata, the Japanese Mitsubishi company and the British Anglo American coal company. BHP Billiton, could also be given up to $340 million worth of permits, the report finds.

The value of the permits is based on production figures from the companies and on the proposals in the Government's green paper on its carbon pollution reduction scheme, which was released by the Minister for Climate Change, Penny Wong, this year. Under the plan, the Government will require most businesses producing greenhouse gases to obtain permits to pollute. The Government plans to limit the number of permits, forcing companies to cut back greenhouse gas emissions. The initial cost of permits is expected to be about $20 per tonne of greenhouse gas.

Companies with permits will be allowed to freely trade them on a carbon market. But the Government has promised to protect key industries, such as aluminium, steel and cement, by giving them 30 per cent of permits free. These are industries facing competition from countries that do not have similar schemes to cut greenhouse gases. The industries have argued they could be forced to close or cut operations and investments if they are not compensated.

In its submission to the green paper last month, Rio Tinto argued Australia's major competitors in the supply of aluminium, coal and iron ore are from countries that "are unlikely to introduce comparable climate change policies in the medium term". It said the scheme risked disadvantaging key export industries and delivering "no net gain to the environment".

But environmentalists argue these "trade-exposed industries" are owned by highly profitable companies who could receive windfall profits from the free permits. They want the Government to carefully assess requests for free permits to determine whether they are justified. The Australian Conservation Foundation is the first group to try to quantify the value of free permits to industries.

"This analysis shows the compensation arrangements proposed in the green paper are far too generous to big polluters and overseas interests," said the foundation's climate change manager, Tony Mohr. "The amount being given away to the big polluters is more than the total federal budget spend on climate change and the environment." The Government is also proposing compensating the domestic coal-fired power generators under the scheme, which could cost another $900 million.

Data from The Climate Group also shows greenhouse gas emissions from power stations and transport in NSW are less than last year's figures.