Tuesday, February 08, 2022

End Tiwai's subsidies

So, having blackmailed us for BluffGeld with the threat of closure in 2020, foreign polluter Rio Tinto now wants to keep the Tiwai Point aluminium smelter open, and has started a public campaign for another subsidy (which naturally will peak around the 2023 election for maximum political blackmail). Aluminium production has got a lot more profitable, and they're eager to talk up the environmental benefits of making it from NZ hydro power rather than dirty Chinese or Australian coal. But those environmental benefits are overstated, as Rio Tinto ignores a huge part of the environmental cost of its smelter - namely that by using 13% of our total electricity supply, Tiwai forces us to rely on the coal-burning Huntly power station. In 2020, that meant an extra 700,000 tons of coal being burned, and an extra 1.4 million tons of CO2 (basicly doubling Tiwai's stated emissions per unit of production). In 2021 it was worse.

And it doesn't pay for any of that damage. Instead, Tiwai receives a massive subsidy of 1.55 million tons of carbon a year, about 900,000 tons more than it actually emits. The "justification" for this over-subsidisation is "compensation" for higher electricity prices caused by the ETS. But Tiwai doesn't actually pay those prices, instead being subsidised $350 million a year by the rest of us, at a cost of ~$200 per household.

If Tiwai wants to stick around, then we should end those subsidies. Meridian doesn't sound eager to continue subsidising its electricity costs (having used the last two years to start building alternative demand in the South Island), and that's good. But we should also eliminate its carbon subsidy. In theory that just means removing "aluminium smelting" from the relevant regulation, but to be certain, Parliament should add a clarifying clause to the appropriate section of the Climate Change Response Act specifying that "Aluminium smelting is not an eligible industrial activity". This one clause would reduce emissions by 1.5 million tons a year, saving us $225 million a year in social cost.

If Tiwai really is as clean as they say they are, they should have no problem paying the full cost of their emissions. And if they're not profitable when they do that, then they were never really profitable at all, and we really are better off without them.