Australian miners step up carbon trade opposition

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CANBERRA (Reuters) - Australia’s coal and gas producers, including miner Rio Tinto Ltd, said the government must give more assistance to major emitting export industries, and to increase the number of free carbon pollution permits.

Mining and gas firms have stepped up their campaign against the government’s carbon trading plans, telling a Senate inquiry the current plan will stifle investment and force mines to close.

Rio Tinto Ltd. produces between 10 and 15 percent of Australia’s coal.

“According to our analysis, some Rio Tinto coal mines that are ‘long life’ would close before 2020 under the scheme,” Rio Tinto Australia managing director Stephen Creese said in a submission to the Senate inquiry.

The government wants carbon trading to start in July 2010 as part of its strategy to curb greenhouse gas emissions by at least 5 percent by 2020, based on 2000 levels, and wants laws for carbon trading passed by the end of June.

The scheme aims to entice polluting firms to invest in cleaner technology so they can meet increasingly tougher annual emissions targets.

Firms over their targets will have to buy permits at auction, while more efficient companies can earn money by selling excess permits for every ton they are under their target.

Australia, the world’s biggest coal exporter and a growing supplier of liquefied natural gas (LNG), accounts for 1.5 percent of global carbon emissions but is one of the highest per-capita polluters. Coal is used for 80 percent of Australian electricity.

The Senate inquiry is examining draft legislation for the carbon scheme and will report back by April 14. The government hopes to introduce the legislation into parliament in May.

In its current form, the scheme will be the world’s broadest, covering 75 percent of emissions and around 1,000 of the largest polluters.

FREE PERMITS

Major trade-exposed emitters, likely to include aluminum smelters and iron and steel producers, will receive 90 percent of permits for free, with 60 percent of permits free to other trade-exposed emitters such as alumina and LNG producers.

The government proposes to wind back the rate of assistance by 1.3 percent per year.

But Rio Tinto said the carbon pollution reduction scheme (CPRS) would cost the company’s aluminum smelting, alumina refining, coal and iron ore businesses A$130 million ($90 million) in 2010/11 and A$430 million over the first 10 years.

“Put simply, the CPRS, as proposed, will cost jobs — now and in the future,” Creese said.

Oil and LNG producer Woodside Petroleum Ltd, a long-term critic of the carbon scheme, said uncertainty over the price of carbon and levels of assistance to trade-exposed industries, posed significant risks to Australia’s LNG industry.

“Despite some suggestions to the contrary, LNG projects cannot absorb the expected cost of emissions permits, nor deal with uncertainty in permit price,” Woodside chief executive Don Voelte said in a submission to the Senate.

He called for the government to abandon the plans to reduce carbon permit allocations by 1.3 percent a year.

Big business and the main opposition parties want the scheme delayed, due to the added costs carbon trading will impose on businesses which are already dealing with a global downturn.

Despite the uncertainty, demand for carbon credits continues to build as big polluters such as coal-fired electricity generators seek to lock in the cost of polluting by buying Australian Emission Units (AEUs).

Newedge Australia said it executed a trade Thursday of 50,000 tons sold forward at A$22.65 ($15.91) per ton. It did not give details of the parties involved.

“Interest continues to build as people are of the view that something is going to happen even though the legislation may be a bit of a struggle getting through the houses of parliament,” said Gary Cox, vice president commodities, energy at Newedge Australia.

The transaction in AEUs was for settlement on November 1, 2012.