Norsk Hydro Australia Project May Be Derailed by Carbon Trading

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March 11 (Bloomberg) — Norsk Hydro ASA, Europe’s second- largest aluminum producer, said uncertainty over plans to start carbon trading in Australia may endanger a proposed improvement of a local smelter.

While the company had said it was considering an expansion of the Kurri Kurri plant, the plans were at an “early stage” and “many factors” will determine whether they proceed, spokesman Erik Brynhildsbakken said today by telephone from Oslo, where Hydro is based. The smelter is near the port of Newcastle in New South Wales state.

“One of those factors is that the carbon trading system has not been clarified, so that remains an uncertainty,” the spokesman said. “We would need that clarified before we decide to proceed.”

An expanded Kurri Kurri plant may generate as many as 3,000 jobs “directly and indirectly,” said Brynhildsbakken. He spoke after the Australian Broadcasting Corp. said Hydro may cancel the planned A$4 billion ($2.6 billion) improvement because of costs from the government’s proposed emissions trading system.

Hydro would need to spend as much as A$180 million on Kurri Kurri by 2030 to comply with the system, ABC said on its Web site, citing a company submission to an Australian Senate inquiry on fuel and energy.

Draft legislation to introduce carbon trading aims to cut Australia’s emissions by between 5 percent and 15 percent of 2000 levels by 2020, Climate Change Minister Penny Wong said yesterday.