Tiwai Pt and CHH seek greenhouse trade-offs

By BRIAN FALLOW

The Government is to negotiate greenhouse agreements to cover the Tiwai Point aluminium smelter and several Carter Holt Harvey plants, including the Kinleith and Tasman pulp mills.

Negotiated greenhouse agreements (NGAs) exempt companies wholly or partially from the carbon tax the Government plans to introduce in 2007 as the central plank of its climate change policy.

Larger firms whose international competitiveness would be put at risk by the one-size-fits-all application of a carbon tax can strike a deal with the Climate Change Office for relief from the tax in return for binding commitments to move to world's best practice in managing their emissions of the greenhouse gases blamed for global warming.

It has concluded one NGA - with New Zealand Refining, operator of the Marsden Point oil refinery - and is in negotiations with paper mill operator Norske Skog Tasman, ACI Glass Packaging and gold miners GRD Macraes and Newmont Waihi.

Although the smelter consumes about a seventh of New Zealand's electricity, that is not where its carbon tax problem lies. It buys most of its power from Meridian Energy, whose generation is all from renewable sources, including the Manapouri hydro scheme built to supply the smelter, which would not be hit by a carbon tax.

But the chemical reduction of alumina produces about two tonnes of carbon dioxide or its equivalent in other greenhouse gases for every tonne of aluminium produced.

A carbon tax at the maximum level of $25 a tonne of carbon dioxide would add $50 a tonne or $16.7 million to the smelter's costs. But it would not bite lethally deep into its revenues, based on the present metal price of about $2300 a tonne.

The smelter operator, New Zealand Aluminium Smelters, is 79 per cent owned by Comalco and 21 per cent by Sumitomo.

In addition to the Kinleith and Tasman pulp mills, Carter Holt Harvey wants NGAs for its recycled paper operation at Penrose and tissue manufacturing at Swanson, Te Rapa and Kawerau. It wants NGAs, too, for its plywood mill at Tokoroa and wood panels operations at Rangiora and Kopu.

Carter Holt spokesman Bruce Chapman said there were too many factors influencing the international competitiveness of these businesses for it to be possible to say that the carbon tax alone would make or break their viability.

The Climate Change Office said it had more applications under assessment.

The NGA

Negotiated Greenhouse Agreement

* An agreement between the Government and some businesses seen as "at risk" from a tax on greenhouse gas emissions to be introduced in 2007.

* The deal shields these companies from the tax in return for commitments to best practice in reducing emissions.

* The first negotiated greenhouse agreement (NGA) was put in place in April last year with NZ Refining, operator of the Marsden Point refinery.

* The refinery agreed to invest $180 million in a project to reduce petrol benzene and diesel sulphur.