The owners of the Tiwai Pt Aluminium smelter say the Government's emissions trading scheme puts the smelter on the path to closure, which would cost thousands of jobs and more than $1 billion a year in exports.
Rio Tinto Alcan (which includes the former Comalco) told MPs hearing submissions on the emissions trading bill yesterday that in its present form it meant New Zealand would not remain a cost-competitive place to manufacture aluminium.
The smelter could not pass on the extra cost of its carbon emissions to its customers, Rio Tinto's Asia/Pacific president Xiaoling Liu said.
Nor would it be competitive, until there was a global price on carbon emissions reflected in aluminium prices.
If the smelter became uncompetitive, demand for the metal it produces would be met by smelters in developing countries, most likely using electricity from coal-fired plants. The global climate would be worse off.
The smelter's general manager, Paul Hemburrow, said its costs would rise as the free allocation of emissions units (initially covering it for 90 per cent of emissions at 2005 levels) was phased out between 2018 and 2030.
"The bill if passed would most likely put the smelter on a path to closure," he said.
"We can't say exactly when but it would be likely to be before the [newly renegotiated] power supply contract with Meridian Energy runs out in 2030."
Greens co-leader Jeanette Fitzsimons asked why the emissions trading scheme (ETS) should affect the price the smelter paid for electricity - its largest cost - when its supplier Meridian generated exclusively from renewable sources and so faced no price of carbon. Rio Tinto's regulatory affairs manager Ray Deacon said the contract included an escalator clause which linked the power price the smelter paid to the price of electricity on the wholesale market.
Much of the time that is set by a fossil-fuel-burning generator that has to recover the cost of carbon. Labour MP Paul Swain said the company had "made noises like this" over the years, a reference perhaps to threats in the early 1990s to up stakes and move to Chile if the Government did not privatise the Manapouri power station, source of most of its power.
He asked which of the changes the company sought was most important to it. Mr Deacon said it was to replace the arbitrary straight-line phase-out of free allocation of emissions units from 2018 by a series of reviews that would only discontinue that protection for trade-exposed industries when their international competitors faced a comparable carbon price.
Gary Taylor of the Environmental Defence Society said industry always had an incentive to overstate the costs of a policy such as the ETS and to pass those costs to someone else - in this case the taxpayer and the future.