Firms to get billion-dollar green subsidy

Tag : including aluminium

Seven of New Zealand's biggest companies will receive"corporate welfare" of $1.2 billion over the next decade,including subsidies on greenhouse gas emissions and their increasedenergy bills, according to an environmental think-tank.

And an eighth company, Fonterra, will receive a further $200million, in addition to separate subsidies of $1.3 million beinggiven to the nation's farmers, Sustainability Council executivedirector Simon Terry said today.

The Emissions Trading Scheme (ETS) legislation before Parliamentprovides for subsidies to be paid partly on the basis of emissionsfrom fossil fuels the companies burn, and also for expectedincreases in their electricty bills. The payments until 2018 willprovide, on average, a 90 percent subsidy on 2005 levels ofemissions and a 90 percent subsidy for increases in the cost ofpower due to emissions charges. "The proposed arrangementsgive extraordinarily high levels of protection to the majoremitters before the Government has the information to tell whatlevels of assistance are really needed," Mr Terry said.

The biggest greenhouse gases subsidies through to 2018 will go tothe nation's largest electricity consumer, New Zealand AluminiumSmelters.

Payments benefiting the Tiwai Point smelter near Bluff, 80 percentowned by Australia's Rio Tinto Alcan are likely to total around$600 million, Mr Terry said.

The aluminium smelter uses about 15 percent of the nation'selectricity, most of it from a long-term electricity supplycontract with Meridian Energy, and it pays market prices for about10 percent of its power requirements.

Another big smelter, New Zealand Steel is likely to benefit by morethan $100 million, assuming a carbon price of $30 a tonne forgreenhouse gas emissions.

Four major pulp and paper firms can be expected to receive a totalof about $400 million up to 2018, nearly all of which arise fromelectricity subsidies, and the New Zealand Refining Company islikely to receive around $70 million.

Mr Terry said the subsidies are being set in the ETS legislationbefore the country has even found out what additional emission cutsit will need to take responsibility for after 2013, and whatreductions other countries will have to meet.

These rules "are a one-way bet for these companies at theexpense of the rest of the community," Mr Terry said,

"There will be good cases for the Government providingtransitional assistance, but it is completely unnecessary topre-commit so far into the future, at such a high rate of subsidyto every major emitter," he said.

Money to pay the subsidies will effectively come from otherconsumers: householders, road users and small and medium businessesthat are responsible for only a third of the nation's emissions.

They will have to provide over 90 percent of the net chargesresulting from the ETS up to 2012, and only a little lowerproportion for the six years after this.

While some of the large emitters that qualify are to get less thanthe 90 percent cover on 2005 levels, others will get more.

"The exercise is ultimately a carve-up of the available fundsbetween the major emitters rather than Government paying to eachfirm only a level of transitional assistance that is in thenation's interest to provide."

Fonterra will receive a further $200 million up to 2018, includingpayments on electricity used by its 10,000 farmer suppliers.

But Mr Terry said these payments were only a small part of theagriculture sector subsidies under the ETS.

"The exemption of agricultural emissions (from animals)amounts to a net subsidy to the sector of $1.31 billion for thenext five years alone, after account is taken of the chargesfarmers pay on electricity and fuels," he said.