Tiwai Deal Mustn’t Lead To A Multi-billion Dollar Subsidy To Pollute Being Granted To Rio Tinto

Close to a million free carbon credits per year could go back to Rio Tinto under the new electricity supply deal announced by New Zealand Aluminium Smelters and electricity suppliers today, if the government doesn’t urgently change the rules for big polluters to receive electricity-related industrial allocation.

The previous government had shrunk Tiwai Point’s industrial allocation under their previous contract, removing a subsidy of around $60 million/year at the time while Tiwai was on an interim supply contract with electricity retailers.

The deal announced today is silent on the passing on of electricity-related emissions costs to NZAS, but if reactivated at the same rate as the 2015 contract, would lead to the smelter receiving 15 million credits worth nearly $2 billion over the 20 year life of the contract.

Common Grace Aotearoa co-Director and spokesperson for the Don’t Subsidise Pollution campaign Alex Johnston, said “Subsidising pollution during a climate crisis doesn’t make sense. When the government’s just put a billion dollars in the budget to recover and build resilience from climate-induced disasters, they risk seeing $2 billion dollars go back in the hands of Rio Tinto to keep polluting if nothing changes.”

“Urgent reform is needed of the automatic subsidy to pollute that Rio Tinto qualifies for under this deal - we need the trajectory of free carbon credits going to be going rapidly to zero, not increasing by millions.”

“The Minister for Climate Change and Associate Minister have both said they are not a fan of subsidising large multinationals to pollute - but without a plan to reform industrial allocation, that’s exactly what will happen."

"The Government ‘s Second Emissions Reduction Plan provides the crucial opportunity for the Minister of Climate Change to outline a plan to end free carbon credits, and phase in a Carbon Border Adjustment Mechanism like the EU is doing.”

“There’s a place for low-carbon aluminium production in a clean energy future for Aotearoa, but there’s no place for subsidising of ongoing pollution. Putting resources into helping heavy industry further decarbonise, or simply just making them pay the full carbon price is what is needed both for a safe climate and a thriving economic future.”

Notes:

The New Zealand Aluminium Smelter currently receives around 600,000 NZETS units under industrial allocation for its direct emissions under the Emissions Trading Scheme.

A 2021 government reform removed industrial allocation for its electricity-related emissions - before that its total industrial allocation was around 1.6 million units/year. This was because it had the temporary supply contract with Meridien Energy that did not pass on the electricity-related emissions cost to NZAS, and so the government set their electricity allocation factor to zero.

It is assumed that the supply contact announced today does pass on the full emissions related costs to NZAS, and so under current settings, NZAS would have its industrial allocation for these costs restored by default. Electricity-related industrial allocation in 2024 would be worth $57 million, or roughly $76,000 per employee.

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