Extract from ABC News
Australia's multi-billion-dollar alumina and aluminium export industries could risk closure if the European Union leads other major economies into adopting so-called carbon border adjustment mechanisms, a think tank has warned.
Key points:
- The G7 is widely expected to discuss so-called carbon tariffs, with the EU and UK both proponents
- The Australian government says it is opposed to what it calls "protectionist" policies
- A new report warns that Australia's $12.6b aluminium export industry is at grave risk but that embracing carbon tariffs and low-emissions technology is the best way to protect it
In a report released ahead of the G7-plus summit, which is expected to discuss carbon tariffs after the host nation Britain said they are a live issue, the left-leaning Australia Institute has evaluated the potential cost to Australian industry from such a policy.
The report is focused on "emissions-intensive, trade-exposed" sectors, as defined by the government's Clean Energy Regulator, which generated exports of just under $24 billion for Australia in 2019-20, or just under 5 per cent of Australia's outbound trade.
Chief among those was alumina refining and aluminium smelting, the two processes involved in transforming bauxite into aluminium.
Australia is home to the world's largest bauxite reserves, but is only the second largest alumina producer (the nation's exports make up 13.9 per cent of total global output), trailing well behind China, which accounts for more than half of world production.
Australia is an even smaller player in the final stage of turning alumina into aluminium, with the nation's exports accounting for 2.3 per cent of global output. Again, China dominates this industry.
However, Australia's exports of the two products still generated $12.6 billion worth of income in 2019-20.
The Australia Institute report warned this sector could be all but wiped out if a cross-border carbon adjustment mechanism, also dubbed a "carbon tariff", is widely adopted, given that the nation's three largest smelters are some of the most emissions-intensive in the world, outside of China.
"Some sectors of the economy are going to be highly vulnerable if Australia doesn't act," observed Hugh Saddler, honorary associate professor at the Crawford School of Public Policy at the ANU involved with the report.
Industry says it is working to cut carbon emissions
The industry does not disagree, but also argues that it is already among the lowest emitting producers of alumina.
"Australia already has some of the lowest carbon alumina products in the world and, as the world's largest producer of alumina outside of China, Australia is uniquely placed to develop low carbon alumina technologies for the world," said Marghanita Johnson, executive director of the Australian Aluminium Council, which represents the industry from mining all the way through processing to distribution.
"Development of alternative technologies, like mechanical vapour recompression, which has the potential to reduce alumina emissions by 70 per cent, will help not only Australian producers but be part of Australia's contribution to the global decarbonisation pathway."
The council cited the Australian Renewable Energy Agency's (ARENA) recent $8.8 million grant to Alcoa to trial the MVR process, which uses renewable energy to recycle waste vapours into usable heat and could cut a refinery's carbon footprint by 70 per cent.
Ms Johnson said those carbon reduction efforts applied to aluminium too.
"Members of the council, Rio Tinto and Rusal (via En+) are all involved in technology trials to remove the use of carbon (including perfluorocarbons) in the direct smelting process," she added.
The Australia Institute pointed to other potentially emissions intensive industries as examples that could be emulated.
Australia's production of zinc metal uses mainly renewable energy, with Tasmania's Risdon facility using hydroelectricity and Townsville's Korean-owned refinery getting a third of its power from a solar plant it built nearby, and contracting with a new large wind farm under development to soon bring its use of renewables up to 86 per cent.
Australian government pushing back on carbon tariffs
Given much of Australian industry's current reliance on coal-fired electricity, it is perhaps not surprising that the federal government has been pushing back against the EU and UK push for carbon tariffs.
"Our view is that carbon tariffs are not the way to go," Trade Minister Dan Tehan told Flow FM, a radio station based in regional South Australia.
"We've put forward a counterproposal, which is that all countries should look to limit the tariffs they put on environmental goods and free up movement of environmental services."
However, the Australia Institute has its own counterproposal to the government.
"This isn't trade protectionism by the G7. It's climate protectionism," said the director of the think tank's climate and energy program, Richie Merzian.
"Australia needs to engage constructively on carbon border adjustment mechanisms in the interests of our economy and climate."
The report noted that, within weeks, the EU plans to release a detailed CBAM proposal that is compliant with international trade rules and to open discussions with its trading partners.
It also observed that border adjustments are under consideration in the United Kingdom, Canada, Japan and the United States, although they are not a priority in some of those nations as they are for the EU.
Australia 'better placed' to capitalise on green exports
The Australia Institute argues that, if Australia does not participate in the development of carbon border adjustment mechanisms globally, then not only might its exports potentially face taxes, but they may even be out-competed by cheaper rivals from even more carbon-intensive developing nations.
"Australia's natural endowments and human resources position it better than most countries to prosper in a low carbon world," said the report's lead author Frank Muller.
The report lists a range of opportunities for Australia to prosper in a low-carbon world, including:
- Green hydrogen and ammonia production;
- Green steel and aluminium production;
- Mining and processing of battery and electronics materials such as lithium, nickel, cobalt, manganese and rare earths;
- Replacing diesel-fuelled mining equipment and vehicles with electric ones, which is already happening at some iron ore mines;
- Low-emissions food production;
- Renewable electricity exports from northern Australia to South-East Asia.
Mr Merzian said Australia would inevitably lose out if it does not join the global trend to lower emissions.
"The Australian government claims that it's approach to climate is dictated by technology not taxes," he said.
"Make no mistake, if Australia continues to stonewall its trading partners and allies on climate, the taxes will come anyway. But the revenue is going to be collected outside of Australia."
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