After it finalises its accounts for the 2012 year, Rio will have written off an astonishing $US30 billion … of the $US42 billion it paid to buy aluminium group Alcan in those heady pre-GFC days of 2008…
But a critical, arguably the core, component of the choice of Alcan – and the price Rio was prepared to pay – was ‘the logic’ of power generation in a carbon-constrained world of the 21st century.
Aluminium is said to be a form of congealed electricity… Alcoa’s smelter at Portland consumes something like 20 per cent of all of Victoria’s power each year.
Well, the key appeal of Alcan to Rio was that much of the power for its North American smelters came from the Canadian Quebec hydro-electricity system…
This in the eyes of Rio would give Alcan’s smelters a powerful and irresistible competitive advantage. Especially over those getting their power from, gasp, coal-fired power stations.
Why? Because the price of power to all its competitors would rise … as the world, in those pervasively inane words, “put a price on carbon;” and further, relentlessly kept raising it.
In particular, China would see the light, and close all its inefficient small aluminium smelters fed from … coal-fired power stations.
Wasn’t China leading the way on moving to renewable energy; closing coal-fired power station after power station? Didn’t Julia and Greg keep telling us so?
In fact China did not, and … kept most of those inefficient aluminium smelters chugging along.
Which destroyed the point of the Rio investment. And exposed Julia Gillard’s mendacious spin:
Appearing on the ABC’s Q&A program on Monday night, Ms Gillard argued the rest of the world was moving on combating climate change. “There’s this image that somehow we’re the only ones – simply not true,” she said.
“You know, China [is] closing down a dirty coal-fired power generation facility at the rate of one every one or two weeks. Putting up a wind turbine at the rate of one every hour. They set their own targets by 2020 of reducing carbon pollution by 40 to 45 per cent per unit of GDP,” Ms Gillard said.
Meanwhile, more Labor warming spin unravels – this time in Europe:
Europe’s carbon market fell to new record lows on Monday as European Union emissions permits dropped below 5 euros [$6.33] before regaining some lost ground after a successful EU auction of 3.5 million permits.
Ouch. Remember how Labor set Australia’s price at $23 a tonne, insisting we weren’t ahead of the pack?
The mismatch in prices last year drove the Gillard Government to announce a link to the European scheme from 2015 - but if the price of our carbon dioxide permits is allowed to fall to these European prices, what earthly incentive will there be for business to switch to “cleaner” power and processes?
As environment scientist Dr. Roger Piekle Jr. says:
Except,of course, the Gillard Government is paying poorer households compensation for – and paid for by – a $23 a tonne tax, which may soon fall to a fraction of that, leaving a huge funding gap. And a budget blown even further.
But Labor keeps frantically spinning that all is well. Forget reality. Here is Climate Change Minister Greg Combet last August:
He was asked if the government would face a budget shortfall, in contrast to the $9.4 billion of revenue it had predicted the floating price would generate in the 2015/16 budget.
“It is three years away and the Treasury modelling is something that we stand by,” Mr Combet said.
“We stand by the budget as it was announced in May.”
Well, Labor hasn’t since stood by that Budget. In December, just before Christmas, it snuck out an admission that the long-promised surplus would not be delivered. And worse is to come. Combet’s forecasts for the future carbon price are as worthless as Labor’s promises were of a surplus this year.
Green spin. Red ink. An ocean of it. Enough to drown us, with Rio already gurgling for air.
Andrew Bolt’s columns appear in Melbourne’s Herald Sun, Sydney’s Daily Telegraph and Adelaide’s Advertiser. He runs the most-read political blog in Australia and hosts Channel 10’s The Bolt Report each Sunday at 10am. He is also heard from Monday to Friday at 8am on the breakfast show of radio station MTR 1377, and his book Still Not Sorry remains very widely read.