Emission Controls: The Exodus Begins
Rio Tinto Alcan is closing its Northumberland aluminium smelting plant in north-east England – a direct result of EU climate legislation. The closure of the decades old smelting plant is devastating for an area with already high unemployment. It is also a poignant closure for me personally.
Back in the 1950s, 60s and 70s my father owned a pioneering fibre glass business in the north-east. His firm was engaged by Alcan to replace much of the old corroding metal infrastructure, with more chemical-friendly, polypropylene piping and fibreglass-lined tanks. Between school terms, I often helped him. It was quite a learning curve standing 90 feet in the air on rickety old scaffolding being told not to step in any puddles that “may be acid”. So much for health and safety back then.
Not that the Rio Tinto Alcan plant isn’t making a profit, mind you. Even in an era of spiking energy costs generally, it is. But in 2013 the plant faces a profit-erasing rise of around lb56 million to enable it to comply with a further tranche of European and UK carbon legislation. As Rio Tinto’s CEO Jacynthe C^ot’e told the London Financial Times, “It is clear that the smelter is no longer a sustainable business because its energy costs are increasing significantly, due largely to emerging legislation.” Note the sting in the tail. Not, as politicians often like to insist, due to rising energy costs, but “emerging legislation”.
Rio Tinto’s plant closure is just one part of a plan to divest the company of $8 billion of aluminium assets. How much is due to “emerging legislation” on emission controls is impossible to say. But expect more jobs to be shed elsewhere.
Britain’s huge energy-intensive chemical industry contributes lb30 million a day to the UK economy. But it is clear already that new green legislation has begun to force early closures and a business exodus to foreign parts. Steve Elliott, chief executive for the Chemical Industries Association, told BBC News in October that he feared more British job losses were imminent, with small and medium companies with narrow profit margins especially vulnerable. “There will come a moment when people say enough is enough,” said Elliot, adding, “And there will only be one direction of travel – out of the UK.” Hardly good news for a country that is consistently top of the European league when it comes to attracting inward investment.
In the English Midlands, a region famed for its pottery manufacture, Dr Laura Cohen of the British Ceramic Confederation told BBC News that high energy costs augmented by anti-carbon costs has forced factory after factory in the pottery industry to close, with one firm recently relocating its operations to China.
Not that UK companies have not done their bit to ‘go green’. Cemex UK operates the country’s largest cement plant. It has already moved away from dependence on coal alone. But Director Andy Spencer estimates incoming carbon legislation will increase his energy costs by lb12 million. What concerns Spencer most of all is that he knows other countries will not impose similar taxes on their cement industries. He states that Cemex UK is already considering transferring operations to plants it runs abroad, especially Egypt. “I can see a time when it makes more sense to do that,” Spencer told the BBC, “and that time is not far away.”
Steel giant Tata which employs 21,000 people has warned the British government that its planned lb1.2 billion investment program could be put at risk by “over the top” green policies. A study by the UK manufacturer’s association EEF has shown that the introduction of the Carbon Price Floor in 2013 will cost the UK manufacturing industry lb250 million a year by 2020. The EEF is demanding compensation to help energy-intensive industries – yet another potential hidden cost of carbon legislation.
In August, a UK Department of Energy and Climate Change study estimated that energy-intensive industries, such as steel and paper mills, would likely have to pay 58 percent more for electricity by 2030 compared to what it would cost them in the absence of current climate policies.
Just last week, GDF Suez SA cited EU regulations as creating an unstable investment environment that was discouraging energy investment. Jean-Francois Cirelli, vice-chair and president of GDF Suez told the European Autumn Gas Conference in Paris, “Governments do not hesitate to take decisions that are not totally based on economic rationale”.
In other words political ideology and sheer wishful-thinking in the war on fossil fuels means that many of those making the political decisions still aren’t “getting it”. Britain’s energy and climate minister Chris Huhne exemplifies the ‘disconnect’ by persistently deeming climate policies sacrosanct while insisting high energy costs alone are to blame. “We’ve had a 27 percent increase in the gas price on world markets over the year to August,” says Huhne. “Now with the best will in the world, I can’t do anything about that.” Huhne is clearly not listening to industry bosses who cite the profit-destroying effect of climate policies, especially the EU-imposed extra green costs currently being factored into budgets from 2013.
The EU Climate Commissar is Connie Hedegaard. She was voted in by nobody yet this unelected official is behind the new EU directive on fuel quality. This measure sets minimum standards for a range of fuels. It is this directive which threatens to label Canada’s oil sands as “dirty” and threaten the future of Europe-wide shale gas development.
Hedegaard says, “With this measure, we are sending a clear signal to fossil fuel suppliers. As fossil fuels will be a reality in the foreseeable future, it’s important to give them the right value.” De-coding Euro-speak, Hedegaard wants fossil fuels made as expensive as renewables.
A plague of profit-busting climate policies is indeed sending a “clear signal” to energy-intensive industries: divest yourself of assets, shed jobs – or just plain ship out. Cocooned in ideological green protectionism, however, don’t expect Hedegaard and Huhne to “get” it.