Rusal opposes carbon tax by Gillard government

RUSSIAN aluminium giant Rusal has accused the Gillard government of hobbling the once high-growth alumina industry through the July 1 introduction of the carbon tax.

It argues the carbon tax will force shrinkage in the industry's share of growth in the global market for alumina, an intermediate product used in producing aluminium.

"Since the design of the tax and the announcing of its implementation, global circumstances have changed dramatically and Australia now faces an almost impossible task of competing with new entrants to the industry," Rusal Australia chairman John Hannagan said.

Rusal is a 20 per cent partner with Rio Tinto in one of the world's biggest alumina refineries, at Gladstone (Queensland Alumina Ltd, QAL).

Mr Hannagan said the design of the carbon tax would hand future global capacity increases to competitors in Asia, South America and other places where there was no "carbon impost".

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That meant the government's carbon tax would deliver a perverse outcome, from a global greenhouse gas perspective, of causing a dramatic increase in emissions in the next decade as "new capacity is added in competitor countries and Australia's share of global production falls".

Mr Hannagan said the carbon dioxide intensity of Australian alumina production by the AWAC joint venture of Alcoa-Alumina, BHP Billiton, Rio Tinto (alone, and in joint venture with Rusal) was almost half that of competitor nations at 0.75 a tonne of alumina.

Australia's position at the bottom of the emissions curve was no accident, he said. "Australia has led the world on research into alumina refining over the past four decades and has long been regarded as the world's most efficient producer.

"Its emissions levels simply reinforce this fact," Mr Hannagan said.

"Despite this world-leading performance, the federal government has determined that the industry must sacrifice its position as the world's most competitive and energy efficient producer to our global competitors," he said.

Local producers had every right to feel "confused and aggrieved" over that outcome, which "reverses 40 years of government policy".

That policy had traditionally encouraged value-adding to bauxite by its conversion into alumina, and aluminium in the final stage.

"Bauxite was seen as the catalyst resource that would drive sophisticated and capital intensive processing that would act as pull-through for the associated requirements for technology development. The strategic requirements of the industry were abundant and competitively priced energy and secure resource access," Mr Hannagan said.

"With these in place, the companies invested in the manufacturing facilities (alumina refineries in Western Australia, Queensland and the Northern Territory) that transformed the strategic policies into an unrivalled comparative advantage that drove Australia from new entrant to world leader." QAL was an example of an industry established as a direct outcome of those government policies, Mr Hannagan said.

"In the case of QAL, the bauxite required high-temperature processing (more energy) using local coal and gas, and the electricity was purchased from Queensland's coal-based state grid.

"QAL emissions remain below the average of overseas competitors, but they are about 40 per cent higher than average Australian refineries."