Mining giant Rio Tinto likely to reap biggest carbon windfall

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THE mining multinational Rio Tinto will be the biggest recipient of public support under the Federal Government’s carbon trading scheme, with $462 million in free carbon permits expected to flow to the company in 2010.

About $3.5 billion will be allocated to emissions-intensive, trade-exposed industries in the scheme’s first year of operation if, as expected, the carbon permit price is $25, according to a report prepared by the investment research firm Innovest Strategic Value Advisors for the Australian Conservation Foundation.

The total value of free permits allocated to Australia’s heaviest polluters will rise to $5.3 billion in 2015 if the carbon permit price reaches $35, as the Government suggested in Monday’s white paper.

“These huge levels of public support mean the Government has bent over backwards for the biggest polluters,” said Don Henry, the executive director of the Australian Conservation Foundation. “It risks entrenching in our economy the emissions-intensive activities that we are supposed to be trying to stamp out.”

The Climate Institute, which earlier offered conditional support for the Government’s carbon trading scheme, said yesterday it was reconsidering. The system would force the rest of the economy to bear the brunt of carbon cuts, while heavy industry was insulated, said the institute’s director, John Connor. The aluminium smelting industry will get $939 million worth of free permits in 2010. By 2015, support for aluminium smelting will rise to $1.2 billion, the Innovest report estimates.

The steel and cement industries, along with aluminium smelters, are eligible to have 90 per cent of their carbon emissions covered by free permits. The alumina refining, liquid natural gas and petrol refining industries will have 60 per cent of their permits covered. The Federal Government aims to raise $11.5 billion in 2010 by auctioning carbon permits to the 1000 heaviest polluters.

The Government says the number of carbon permits will be wound back every year, partly to account for improvements in household energy efficiency.

“Everyone will be doing their bit under the carbon pollution reduction scheme - no one gets a free ride,” said a spokeswoman for the Climate Change Minister, Penny Wong. “Support to coal-fired electricity generators is targeted and transitional - not ongoing. This means more and more of our electricity supply will come from gas and renewables like sun, wind and geothermal power.”