KEY POINTS:
Among the loudest critics of the emissions trading scheme are large industrial concerns which claim it will undermine their ability to compete in export markets or against imports.
Rio Tinto, owner of the aluminium smelter at Tiwai Pt, told MPs the scheme would "put the smelter on the path to closure", imperilling more than 1000 jobs and more than $1 billion a year in export earnings.
Under the scheme the smokestack sector will get a free allocation of emission units sufficient to cover 90 per cent of their collective emissions in 2005. That 90 per cent will be reduced to zero over 12 years starting in 2019.
Details of the allocation plans for individual firms have yet to be thrashed out, and will have to be approved by Parliament.
The Government says the scheme will give them financial incentive to reduce emissions, but enough protection to keep them in business and not destroy the value of investment they made in the past in good faith.
The smelter made deep cuts in its on-site emissions under voluntary arrangements in the 1990s, roughly halving emissions per kilogram of metal produced. A 2005 baseline year, Rio Tinto argues, gives it no credit for that and it will be hard pressed to find more savings.
NZ Steel, which operates the Glenbrook steel mill, said the scheme was a threat to its medium-term viability and to plans its Australian parent company has to invest more than $1 billion at the plant over the next 10 years.
It said 80 per cent of its carbon emissions are the unavoidable outcome of the chemistry of making steel from ironsands. The amount of coal it uses to combine with the oxygen in its feedstock is already close to the theoretical minimum, it said.
Holcim Cement plans to replace its existing 50-year-old plant on the West Coast with a new one in north Otago.
It would enable Holcim to reduce emissions per tonne of cement it sells by 18 or 19 per cent, its energy and climate change manager, Michael Rynne, said. It will also be some 75 per cent bigger, allowing the company to avoid importing cement as it now does because production from Westport falls well short of demand.
But an allocation of free permits set at 90 per cent of the Westport plant's 2005 emissions would clearly be a lot lower than if the new plant had already been commissioned.
It would send a perverse signal that it was better to keep a less efficient plant operating than invest in a new, more efficient one, Mr Rynne said.
Gary Taylor of the Environment Defence Society said industry always had an incentive to overstate the costs of a policy such as the emissions trading scheme and to pass those costs on to someone else, in this case the taxpayer and the future.
