Aluminium giant Alcoa has spent the last year manoeuvring for the release of the Federal Government’s climate White Paper in December. Planned expansions were canned, dozens of workers laid off, and Alcoa’s constant refrains warned of moving operations offshore if they did not get their way in the Carbon Pollution Reduction Scheme.
It is a role Alcoa have been playing for decades: undermining efforts to regulate and reduce pollution, flooding Canberra with lobbyists, and putting the brakes on political change.
Aluminium is Australia’s most emissions intensive industry, using 13% of all electricity and polluting 6.1% of national emissions. The industry’s processes in Australia – from bauxite mining to alumina refining to aluminium smelting – rely on oil, gas and vast amounts of coal-fired power. The industry is set to receive over a billion dollars in free permits under the Carbon Pollution Reduction Scheme (CPRS), to be announced in next week’s White Paper.
Drew Fryer, of sustainability and finance advisors Innovest, says the Federal Government is proposing to give the aluminium industry 90% of their permits to pollute under the scheme for free. “We see over $825 million going to aluminium smelting and $227 million to aluminium refining. On the face of it, it looks like a fairly good deal for aluminium.”
With at least 20% of permits under the scheme to be dished out free, Innovest expect half of all free permits to be handed to the aluminium industry. Alcoa is set to receive over $151 million, and parent company Alumina Ltd $101 million.
Polluting industries have been begging for CPRS exemptions and hefty handouts all year, threatening plant closures, job losses and economic ruin. But Fryer says if a carbon price of $20 per tonne were set, and it could be as low as five dollars, Alcoa’s cost of emissions would be merely 3.8% of their earnings if they received no assistance. With the 90% of free permits promised by the Government, Alcoa will only bear a cost of 0.4% of their earnings under the CPRS.
Damien Lawson of Friends of the Earth Australia says, “Effectively, for the first few years of the emissions trading scheme, the aluminium industry won’t bear any cost; and the carbon price will have very little impact in terms of driving a change agenda within the industry.
“Free permits come with no strings attached. They don’t require industry to engage in any restructuring of their industry towards a low carbon operation.”
Lawson says the aluminium industry has long been a strident voice against regulation and reduction of greenhouse gas emissions. “A decade ago, the aluminium industry furiously lobbied the Federal Government to defer the introduction of a 2% renewables policy. They were successful and have been at it ever since on climate change.”
Whilst Alcoa claims they are serious about reducing greenhouse pollution, their track record shows breaches of environmental standards, lax monitoring and increasing pollution. There have been high profile spills of caustic residue slurry at their Wagerup refinery in Western Australia, emissions of double permitted amounts at their Portland smelter in Victoria, and numerous fines for breaches recorded by Environmental Protection Authorities.
West Australian Parliament Upper House Greens member Paul Llewelyn says, “Alcoa has become very entrenched in the WA economy and way of doing business. Environmental accidents are seen as a natural part of doing business and an expected risk people are prepared to have. Alcoa might get a slap on the wrist, but it’s peanuts to what they make. They just pay the fine and manage to convince us it’s all fine because there isn’t another wealth model in WA. We’ve become so dependent in that income stream that it has reduced the ability to regulate.”
John Harris lives on the doorstep of Alcoa’s Wagerup alumina refinery in south-western WA. He’s 61, he coughs, splutters and collapses some forty times a year, which he attributes to breathing emissions from the plant. He has been diagnosed with Reactive Airways Dysfunction Syndrome. “If I’m outside, I can just drop to the ground and really be in trouble. When I get into [an emissions] plume coming from Alcoa, my lung capacity disappears. I have to use Ventolin to get my airways open again.”
He says it began in 2002, “[Alcoa] upped their production and put in taller stacks to disperse the plume. That’s when we started to get hit.” Community members in towns around the Wagerup refinery in Yarloop, Hamel, and Cookernup have felt and recorded adverse health effects for more than a decade.
With some 300 residents, John Harris is initiating proceedings for a class action against the American-owned company, and they have enlisted US anti-pollution activist Erin Brockovich to spearhead the litigation.
Vince Puccio of local residents’ group Community Alliance for Positive Solutions says, “Most people tend to suffer multiple health symptoms: bloody noses, nausea and skin rashes. We have unexplained cancers at the moment; there’s a lot of stress.”
His partner suffered industrial asthma and bloody noses, and like many in the town, was forced to leave. “Now the whole town is basically collapsed; infrastructure is almost all gone. The town is nearly a ghost town,” he says.
With a dearth of pollution and health monitoring, residents have battled for recognition from Alcoa and the WA State Government for years. Forced to fund and collect of air samples themselves, they have sent the samples to a laboratory in the United States.
Resident pressure led to a 2004 CSIRO study of air quality, followed by a 2006 study into particular pollutants of the refinery. Ian Galbally, Chief Research Scientist with CSIRO Marine and Atmospheric research says, “[Alumina refineries] have always reported the traditional air pollutants such as sulphur dioxide, nitrogen oxides, and carbon monoxide. But it had not been previously recognised they are also important sources of volatile organic compounds and probably dusts.” Many pollutants from the refinery can cause skin and respiratory irritation with low exposure, and with higher exposures could be hazardous and carcinogenic. Alcoa continues to deny any link between their emissions and community health complaints.
An October 2008 WA Department of Environment and Conservation report tracks emissions plumes from the Wagerup refinery to towns where residents have health complaints. A November 2008 WA Department of Health phone study found residents have a “significantly higher likelihood” of reporting symptoms of headache, breathing difficulties, sore or irritated eyes, skin irritation, cough, sore throat, fatigue after sleep and nosebleeds than other West Australians, “potentially related to chemical exposure”. Vince Puccio says residents felt vindicated, “The study proved the causal link is Alcoa. Up until this point Alcoa has been denying the link between the community’s complaints and the refinery.”
Residents criticised the study as weak for failing to acknowledge migration from the area, data on local cancer deaths, and flawed data collection. “But even as a weak study, it still proves Alcoa has impacted on people’s health in the community. We have asthma double that of the state average. Cancer rates are higher and more so in men. There’s a higher cancer rate in Cookernup above the normal state level,” says Vince Puccio.
Alcoa’s take on these reports differs to residents. Executive Director of Human Resources, Environment, Health and Safety Kim Horne says, “We know the refinery has got the world’s best technology, the CSIRO study concludes that the air quality in that area is at the better end of rural [areas]. We’ve got air monitoring data that says sometimes you will get odour because of this strange weather. We’ve got the Health Department report that says people down there have no chronic illness. In fact, they’re pretty much the same as everyone else.”
The emissions sometimes produce a distinctive odour, a term Alcoa has enthusiastically adopted to describe their toxic pollutants. Horne says, “Under some quite rare weather conditions some of the odour from the plant behaves in a strange way and what is called ‘touches down’ so it lands in a particular area for a short period of time and in that time you can smell it, at other times in exactly the same location you wouldn’t smell it at all.” The first recommendation in the 2004 WA Government Inquiry into the Wagerup refinery urged the use of the term “emissions” rather than “odours” to describe Alcoa’s pollution, but Alcoa is staying on message.
While the company holds the line on ‘odours’ and ‘strange weather’, the WA Government forced Alcoa to offer to buy properties in particular zones around the refinery, which, alarmingly, Alcoa then rents to new tenants. Some residents, like John Harris, have refused the buy back offer. “I’ve got five acres and the prices they were offering were fairly low. The thought of getting enough cash to move into a quarter acre block in town really didn’t appeal. I wanted to really replace what I’ve got here, and there was no way I could do it with the money they were offering. I would like to move away really, but I want what I’ve got here replaced… the only option for me is to join the legal action and go through the American courts.”
West Australian Greens member Paul Llewelyn says, “[Alcoa are] saying ‘we don’t pollute, but if you want to leave we’ll buy your property, but we don’t believe we’re polluting anything or causing any damage.’ That’s a contradiction.” He believes the scheme was designed by Alcoa and the West Australia Government to limit Alcoa’s liability to pay compensation for the health impacts of their operations.
Llewelyn says the compensation packages have been flawed. “Alcoa will buy back a property from somebody and on sell it. They have to sign a confidentiality agreement and an agreement they will never bring a complaint against Alcoa. They know the area has been polluted and poisoned by Alcoa, and Alcoa’s tying up people in contracts to prevent any further complaints.”
Llewellyn has seen copies, but Executive Director Kim Horne denies any contract clauses or confidentiality agreements exist: “That’s not true.”
The buy back scheme has divided the community, with some leaving, some remaining, some ineligible and significant differences in the prices offered. Vince Puccio says, “It was an ad hoc policy made on the run, no one can really understand it. There are different formulas for different people. There’s a lot of unhappy people involved in this. I think they expected probably about a dozen people to put their hand; I think they got something like over 200, way beyond what they thought. It’s become a nightmare the way they’ve handled this.”
The property buy back scheme was a condition enforced by the WA Government in approving a huge expansion of the Wagerup refinery – an expansion Alcoa shelved last November.
Kim Horne says, “[It was for] a combination of reasons, most predominantly the current financial situation globally. There’s also the unknown of what the emissions trading scheme will look like and how that would effect our industry. There’s some questions about gas supply which we hadn’t cured yet, so all of those combined has had us delay the project.”
Last December, Alcoa confirmed they had also “curtailed” a long-planned expansion of their Portland aluminium smelter in Victoria, citing concerns around energy security.
Damien Lawson of Friends of the Earth Australia believes, “Alcoa is using the decision to not proceed with those investments, decisions driven by the global financial crisis, as a stick or a form of bribery to leverage the worst possible outcome for the climate in the Carbon Pollution Reduction Scheme.
“Fluctuation in commodity price is far more significant in terms of a company’s bottom line than a carbon price, which is actually very small compared to their overall turnover and profits. The decision not to go ahead with those investments probably has a lot more to do with the availability of credit on an international financial market, caused by the global financial crisis rather than the emissions trading scheme.
“Alcoa are trying to get a silver lining out of their decision not to go ahead with the investments. That must be clear to the Government, but the Government wants still to go down the path of favourable conditions for big polluting industries,” says Lawson.
The silver lining for Alcoa was delivered in the Federal Government’s White Paper, lining up a billion dollars worth of free permits for aluminium companies. Alcoa already receives hundreds of millions of dollars in publicly subsidised electricity and shared infrastructure costs. Greens member Paul Llewellyn says, “It’s extremely difficult to get a hold of the price Alcoa is paying for any of the energy that comes down the line. We know they would be paying a quarter of the price of any other industrial operations, but there’s no published data at all on Alcoa’s energy consumption and the price they pay.”
It is the same story at Alcoa’s Portland aluminium smelter: 30 year contracts to provide huge amounts of brown coal-fired power from some of the dirtiest power stations in the world, heavily subsidised by the State Government. Victorian Greens MP Greg Barber says, “We know Alcoa are getting an extraordinarily cheap price for their electricity, but we don’t know how much they are paying. A carbon price will exacerbate the existing subsidy. It means that Alcoa pay less, and other consumers and the public pay more. It is not a level playing field.”
With years left in lucrative electricity contracts and billions in promised permits in the emissions trading scheme, Alcoa still warns of moving offshore if there is any hint of unwanted regulation. Managing Director Alan Cransberg says, “Obviously the purpose of an emissions trading scheme is to reduce greenhouse emissions. But it would completely defeat the purpose of emissions trading if important industries in Australia were forced offshore. If industry here was not internationally competitive anymore, because of emissions trading, they would then close and the gap in the market would be picked up by overseas operations – including those with lesser environmental standards.
“The emissions would simply move overseas in carbon leakage. Ultimately, this could mean increased greenhouse emissions and worse outcomes for the environment. The problem will just be shifted to another part of the world, and possibly with increased environmental impact,” Cransberg says.
But Senior Lecturer at the University of NSW Institute of Environmental Studies Dr Mark Diesendorf says if Alcoa follows through with their threat to move offshore it might actually reduce global emissions, as the aluminium industry elsewhere in the world uses cleaner sources of power, particularly hydroelectricity.
Damien Lawson believes, “There’s a lot of shadowboxing going on by the aluminium industry: big ambit claims and panic being deliberately driven about so-called ‘carbon leakage’. If you look back through history at other attempts at regulation, industry has done exactly the same thing. With regulation of other types of pollution or increases in corporate taxation, industry constantly played the capital flow card as a way of pressuring governments to water down their proposals. It’s exactly the same thing with climate change.”
Diesendorf says, “It is a clear winner to go with renewable energy, energy efficiency and public transport. There would be no significant loss of jobs. In terms of export revenue, there would be a modest loss if the industry went offshore. If we gave the stimulus to renewable energy, we could be manufacturing wind turbines, expand solar hot water, bioenergy production, energy efficiency measures and public transport. There are huge job opportunities in renewable energy and energy efficiency.”
Julius Roe, National President of the Australian Manufacuturing Workers Union argues, “New green jobs won’t materialise or will only materialise as precarious jobs for our members. With restructuring, the new jobs aren’t created in the same location as the old jobs. The new jobs don’t require the same skills as the old jobs. So those who are displaced are unlikely to be the ones who get the new jobs if you have a free market situation.
“We need a just transition where the Government actually intervenes to ensure new investments are made in the right places and are able to employ the right people. Without such interventions, it will be the same old story.”
“[The AMWU] believe there should be no free permits [in the Carbon Pollution Reduction Scheme], but rather assistance provided to those companies in return for making necessary investments in more environmentally sustainable production, and making sure they do those things in conjunction with their workforce,” says Roe.
In the wake of the climate White Paper and ten months until the important United Nations climate meeting in Copenhagen, Dr Diesendorf challenges governments to call the bluff of the aluminium industry and start serious investment in renewable energy. “Aluminium smelters seem to be a big political symbol for governments. And so, to phase them out, or make them pay for their electricity and pollution, governments would take a beating from the opposition. But if governments had in place a transition strategy to a renewable energy manufacturing industry and a means to transition jobs, they could weather that opposition.”
Jessica Minshall and Holly Creenaune
Australian Student Environment Network