Rio Tinto warns Ottawa over reductions in emissions

Rio Tinto warns Ottawa over reductions in emissions

25th October 2007

by Andy Hoffman, Toronto Globe and Mail

Rio Tinto Alcan, the world's largest aluminum producer, warned Thursday it would consider moving production offshore if Ottawa opts to impose absolute reductions on greenhouse gas emissions.

At an event marking the birth of the new company created by Rio Tinto PLC's $38.1-billion (U.S.) takeover of Montreal's Alcan Inc. , Dick Evans said regulations mandating overall emissions could have a devastating impact on its Canadian operations.

“If you look at absolute reductions as a solution, the likely consequence is that you will drive the growth of aluminum production offshore potentially to other jurisdictions that do not have the same environmental standards and do not have the same commitments to greenhouse gas reduction. Therefore the unintended consequences of ill-conceived legislation or controls could very well be to worsen the situation rather than improve,” said Mr. Evans, the former Alcan chief executive officer who has been tapped to run the new unit of the British mining heavyweight.

The current Conservative minority government favours a so-called intensity-based carbon regime, whereby companies are allowed to increase emissions as production rises. Opposition parties, however, have recommended moving to an “absolute” regime, with harder emission limits.

Rio Tinto

The executive favours reducing emissions on an “intensity” basis – measured by carbon emissions per unit of aluminum produced – rather than a cut in the overall amount of greenhouse gases produced.

In 2006, Alcan's worldwide operations emitted 20 million tonnes of greenhouse gases directly from its smelters and a further 11.6 million tonnes from other sources. A total of 4.3 million tonnes of the emissions came from its wholly-owned Canadian operations. The company has committed to a 10-per-cent overall reduction in the intensity of its emissions on a per unit basis by 2010.

Demand for aluminum used in vehicles, electricity transmission and building supplies is on the rise, said Mr. Evans, the Rio Tinto Alcan CEO. Alcan's new smelting technology dubbed “AP” is currently the most environmentally friendly way to produce the metal.

Last year, the company committed almost $600-million towards a pilot project using state-of-the-art AP50 smelting technology in the Saguenay Lac Saint-Jean region in Quebec. Run on hydroelectric power operations owned by Alcan, the new smelter promises to produce more aluminum with less electricity than traditional smelters. The company also wants to modernize its Kitimat operations in Northern B.C. with AP technology that would reduce emissions from 1.3 million tonnes to 800,000 tonnes, but the plan has been stymied so far by regulatory delays and local opposition.

“Our track record in reducing green house emissions on an intensity basis is outstanding … So having the most efficient greenhouse-gas-emitting smelters worldwide is the best impact for the world,” he said.

Some leaders, including many provincial premiers such as Ontario's Dalton McGuinty and Quebec's Jean Charest, have called for a so-called “cap-and-trade” system. If adopted, the measure would see hard limits placed on the amount of greenhouse gas individual polluters could emit.

Companies that exceed the limits would pay a fee to those that come in under their limits – essentially trading cash for credits earned by their competitors.

Rio Tinto CEO Tom Albanese said he strongly supports Mr. Evans's call for intensity reductions rather than hard caps on emissions.

“The fact of the matter is you have two billion people between China, India and the rest of the world that want to live just like you do. They want to have an urbanized middle-class life. They want to have access to broadband, they want to have access to cellular phones, they want to have access to things that use aluminum. That demand is going to be met by supply.

“We are better positioned to try and match that supply with leading practices as opposed to someone who may not be so sensitized to that carbon envelope,” he said.