In that post I argued that New Zealand Aluminium Smelters Limited, the operator of the Tiwai Point aluminium smelter, was being 'over-allocated' emission units under the New Zealand Emissions Trading Scheme. That the company was being given more free carbon credits than the carbon credits it was required to surrender for it's emissions. And therefore the company was not 'facing a carbon price' under the emissions trading scheme, but being subsidised.
The company was given an industrial allocation of 210,421 units for the six months from 1 July to 31 December 2010. I estimated that the smelter company was required to surrender between 143,000 and 172,000 emissions units for the six months to 31 December 2010. Therefore the estimated degree of over-allocation of units was between 120% and 147%.
In that post, I responded to feedback that the method of calculating the free allocation of units to emitting industries included extra units for the extra costs of generating electricity from fossil fuels under the emissions trading scheme. That was in addition to the stated aim of free allocation meeting 90% of a "trade exposed" emitter's direct emissions.
Let's just be very clear that this is conceptually a departure from the classic 'cap and trade' model of emissions trading. In strict cap and trade with a real cap on emissions, and with 'grand-parented' free allocation of the capped units to emitters, the energy companies would be allocated the energy sector's share of the cap. If an allocation process adds extra units for industries because of indirect or 'up-stream' carbon-intensive energy costs, then those industries are receiving an allocation that would have gone to the energy companies in the classic model.
I argued that it was a nonsense to for the free allocation of units to a smelter to include a compensation factor for upstream carbon-intensive electricity costs, when that smelter owed it's existence to a dedicated source of hydroelectric electricity generation from Lake Manapōuri.
Then on 2 November 2011, there was Nick Smith fails the smelter spin test.
On 23 April 2012 I reported that Helter smelter: NZ Aluminium Smelters wins the 2011 Roger Award.
On 9 September 2012, I wrote Power to the smelter? Rio Tinto Alcan NZ Ltd wants to pay less for electricity for the Tiwai Point aluminium smelter.
11 September 2012 Hot Topic Rio Tinto Alcan NZ plays godfather: nice aluminium smelter you got, be a shame if something happened to it