THE introduction of measures to penalise C0² emitters in the Budget have cast doubt over the long-term future of Northumberland’s largest private sector employer.
The measures, along with changes to European legislation, will cost Lynemouth aluminium makers’ Rio Tinto Alcan an extra £40m a year, wiping out its annual profits.
Bosses at the plant, which employs more than 600 people and contributes more than £100m to the North East economy, have hit out at the measures.
And they are now looking at running the site’s power station on wood rather than coal by the end of next year to avoid the increased penalties.
But they have yet to receive the go-ahead for the proposed conversion from parent company Rio Tinto and have expressed concerns about Lynemouth’s long-term future.
John McCabe, corporate affairs director, at Rio Tinto Alcan, said: “If we do nothing it would be very difficult to see how there could be a long-term future for the plant. We are already a high-cost operation and as such we have an unsustainable long-term future if we don’t change how we operate.
“Almost one third of all our current running costs are the result of legislation. Doing nothing is not an option and the preferred method would be to convert to biomass.”
Chancellor George Osborne announced a Carbon Floor Price (CFP) of £16 per tonne would be set from 2013 rising to £30 a tonne in 2020.
This is designed to encourage energy companies to invest into low-carbon power generation – in particular nuclear.
From 2013 Alcan will also receive fewer carbon credits due to change in the European Emissions Trading Scheme meaning the two additional measures will cost an additional £40m a year.
One measure to cut C0² emissions will be to run the Alcan power station on wood (biomass). Talks with Northumberland County Council to secure planning permission are ongoing and Alcan says it would be able to convert its existing coal-fired power station by 2013.
Using biomass not only cuts C0² emissions but also gives Alcan Government cash support for power production under the Renewable Obligation Certificates’ scheme.
The conversion of the Lynemouth plant biomass will cost £50m and a further £170m a year to run.
Ian Lavery MP for Wansbeck, said: “The carbon floor price will have a devastating impact on large plants like Alcan. We need a firm commitment from Rio Tinto Alcan that it is prepared to invest in the Lynemouth plant. It has been an excellent employer in south east Northumberland for many years and these are worrying times for the workforce and their families.
“I am very much aware of the situation and will be seeking assurances from ministers of measures to lessen or delay the impact of the introduction of the Carbon Price Floor and new European legislation. But it would be made much easier if we were given firm assurances from Rio Tinto that it will invest in Lynemouth.”
The CPF legislation looks set to effect many of the region’s larger industrial producers.
Karl-Ulrich Köhler, MD & CEO of Tata Steel’s European operations, which employs more than 1,000 people on Teesside, said: “The introduction of the Carbon Floor Price represents a potentially severe blow to the sustainability of UK steelmaking.
“The CFP proposal will impose additional unilateral emission costs specifically on the UK steel industry by seeking to artificially ensure that these costs cannot fall below Government-set targets which no other European country will enforce.
“This is an exceptionally unhelpful and potentially damaging measure.”
Page 3 - MP warns of risk of two speed britain >>
MP warns of risk of two speed britain
THE spectre of a “two-speed” Britain with the North East lagging behind the South East has been raised by a Labour MP.
North Durham’s Kevan Jones issued the warning in response to Chancellor George Osborne’s Budget on Wednesday.
Mr Osborne claimed that his plans would help economic growth in every part of the country, with a package of measures including a cut in corporation tax designed to help private companies create jobs.
But Mr Jones warned of the potentially dire impact of cuts, with a contraction of public sector jobs in areas like the North East having a direct impact on the private sector.
“Trying to attract business and growth to those areas will be very difficult, and I fear that we could have a two-speed Britain.
“A reasonably prosperous South East of England, but stagnant or even declining regions, such as the North East and Northern Ireland,” said the Labour MP in the Commons.
Berwick Liberal Democrat MP Sir Alan Beith hit back, saying: “Even with Labour’s slower rate of deficit reduction, he could not have avoided a significant decrease in the number of public sector jobs to meet his party’s own projections of how it would reduce the deficit.”
Mr Jones accused Sir Alan of giving “succour” to the proposals that he claimed could “damage the North East economy more severely than even those in Thatcher’s day.”