Australia's carbon trading scheme will jeopardize oil refining industry

Australias A$35 billion (US$30.4 billion) petrol-refining industry has warned that the emissions trading regime will jeopardize its long-term future, escalating the business backlash against the Australian government scheme as its costs become clear. The refining industry would be ineligible for compensation for tens of millions of dollars in carbon costs and says this would lead to an investment freeze and could cause some refineries to close. Caltex Chief Executive Des King said that without compensation, some Australian refineries “will close and all will face huge extra costs that will limit any ability for future investment”. ExxonMobil’s Chairman Mark Nolan has warned that his refinery at Altona in Melbourne could be forced to close if it were to receive no compensation for the new carbon price. King said that petrol refining fell well below the government’s proposed emissions threshold for free permits, even though the Australian price was set by fuel imported from countries where refiners did not face a carbon price. His views were backed by Shell Chairman Russell Caplan, who said the government’s plans would make it even harder for Australian refineries to compete with large regional refineries in India and Singapore. Prime Minister Kevin Rudd said the negative business reaction was an anticipated part of the government’s consultations on its green paper, before it produced a final version of its carbon reduction plan at the end of the year. The government has promised to offset the cost of carbon for the emissions created if drivers burn petrol, so that at least for the first three years of its scheme, it will not cause higher prices at the bowser. But it is not promising any compensation for the emissions created by the process of refining. (July 19, 2008)