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Emissions trading and reducing carbon pollution

CHAIR —Welcome to the inquiry. I invite you to make opening statement, and then we will move to questions.

Ms Lyons —Thank you for the opportunity. As an opening statement, we will re-emphasise points made in the written submission Alcoa provided to the committee on 8 April. Alcoa undertakes several emissions-intensive trade-exposed activities in Australia through operation of Australia’s largest integrated aluminium business. This network includes two bauxite mines, three alumina refineries and two ship-loading facilities in Western Australia; two aluminium smelters, a rolling mill, port facilities, a power station and a mine in Victoria; and a rolling mill and Australia’s largest aluminium recycling plant in New South Wales. Alcoa has been investing in Australia for over 40 years, and the replacement value of this capital is in excess of $20 billion. Alcoa’s Australian operations directly employ over 6,000 people and a further 1,500 full-time contractors, many in regional areas such as Geelong, Portland and south-west Western Australia. These facilities are vital parts of many local communities.

In recognising the importance of responding to climate change, Alcoa accepts that economic instruments such as emissions trading have a valid role to play in this response, provided it is done in a way that addresses the environmental challenge while strengthening the Australian economy and preserving the jobs and social benefits that spring from Australian export industries. Alcoa supports the introduction of a carbon price signal in Australia.

Fundamental to delivering this balanced outcome is a need to ensure that the international competitiveness of Australian industries is preserved such that jobs and carbon are not simply exported to lower cost centres in other countries. This risk arises because the prices companies like Alcoa receive for their exports are determined by the international marketplace and additional costs experienced in Australia cannot simply be passed on to customers. In economic terms, Alcoa is a price taker.

Mr McAuliffe —Most of the countries that are home to aluminium producers have not yet adopted carbon pricing, and those that have, such as the European Union, have implemented schemes that impose significantly less cost than the current Australian proposal. This establishes a real international competitiveness risk that may erode the value and viability of Alcoa’s Australian facilities. Alcoa’s competitors are located in places such as China, India, South Africa, the Middle East, Brazil, Europe, Russia, Canada, Jamaica, Guinea and the USA.

In relation to the CPRS, Alcoa believes there are a number of key changes that need to be made to its design to ensure it does not lead to carbon and jobs leakage from the Australian aluminium industry. In summary, the minimum changes that Alcoa believes to be necessary are as follows. Firstly, Australian EITE industries should receive a permit allocation equivalent to at least 90 per cent of their emission obligations. This would include refining, smelting and aluminium rolling businesses here in Australia. Secondly, critical issues associated with the calculation of the proposed electricity allocation factor must be rectified to avoid unsustainable impacts on the Victorian aluminium smelters and their local communities. Thirdly, we believe erosion of EITE permits should not occur before international competitors are subject to comparable carbon pricing. Furthermore, our aluminium rolling business is attempting to navigate its way through the value-add EITE assessment process, which has proven to be quite challenging. The definition for value-add is based on revenue minus the five highest costs. However, labour and maintenance, despite being our second and third highest costs, cannot be subtracted under the rules set by the department. This means our value-add number is then inflated, reducing the likelihood of qualifying for EITE status. We have suggested a couple of solutions to this problem, including using the Australian Bureau of Statistics calculations of value-add or using conversion revenue rather than just straight revenue.

The following will give you a feel for the overall potential impact of the CPRS on our businesses in Australia. If the CPRS was implemented as presented in the white paper, it would cost Alcoa’s Australian operations something around $100 million in the first year of operation and would increase every year thereafter. The initial cost comprises the permit gap left after partial EITE allocation, cost paths through from upstream inputs such as domestic gas and substantial impact from what Alcoa believes is a poorly designed electricity allocation factor. These costs would naturally impact on international competitiveness. For example, work done by the Australian Aluminium Council shows that a white paper based CPRS may move individual facilities from second or third quartile positions on the international cost curve to third or fourth quartile positions. That would put some facilities on a path to closure. Even after the change Alcoa has called for, the CPRS would still impose significant additional costs on our business. In year 1 Alcoa would still experience a cost increase approaching $50 million. This represents a significant financial incentive to continue to reduce the company’s carbon footprint.

In calling for changes to the CPRS Alcoa well recognises there is a need to respond to climate change and has not shirked this challenge. The following examples illustrate Alcoa’s willingness to take voluntary action in relation to climate change, and I will make four points. First, globally Alcoa set an ambitious target to reduce its 1990 direct greenhouse gas emissions by 25 per cent by 2010. This target was reached in 2003, and we are now operating at around a third below the 1990 benchmark.

Senator BOSWELL —How much did that cost?

Mr McAuliffe —I have not got a figure globally. I can give a feel for some of it. My second point is that in Australia our aluminium smelters have reduced direct greenhouse emissions per tonne of product by 61 per cent since 1990, primarily through reduction of PFC emissions driven by environmental priorities. Third, Alcoa’s Australian alumina refinery is amongst the most efficient in the world, and we have still been able to reduce greenhouse gas emissions per tonne of product by 12 per cent since 1990. Our aluminium rolling businesses have reduced direct emissions by 21 per cent since 1990. Alcoa has made good progress in responding to climate change and intends to continue to do so. Alcoa supports well-designed emissions trading as part of a global response and asks the parliament to ensure that ETS design in Australia still encourages future investment in the Australian alumina and aluminium business.

Senator BOSWELL —Those reductions are very commendable. How much have you spent all up on the Australian reduction scheme?

Mr McAuliffe —It is very substantial. I have not got a total figure, but I can give you a good example in terms of energy efficiency in our Western Australia refineries. We have been able, in a joint venture with Alinta, to install cogeneration facilities that have increased the energy efficiency on site from somewhere between 35 and 50 per cent up to 75 per cent. Those investments alone are $500 million to $600 million. On top of that there are investments in smelters and other initiatives at the refineries. So very substantial sums.

Senator BOSWELL —Where is RET at the moment? Are you paying it? Are you in or are you out? Based on yesterday.

Mr McAuliffe —Based on yesterday we estimate that the RET would cost our Victorian smelters around $25 million to $26 million in 2020.

Senator BOSWELL —I am finding it hard to follow this debate. I understood that the Prime Minister said that EITE industries would be exempt from RET. Am I correct?

Mr McAuliffe —Our interpretation of yesterday’s decision is that the smelters would still be exposed to the existing MRET, the mandatory renewable energy target, but would receive, assuming they get 90 per cent EITE status, which they are confident they will, 90 per cent exemption from the expanded RET, the new scheme. So we would still have to pay exposure for the first one and partial exposure for the second.

Senator BOSWELL —I do not understand that.

Mr McAuliffe —There are two schemes. There is the existing mandatory renewable energy target, the MRET. Our understanding is that yesterday’s decision did not give any exemption in relation to that.

Senator IAN MACDONALD —What percentage is that, just to remind us?

CHAIR —It is 9½ thousand gigawatt hours by 2010.

Senator BOSWELL —It is 10 per cent, isn’t it?

CHAIR —It was a notional 2 per cent at the time. It was 9½ thousand gigawatt hours by 2010.

Senator IAN MACDONALD —It is a notional 2½ per cent, just to put it in perspective.

Senator BOSWELL —So you are paying that. What is the increase? You are going to get 90 per cent of the increase.

Mr McAuliffe —That is right. The other one is the 45,000 gigawatt hours of the expanded RET. So, assuming we qualify for 90 per cent, we would receive a 90 per cent exemption from that component. So that would leave us around $4½ million or $5 million cost at a shortfall charge of $65, which was also increased yesterday, so we would have around $4 million to $5 million cost associated with the expanded RET and approaching $20 million cost for the MRET.

CHAIR —I just want to get another detail. Is there a decay factor that goes along with the changes to the RET that follows the—

Mr McAuliffe —The expanded RET actually has an increasing amount building up to 2020. Does the 90 per cent decay in the way that EITE allocations have proposed? My understanding is no, but we have only had a chance to briefly look at it.

CHAIR —But the 90 per cent continues to rise as 90 per cent of the annual allocation on an annual basis?

Mr McAuliffe —It stays at 90 per cent.

Senator BOSWELL —If you were carved out of the RET, does that mean the 20 per cent gets passed back to the people that are not carved out?

Mr McAuliffe —No, it should not. In the submission that we made to the government in relation to the expanded RET we said that, in our opinion, those facilities that are provided with exemptions should be removed from the total pool.

Senator BOSWELL —So the target comes down off 20 per cent?

Mr McAuliffe —That is our view.

Senator BOSWELL —I know it might be your view, but what is the government’s?

Mr McAuliffe —I am not aware of that detail at the moment.

Senator BOSWELL —The RET is important and I understand the government is going to put the legislation in in the next couple of weeks. I would have thought the wise thing to do would be to leave it until after the ETS went through, or did not go through, and then build your case on that.

We have listened to many heavy industry people, so I will ask you some of the questions that I have asked them. Your competitors are carved out of emission trading. Do you face any competitors internationally, competitors that are going to have emissions trading placed upon them?

Mr McAuliffe —Some of our competitors are located in Europe, so they obviously already have a scheme, but the costs that they would experience would be significantly less than the costs that we would experience here in Australia if the white paper were implemented. There has been an analysis done by the Minerals Council of Australia. I assume they have provided a submission to you that goes through that and that compares the costs of the European scheme to the CPRS. They would be significantly higher if the white paper were implemented.

Senator BOSWELL —What is the EPS going to do to your power bill?

Mr McAuliffe —It would very significantly increase it.

Senator BOSWELL —If it is not in confidence, how much power would an organisation like yours use?

Mr McAuliffe —The price that any of the producers pay for power is commercial-in-confidence, but I can tell you the amount that we use. For example, in Victoria, our two smelters consume about 8½ million megawatt hours a year. They are very significant consumers of electricity. That means that increases in the cost of power have an enormous potential impact on the viability of those smelters. That is why we have a concern about the electricity allocation factor. The CPRS white paper recognised the importance of indirect emissions or power and it proposed to provide up to 90 per cent initial assistance for the CPRS driven price uplift. Unfortunately, the way that the electricity allocation factor is proposed in the white paper it would deliver to the Victorian smelters significantly less than that—around 74 per cent initial assistance. That would increase the cost of the carbon signal to us in Victoria by $45 million more than it should.

I know it is a complicated matter, but let me put it to you this way: electricity allocation factor assumes that you will be able to purchase power at a carbon intensity of one tonne per megawatt hour. In Victoria, it is typically between 1.25 and 1.6. We believe, with considerable confidence, that the best we would achieve in the marketplace for a long-term contract is 1.22 to 1.25. That little calculation in the electricity factor could cost us an enormous amount of money in Victoria, which then impacts on the smelter’s viability. It is discussed in our submission and we are happy to provide calculations on that, if you wish.

Senator HEFFERNAN —If the contribution that electricity makes to your carbon footprint were generated from power that has no emissions, what would that do to your footprint?

Mr McAuliffe —It would be very good. If it were possible, it would reduce it enormously. I will give you an example: in Victoria, the two smelters that we operate were responsible last year for about 1.1 million tonnes of CO2 as a direct emission—CO2 equivalents—whereas the power we purchased gave rise to more than 10 times that—10 million tonnes.

Senator HEFFERNAN —This committee is getting sick of me saying this, but the MBD company that has actually signed a memorandum of agreement with Loy Yang power station, Eraring power station and Tarong power station in Queensland is commercialising up technology with that algae which converts to biodiesel and feedstock, and which will give zero emissions from those coal-fired power stations. If there were prudence in the system would there not be a possibility that technology could overcome all these problems?

Mr McAuliffe —We are very interested in that sort of technology. We are interested in technology around coal drying. We have made some investments in those areas. I think what you have just described there is probably a very similar scheme to what we are looking at in Western Australia around algae for the capture of CO2. We are very interested in all of those. The amount of power that we use in Victoria is a very large amount at 8½ million megawatt hours.

Senator HEFFERNAN —I think that earlier Alcoa said to me it could reduce your impost—the tax side of it—by 60 per cent if the power had no emissions?

Mr McAuliffe —No, I am not sure that I made that comment. But power is a very significant contributor to the overall emission profile that we have.

Senator BOSWELL —We had the cement industry in yesterday. They told us that a lot of their investment is being hung up—they are not going ahead, and holding off on reinvesting. Is the aluminium industry in the same situation?

Mr McAuliffe —Yes, it is—perhaps to a different extent, but you have representatives of the Australian Aluminium Council appearing later today and they will be able to give you examples across the industry. From our perspective, we have a couple of projects that are currently on hold until we are able to resolve power contracts going forward for Victoria. One of the contributions in terms of those power contracts and how they will look in the future is the CPRS, so it is potentially a very significant cost. That is why we would like to see it resolved.

Senator BOSWELL —You may have answered this, but I have got it written down here—how does your performance benchmark against your competitors? Where are your major competitors? China?

Mr McAuliffe —Spread around the world: China, India, South Africa, the Middle East, Brazil, Europe, Russia—

Senator BOSWELL —Let us take China, and the worst case scenarios and the best case scenarios.

Mr McAuliffe —I will give you two examples. In terms of alumina refining, we refine alumina at three facilities in Western Australia. They are at the leading edge of efficiency and environmental performance. I will give you a simple example: we produce alumina out of Western Australia at about 0.57 tonnes of CO2 per tonne of alumina. Some of the Chinese refineries produce alumina at 1.4 to 1.8 tonnes, so we are conservatively less than half the footprint. They are very, very efficient facilities in WA, and I can explain to you why they are so efficient.

In Victoria, our smelters—as I said before—have roughly 10 times the emissions profile due to power compared to their own direct emissions. So, like all Victorians, we rely on coal-fired power and are comparable to other facilities that rely on coal. They are more emissions-intensive than, say, the last smelter that Alcoa built in Iceland, which was on hydropower. They are constrained significantly by their reliance on coal.

Senator BOSWELL —What about the worst performances, such as China?

Mr McAuliffe —They vary. Some of those other smelters would have significantly more direct emissions, but their indirect emissions associated with power would depend on their fuel source and, if they are on coal, they will be similar to what I have described or worse.

Senator BOSWELL —What about their indirect—

Mr McAuliffe —It depends on their power source. If they are on coal then they will be as high as or higher than the ones I have described in Victoria.

Senator BOSWELL —Your plant in Victoria does not perform any better or any worse than the Chinese plants?

Mr McAuliffe —It does in terms of direct emissions.

Senator BOSWELL —That is what I am asking.

Mr McAuliffe —Certainly, in terms of direct emissions they are efficient. Those reductions that I mentioned in the opening statement are because of the investment we have made to reduce their direct emissions. They are very efficient in that regard.

Senator BOSWELL —We will have to pass some legislation under the CPRS, and we do not know what is in it. It will all be confirmed by regulation. Does this make you feel comfortable?

Mr McAuliffe —We have said in submissions to the government that it is impossible to assess the full potential impacts of the CPRS until we see the detail in the regs. Obviously, we have been able to make assessments based on the white paper. Having said that, I say there are still some unresolved matters. I am sure the committee is aware that most industries are currently going through the definition process, so I cannot tell you exactly what our permit gap would be until those definitions are resolved.

Senator HEFFERNAN —I do not think the government can, either.

Senator BOSWELL —It is not your problem; it is our problem. I do not know how we are expected to assess legislation when we do not know what is in it.

Senator PRATT —I understand the need for your industry to have certainty. You have very long-lived assets and, as a result, you have been tackling climate change and reducing your emissions profile since the 1990s, as I understand it. I want to talk to you about the need for certainty, going into the future. If we fail to get consensus in the parliament, we will end up with no scheme and a looming carbon liability that we are not quite sure what to do with. I want to talk to you about two scenarios: one is getting the detail in the current scheme right versus a delayed reaction—and we do not yet know if the whole world will delay it or get on with it—and the other scenario looming ahead of us could be a collective lack of action around the globe and a need for very severe carbon cuts at a much greater accelerated rate. I want to talk to you about the best prospect versus the worst prospect for managing this issue.

Mr McAuliffe —We have said in our submission and we have also tried to convey it in our opening statement that we would prefer to see this scheme start in Australia. We are actively lobbying in America for the past administration and the present one to adopt a cap-and-trade scheme. That is our position. Having said that, I say it needs to be good policy. We are supportive of it, provided that the design still encourages investment and export industries in Australia. Getting the detail right is more important than starting soon. That is the balance that we hope the parliament will be able to achieve. We would encourage parliament to make some amendments to the CPRS so that we can start the process, but start it in a way that does not penalise Australian industries beyond what they can live with. That is our position. Not all industries are in the same position, but that is our position. We hope that the existing scheme can be modified, similar to what we have described in our opening statement so that it commences but it does it in a reasonable way.

Senator PRATT —What is your judgement about that other, more catastrophic risk, that if we do not do enough to manage emissions now, globally and collectively, we will have to close down big emitters in a rush to try to find a way of managing that problem?

Mr McAuliffe —It is up to others to talk about what is an appropriate global target and so on. We simply defer to the consensus via the IPCC. They are far more qualified to comment on it than we are.

Senator PRATT —But one of the issues that have come out in the Treasury modelling is ‘act early and we will save’ versus ‘if we act too late, we’ll need to make much bigger cuts and it’ll cost more’. What is Alcoa’s position on that question?

Mr McAuliffe —Acting early is desirable.

Senator PRATT —You have been doing that for a while already.

Mr McAuliffe —That is right. However, it would not in our view be sensible for Australia to take a very aggressive approach ahead of our competitors. All that that would do is drive investment and jobs offshore.

Senator PRATT —In relation to your competitors, you have responded positively in relation to America putting an agreement in place. Which are the key countries that we need to lock in to a global agreement to mitigate that? I imagine it is China and other parts of Asia. The European Union has a scheme up and running already. Clearly, it might not have the same liabilities, but once we start to get into a well-developed carbon trading scheme we can probably level those things out. But the real question is what—bringing Asia online?

Mr McAuliffe —Pretty much. There are two ways of looking at that. In terms of emissions, you are well aware that the role that America and China play in emissions. They are dominant. The other way to look at it is in terms of competition. I will give you a bit of the feel of it. In terms of aluminium, in 2008 these are the sorts of numbers our competitors ran: China was at about 32 per cent; other parts of Asia, including India, were at 10 per cent; Russia was at 10 per cent; Europe was at 12 or 13 per cent; and the USA was at six or seven per cent. Australasia was at five per cent, so we are a relatively small player in terms of that overall market. If we move ahead of our competitors then quite clearly we will end up suffering.

Senator PRATT —Lastly, as I understand it, one of the issues at play at the moment is electricity contracts, and those costs being passed on to Alcoa. You are claiming that you are going to have to bear those costs, but government cannot see behind your contracts to see whether that claim is true. How can you prove that you are a weaker party in those negotiations? Because you are such a big buyer of power, I would have thought you were in a pretty powerful negotiating position.

Mr McAuliffe —It is a complex issue, but let me say this: the capital intensity of the smelters requires them to operate on long-term power contracts—20 to 30 years—so some of the assumptions in the modelling that was done for Treasury work for a spot market. but not for a long-term contract. The power producers in Victoria will not carry the carbon risk for a long-term contract. They cannot do so because of their financing arrangements. That means that, when you are in the market for those sorts of contracts, you will experience full carbon cost pass-through. If you are in Victoria that means you will pay based on an intensity of around 1.25 to 1.5. How do we resolve this? We have made several suggestions to the department and to government. We think it is very easily solved. The white paper has a provision in it called ‘the very large electricity user clause’. That was put in place because of this issue. It says that the regulator can choose to vary the electricity allocation factor based on the contracts. If they see a full carbon cost pass-through, they can vary it. That is for existing contracts. We understand the department’s reluctance in terms of new contracts because they want to ensure there is an incentive for minimising the carbon footprint.

We have done a couple of things. In our submission we have said it would be quite appropriate for us to make all of that information available to the regulator—some of it would be highly confidential, but that is nothing unusual for government—so that the regulator would be able to satisfy themselves that we have done everything we can do to get a lower intensity power source and, secondly, that it was not practicable to get a lower intensity in the case of Victoria. We would be willing to share as much information as we can to give the regulator confidence.

We are also in the process of having independent consultants look at this issue. We are probably only a couple of weeks away from being able to provide the department and the government with a third-party expert view on whether or not there are alternative options. We are pretty confident that they will come up with a similar thing to what we have come up with because we have tried very hard to get a lower carbon intensity power source in Victoria. As I hope we demonstrated earlier, we are pretty committed to reducing our emissions profile anyway. So we will keep doing it.

Senator IAN MACDONALD —Thanks for your submission, and we have heard from Rio. You mentioned what emissions you have in Western Australia, 0.57 tonnes of CO2 per tonne, as opposed to China, 1.4 to 1.8. Is that anywhere in your submission, and do you have the same statistics for other competitor countries anywhere?

Mr McAuliffe —It is not in the submission to this inquiry but it is in our submission to the green paper, which is public. We could provide you a table of that. It varies around the world and it varies depending on the power source, the vintage of the facility and the technology that is being applied. In the Western Australian alumina refineries that Alcoa runs (a) we are able to do it on gas (b) we have co-generation in place not at all but at some and (c) they are relatively modern facilities which we have kept modern—we continually reinvest in them. Those things keep them at the leading edge of that efficiency.

Senator IAN MACDONALD —Do you have the figure for your Victorian one?

Mr McAuliffe —It is about 1.1 million tonnes direct. The majority, 10 to 10½ million tonnes, is based on the power station. So it will vary on power source.

Senator IAN MACDONALD —But what is it?

Mr McAuliffe —Per megawatt hour or per tonne of product?

Senator IAN MACDONALD —Compared to the 1.4 in China, what is it?

Mr McAuliffe —It is a different product. It is aluminium as opposed to alumina, so it is a completely different comparison.

Senator IAN MACDONALD —But it would be higher there.

Mr McAuliffe —Yes. It is higher because it relies on coal fired power.

Senator IAN MACDONALD —Isn’t Victoria’s brown coal—and as a Queenslander from a black coal state this stuck in my mind—being given a bit more favourable treatment than black coal, or have I got that wrong?

Mr McAuliffe —You are talking about a different part of the scheme. You are talking about the assistance to strongly affected industries such as the coal sector.

Senator IAN MACDONALD —Yes, but it would flow through to your power source, wouldn’t it?

Mr McAuliffe —Not necessarily. What will flow through to us is what is passed through in the contract. What they will pass through is the intensity that they have to pay at. If we had a contract with a power station that is operating at 1.5 tonnes of CO2 per megawatt hour, it will have to deliver permits based on that 1.5, and that cost will be passed straight on to us.

Senator IAN MACDONALD —What is the benefit they are getting over the black coal? Is that just a straight subsidy or something?

Mr McAuliffe —That is in relation to assistance to power providers. That is not something I am fully across.

Senator IAN MACDONALD —They will not pass that on to you?

Senator PRATT —That is the infrastructure transition payment, isn’t it?

Mr McAuliffe —Yes, I suspect that is what the senator is referring to. That is the part of the scheme that is about providing assistance for the loss of capital asset value within the coal fired power station. The more important part of that question from our point of view is: will we benefit from that? We will not benefit from that because the power provider will pass on their full carbon cost to us.

Senator IAN MACDONALD —Again correct me if I am wrong, but do you have an interest in a plant somewhere in the Middle East—Bahrain, is it? Do you supply the bauxite to them?

Mr McAuliffe —We export alumina to the Middle East out of our Western Australian refineries.

Senator IAN MACDONALD —And they then process that into aluminium at—whereabouts is the plant?

Mr McAuliffe —Sorry, I do not know. I cannot tell you off the top of my head.

Senator IAN MACDONALD —Then you will not be able to tell me how that plant, which is fairly new as I recall, compares.

Mr McAuliffe —Some of that would be in the public domain. It may be fuel oil that you are looking at, which can be quite emission intensive.

Senator BOSWELL —In response to a Labor senator you said you wanted amendments. Have you ever heard the expression ‘turning a silk purse into a sow’s ear’? We are going to have to turn a sow’s ear into a silk purse if this is to go through with amendments. I just give you a bit of a warning: do not be too gung-ho, because if you start trying to amend things in the Senate you will end up with so many unintended consequences that no-one will know who’s who in the zoo.

CHAIR —I am not sure that is a question!

Senator BOSWELL —It is not a question; it is a statement. I know your head office establishes policy, but I am just giving you a warning.

CHAIR —Thanks, Senator Boswell. I am sure they are suitably warned! I will just ask about some of your investments in other carbon mitigation processes. I understand you have had some investment in a carbon biochar project—

Mr McAuliffe —Alumina Ltd has an investment in biochar.

CHAIR —Okay. So it is not you?

Mr McAuliffe —No. We look at biochar and a few other potential carbon sequestration projects. We are interested in them, of course. Alcoa or Alcoa Australia has invested, for example, a significant sum of money in a process called carbon capture, or carbonation, of residue. We produce large volumes of residue after we are able to extract the alumina from bauxite. We have developed a process that the research and development facility at Kwinana that locks up CO2 in bauxite residue. We are quite proud of that. That is something we want to see implemented globally as well. So we are able to sequester CO2 in WA.

CHAIR —Could you give us the rough sense of your R&D investment in carbon reduction, and what your actual investment in carbon reduction has been, say, over the last 10 years?

Mr McAuliffe —I do not have the figure with me. I can give you some examples. To develop that carbon capture process up to the point where we have got running just at the Kwinana facility was in excess of $10 million. The investments that have been made by us in Alinta in co-generation, as I said before, are probably north of $500 million. We have currently invested, or committed to invest, over $70 million in trying to develop up some new gas fields because of gas’s importance as a transitional fuel and also its benefits in terms of energy efficiency. They are just some examples.

CHAIR —Okay. You do not have a sense of what your annual R&D on that might be?

Mr McAuliffe —I do not have that with me. We can provide that.

CHAIR —Please provide us with that on notice.

Mr McAuliffe —I am sure some of it has been published in past sustainability reports. We will take that on notice, Senator.

CHAIR —Okay. Thanks very much. I think that clears us off, so thanks very much for being here this morning. We appreciate your evidence and your submission. Thanks for your contribution today.

Mr McAuliffe —You are very welcome.

[11.07 am]