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Why are we paying out to billionaires?

The government is forking out hundreds of millions to help NZ Steel deliver the country’s largest emissions reduction project to date – one that will result in half of the coal used at Glenbrook Steel to recycle scrap steel being replaced with electricity.

Prime Minister Chris Hipkins made the announcement on Sunday alongside Energy and Resources Minister Megan Woods and Climate Change Minister James Shaw at the Glenbrook steel factory in South Auckland.

Woods said the government will help co-fund an electric arc furnace at Glenbrook to replace the existing steelmaking furnace and two of the four coal-fueled kilns.

She said the new electric arc furnace will cut the factory’s emissions by more than 45 per cent and produce 100 per cent of its annual steel production as lower carbon steel.

Woods said the deal will help the company reduce 800,000 tonnes of climate pollution from its Glenbrook mill each year.

“That’s the equivalent of taking approximately 300,000 cars, or all the cars in Christchurch, off the road.”

Hipkins, meanwhile, said the project demonstrates how serious the government is about reducing New Zealand’s emissions as fast as possible.

“This project dwarfs anything we have done to date. Alone, it will eliminate one per cent of the country’s total annual emissions.

“The plan means New Zealand businesses will have access to locally produced, cleaner steel, and high-value jobs are protected that otherwise might have gone offshore.”

There is no doubt that action is needed urgently to mitigate climate change – or soften the blow at least.

And no question, this is an undertaking with a massive upside but it doesn’t seem to be something the government needs to write a cheque for.

However, it should be noted that the deal is set to cost the government $140 million, while NZ Steel recorded profits of close to $3 billion last year.

Without knowing the details of the deal’s ins and outs, it could be assumed that a company making such a gigantic profit could pay for the upgrade themselves.

If the Emissions Trading Scheme were operating the way it should, the high-emitting company would have been incentivised to make these changes on their own accord to avoid a large bill for their emissions.

The $140 million used to fund this project could have been allocated to smaller companies that may not be able to afford to have high-tech upgrades – but it seems that the government’s desire to be associated with a positive climate-related headline trumped such considerations.

Shaw argued the deal will save the government and the nation money in the long term: “The lifetime abatement cost is forecast at $16.20 per tonne. Current carbon prices are around $55 per tonne.”

Shaw said the deal is estimated to contribute 5.3 per cent of the emissions reductions needed under New Zealand’s second emissions budget for 2026 to 2030, and 3.4 per cent within the third emissions budget for 2031 to 2035.

While it’s impossible to fault the concept of reducing the emissions of a steel plant, it does call into question the effectiveness of a system that’s supposed to penalise similar companies and force them to change their practices.

Grace Prior
Grace Prior
Grace Prior is a senior reporter at the Wairarapa Times-Age with a keen interest in environmental issues. Grace is the paper’s health reporter and regularly covers the rural sector, weather, Greater Wellington Regional Council, and coastal stories.

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