Emissions trading and uranium: a blessing or a curse? - Part Two

Suzanne Dickey*

While the uranium mining and milling process does not involve the high emissions associated with coal mining, there are still significant amounts of emissions attributable to uranium extraction and processing.
Greenhouse gas emissions are mainly derived from diesel-powered equipment used to excavate the uranium-bearing rock and from generation of electrical energy at the mine site. Drilling, blasting, excavating, separating and transporting uranium all involve GHG emissions.
Available data from existing uranium operations indicates that uranium production will be affected by a price on carbon. The Ranger uranium mine in the Northern Territory reported CO2-e emissions of 79,000 tonnes in 2005, sufficient to trigger obligations to report and participate in the CPRS.
Under the CPRS if Ranger has similar emissions in 2010-2011, it will be required to obtain 79,000 Australian emissions units. The price of these emissions units is unknown now but the CPRS proposes a cap of $40 per tonne for the first year.
Even if the price of permits is only half the cap, $20 per tonne, it will still cost the Ranger mine $1,580,000 to obtain sufficient permits. That cost will affect the price of Australian uranium.
The CPRS will provide assistance to certain industries affected by the Scheme. Emissions-intensive, trade-exposed industries will receive assistance, in the form of free permits, to reduce the risk of carbon leakage (movement of an industry and its associated carbon to another country that does not impose a limit on carbon emissions) and to help them transition to a low carbon economy.
The legislation also proposes assistance, in the form of free permits, to the coal industry.  Assistance will be targeted to the most emissions-intensive generators and limited to existing coal-fired generators for the first five years of the scheme.
In February 2009 the Department of Climate Change issued a guidance paper for the assessment of activities for the purposes of the emissions-intensive trade-exposed assistance program.
The Government will determine, based on the assessment process outlined in the paper, which activities will be eligible to receive assistance. Formal assessment for eligibility is due to be completed by June 2009 when the draft scheme regulations will be released. It is unlikely that uranium production will be assessed to be an emissions-intensive trade exposed activity.
While the number of businesses requiring permits under the CPRS is estimated at 1,000, all businesses will be affected by the introduction of an emissions trading scheme.
The costs associated with energy, transport, goods and services will increase as a result of many of the producers and service providers being required to buy a permit to cover the emissions associated with the production of energy, the transport of goods and the supply of goods and services. These entities will then pass on the costs of complying with the scheme.
The uranium industry will have to absorb the added costs that an emissions reduction scheme brings and some companies will be directly affected by both reporting and scheme obligations. While a carbon price will make nuclear power a more cost competitive energy option, the immediate effect of emissions trading will be to increase the cost of Australian uranium on the world market.

To read the first part of this report click here.

* Suzanne Dickey is a partner at Finlaysons, a commercial law firm with specialist teams knowledgeable on a range of business sectors - www.finlayons.com.au