4th July, 2008

Carbon costs passed on through electricity prices could cut the profits of manufacturers in carbon-intensive countries, indicates research released by Trucost today. Aluminium producers could find electricity and carbon costs rising to one-third of revenues in China and India, around one-quarter of revenues in the UK and US and just one-tenth of revenues in France. Carbon costs would cut deep into profits or drive up prices of manufactured goods.

Trucost has analysed how carbon costs from purchased electricity would affect manufacturers in different industries and countries. Global carbon emissions trading would reduce companies’ competitiveness most in high-energy sectors that operate in countries with carbon-intensive electricity supplies.

China and India rely heavily on fossil fuels and have more carbon-intensive electricity supplies than the US and Germany, closely followed by the UK and Japan. France, which relies mainly on nuclear power, has the lowest carbon electricity of the countries analysed.

Electricity is currently cheapest in France, the US, India and China. However, emission trading schemes will increasingly give carbon a monetary cost for utilities around the world. If they pass on carbon costs of €27/$40 per tonne, the price of electricity in India and China would rise by almost 50%. France, Germany and the UK have lower-carbon electricity and electricity prices already include the majority of carbon costs under the EU ETS.

Manufacturers in carbon-intensive countries could find their competitive advantage markedly reduced. Businesses with heavy energy use, such as aluminium or industrial gas manufacturers, will be most financially affected by indirect carbon costs.

Trucost’s analysis of how energy-intensive manufacturers could be affected through their global electricity use shows that Alcoa’s profits for 2006 would have fallen by 31% ($673 million). BHP Billiton and Rio would see drops of around 11%.

Simon Thomas, Chief Executive, Trucost, said: “Many companies have effectively exported carbon emissions. Large energy users with production in carbon-intensive countries will be most exposed as carbon costs come in to play. Investors and companies will increasingly have to price in indirect carbon costs from electricity use.”

NOTES TO EDITORS

Sectors analysed: Alumina refining and primary aluminium; Industrial gases, Cement, Iron and steel mills and ferroalloy, men’s and boys’ cut and sew apparel.

See Figures 1, 2 & 3 and Tables 1 & 2 in the Research Note Manufacturers: Profits at risk from carbon costs.

About Trucost

Trucost Plc is a world-leading environmental research organisation which helps companies and investors understand the environmental impacts of business activities. Trucost provides data and analysis on company emissions and natural resource usage in financial as well as quantity terms to help investors, fund managers and analysts understand how environmental issues could affect companies' future earnings. Institutional investors use the information to assess the carbon or environmental footprints of their portfolios, to identify differences in performance, to address environmental risks and create structured products with lower carbon or environmental impacts.

Trucost tracks data on the environmental impacts and disclosures of over 4,200 companies and has the world’s largest record of greenhouse gas emissions. Coverage includes the FTSE All-Share, S&P 500, Russell 1000, Nikkei 225, DJ STOXX 600, MSCI World Developed, MSCI Europe, MSCI Asia ex-Japan and ASX 200 indices.

Trucost has offered expert advice and research to major corporations, institutional investors and to Government departments and associated agencies since its launch in 2000. Trucost’s investor clients include most major investors worldwide.

For more information on Trucost please contact:

Theo Moore, Brunswick Group
Matt O’Leary, Brunswick Group
Tel: 0207 404 5959
Email: Theo Moore