Aluminium Luminaries – Oleg Deripaska

Aluminium Luminaries – Oleg Deripaska

Oleg Deripaska, president of United Company RUSAL, wrote an opinion piece in The Australian last week outlining his opinion of the 2015 United Nations Climate Change Conference (COP 21) and its findings. As one of the biggest movers and shakers in the aluminium industry, his insight on the most important climate change agreement in history is as important as it is unique.

First, a little background on Deripaska: born on the second day of 1968 in Dzerzhinsk, a city of a quarter million on the Oka River about 250 miles east of Moscow, Deripaska grew up on the family farm in Krasnodar region, south of Russia. His grandparents taught him from an early age how to farm the land and instilled in him the value of hard work. “They taught me everything about growing: what’s the right time to plant seeds, how you should plant everything,” he explains.

He became an electrician’s apprentice at age eleven, and, due to his mathematical acumen, he matriculated at Moscow State University in 1985 at age seventeen. Interrupted by a period as a conscript in the Soviet Red Army from 1986 to 1989, he graduated cum laude from university with a physics degree in 1993 at age 25.

The collapse of the Soviet Union two years prior to his graduation made it impossible for him to continue studying, so he teamed up with fellow scientists and established a metal trading company that specialized in export arbitrage and traded through Estonia. “I started my business at an unusual moment in history. The country in which I was born and raised had disappeared, although the new country was not fully formed. The first one gave me an excellent education; the second one gave me the chance of success,” Deripaska explained.

Deripaska saved almost all the profits he made from the arbitrage trade to purchase shares in the Sayanogorsk Aluminim Smelter in Siberia. He bought enough shares in 1993 and 1994 to become the plant’s largest single shareholder other than the government. He became the plant’s director general in 1994 at age 26.

The year 2000 saw Deripaska join in a partnership with Roman Abramovich’s Millhouse Capital for managing their respective aluminium and alumina assets. The partnership, called RUSAL, continued to purchase assets all over the world until 2007, when RUSAL, SUAL, and the alumina assets of Glencore, merged and became United Company RUSAL. The new RUSAL consisted of sixteen aluminium smelters, twelve alumina refineries, eight bauxite mines, three powder metallurgy plants, three silicon smelters, three secondary aluminium plants, three aluminium foil mills, two cryolite plants, and one cathode plant, among other assets. This merger created what was, until very recently, the biggest aluminium company on Earth.

As for Deripaska, and despite him downplaying his own wealth, the empire he built made him the ninth richest man in the world in 2008, with a net worth estimated at that time to be US$28 billion. At the time of this writing his wealth is estimated to be in the neighborhood of US$2.5 billion.

Deripaska’s bona fides now established, an examination of his thoughts and opinions regarding the results of COP21 show that he is at the very least less than hopeful that the agreements made in the course of the conference will foster worthwhile, positive change.

He first points out that the summit, whose purpose was ostensibly to agree to a global emissions standard, failed to do just that. Deripaska goes on further to point out that the “unenforceable, non-binding pledges” would only account for a fraction of a degree Celsius in improvement of the Earth’s temperature.

Deripaska goes on to give two proposals for reducing emissions and avoiding “ecological calamity.” The first proposal is to institute a “one-for-all carbon levy”:

Overnight, a one-for-all carbon levy with a secondary purpose of financing international and national climate programs would change the world’s economic calculus and corresponding emissions. It is as simple as that. Fossil fuel energy companies will ferociously oppose it, and they wield disproportionate political power. But it is necessary to introduce a one-for-all carbon emission levy and make payments obligatory for everyone at the same rate.

He goes on to explain that such a levy will reduce demand for fuels that emit high quantities of carbon and thereby cause business to reduce smaller amounts of greenhouse gases. A modest tax of US$15 per metric ton would set a pricing mechanism, and it would set in motion research and development initiatives dedicated to finding energy efficient and/or low carbon solutions.

The second proposal for reducing global emissions involves using an old resource in a new way – coal. Used in producing a significant percentage of the world’s energy, the attraction to coal is obvious. It is inexpensive, easily accessible, easily transportable, weatherproof, and, in many countries, supported via government subsidy.

Citing existing innovations in the use of coal, Deripaska explains the necessity of continued research and development:

We must go further — a new coal chemistry industry should be developed in the same way as in the past we have developed a petrochemical industry, or chemistry based on usage of natural gas. This new industry should seek to provide technological solutions to extract as much material as possible out of coal reserves without actually burning it. But coal isn’t popular today; no one wants to deal with it because of the climate case — that is why the role of states is greatly important. Finding alternative ways to use coal and developing coal chemistry technologies are the challenges we need to address in the near future.

He closes the opinion piece by lauding the intent of COP21, but reminding readers that the goodwill generated by the conference are of little use without implementing specific and binding proposals similar to the ones he outlined.