The aluminium industry has scored a report which argued that the sector should be denied compensations totalling to $10.5 billion under Australia's proposed emissions trading scheme since aluminium smelters contributed far more greenhouse gasses than that of the world average and will eventually be more economically unviable in the future.

In a report by The Age, Australian Aluminium Council executive director Miles Prosser said that shutting down the nation's aluminium industry and the consequent shifting to offshore operation is ridiculous, adding that such proposals could lead to a dismal result for the Australian economy.

Mr Prosser also contended that Australian smelters are in competition against the Chinese, which may use power sourced through nuclear or hydro energy, and therefore would not necessarily lead to lower greenhouse emissions.

A Grattan Institute report released last week urged the government against issuing $22 billion in free permits to emissions-intensive trade-exposed industries (EITE), which includes aluminium processing, as the first 10 years of the Carbon Pollution Reduction Scheme (CPRS) implementation gets underway.

In a deal between the government and the opposition last year, the aluminium industry is slated to receive the biggest chunk of CPRS payments, coupled with free permits amounting to $8.1 billion to be released by 2020, notwithstanding the fact that aluminium smelters are the chief consumers of electricity in Australia.

The deal was cut to dissuade the domestic industry from transferring to offshore destinations though the Grattan report has suggested that offshore operation of aluminium processing would likely result to lower greenhouse emissions.

The report has cited as examples the operations currently based in Bell Bay, Tasmania and Kurri Kurri in NSW, which are destined to incur higher production costs once electricity subsidies enjoyed by the industry were finally withdrawn, and adding that the processing plant in Point Henry, Victoria could in turn succumb to expected swings in market prices.