Appraising aluminium smelters in small island developing states

Trinidad and Tobago are the most southerly of the Caribbean islands located just 11 kilometres (7 miles) off of the north east Venezuelan coast. The country has been engaged in the international oil market for over a century utilizing its hydrocarbon resources to boost economic development. Most of the country's foreign exchange earnings come from the export of oil and gas and related down stream industries such as methanol, iron and steel and ammonia. The thrust to monetize the gas reserves continues in Trinidad and Tobago and the government has recently signed agreements for the construction of two aluminium smelters. However, concerns have been raised that aluminium smelting could have negative environmental and social consequences for a small island developing state. The economic question is how should a small island developing country balance the need for further economic development with its concern for ecosystem conservation and possible alternative livelihoods in the future? What are the true benefits and costs of aluminium smelting to a small island developing state? Are the possible environmental costs minimal or significant? Should aluminium smelting be powered by electricity generated by natural gas, a non-renewable resource? What is the user cost associated with an aluminium smelter using natural gas as its power supply. What are the valuation techniques necessary to analyse such a policy?.