Inclusion of indirect emissions in CBAM could jeopardize EU decarbonization ambitions: European Aluminium

Industry association European Aluminium has warned of the negative impact of including indirect emissions in the European Union’s Carbon Border Adjustment Mechanism (CBAM)

In a statement on Monday November 7, released to coincide with the COP27 climate conference in Egypt, European Aluminium said that it supports the European Commission’s initial proposal that indirect emissions – those emissions not emitted directly by a company itself, but that come from sources such as aluminium mines or freight transport – should not be included in CBAM until an adequate methodology has been developed that mirrors the unique indirect carbon costs producers face in Europe.

Earlier this year, the association published a position paper against including indirect emissions into CBAM, which it said could lead to higher global emissions if production in Europe is shifted elsewhere through carbon leakage.

It has also said that including indirect emissions too early would hurt the aluminium industry’s transition to carbon neutrality particularly hard, leading to more carbon leakage and depriving the region of domestic aluminium production.

“Given the role a CBAM [has to] play in Europe’s decarbonization agenda, we reiterate that the system should be first tested and [that] all circumvention risks and downstream impacts [are] assessed,” Emanuele Manigrassi, a senior manager at European Aluminium, said.

“We welcome the council’s proposal for a more gradual reduction of free allocation, accompanied by a detailed review before 2028 and periodic reviews every two years,” he added.

European Aluminium said that, over the past 15 years, Europe has lost one third of its primary aluminium production capacity due to the unfavorable business conditions on the continent compared with other regions in the world. And it added that the higher electricity prices that European producers have faced, even when using renewable power, had led to 50% of the remaining EU production capacity being taken offline since October 2021.

The lost European aluminium production, the association said, has been replaced by much more carbon-intensive production in other parts of the world, resulting in a net increase of 10.3 million tonnes of carbon dioxide (CO2) over the past year.

What to read next
The rising interest for low-carbon primary aluminium within East Asia is clear, although its ability to command a premium remains uncertain, according to market participants
Read more about how we are responding to growing demand for green metal in Japan and South Korea
Fastmarkets has discontinued its aluminium low-carbon differential value-added product, Europe, as of Friday March 1, 2024.
Fastmarkets is launching a low-carbon primary aluminium differential, Japan, South Korea to complement its existing premiums in East Asia and to meet market interest in a low-carbon aluminium pricing mechanism.
An ongoing disruption to trade via the Red Sea and recent strength in some Asian markets are providing support to aluminium premiums across Europe, despite a continued period of low regional demand, participants have told Fastmarkets
Aluminium and nickel appear to have once again escaped inclusion in the latest list of sanctions imposed by western governments on Russia, ending days of speculation that increased both the prices and the traded volumes of the metals.