European Parliament vote on Carbon Border Adjustment Mechanism (CBAM) enshrines net increase in global carbon emissions, says European Aluminium.
European Aluminium, the industry association representing the aluminium value chain in Europe, is very disappointed by the outcome of the European Parliament’s plenary vote on the Carbon Border Adjustment Mechanism. Members of the European Parliament opted to include indirect emissions in its proposal, ensuring an increase in global carbon emissions from aluminium production.
CBAM vote disappoints
The vote comes without any robust method to calculate indirect carbon costs on imports, and without realisation that the European electricity grid must be much closer to decarbonisation before Europe can draw any benefit from a CBAM on indirect emissions, says European aluminium. The association calls for a more cautious approach to phasing in indirect emissions and highlights that the upcoming inter-institutional negotiations with EU Member States will play a major role in reverting the acceleration of today’s carbon leakage path.
Since October, Europe has already lost 50 % of its primary aluminium production (1.1 m t) due to record-high electricity costs, which usually make up 40 % of costs of the highly electricity-intensive primary aluminium production process.(1) European production losses were immediately replaced by increased production in third countries, notably China, and new capacity is being installed in countries like India and Malaysia. Because the average carbon footprint of primary aluminium production in these countries is up to three times higher than in Europe, the production shift increased net global emissions by 10.3 m t of CO2 this year, which is equivalent to the annual emissions of two m cars. (2) European Aluminium warns that this is just the beginning of a rise in global emissions.
EA fears decline in European aluminium production
“Our industry is accelerating the green energy transition by working with clean technology producers to develop new solutions based on sustainable aluminium produced in Europe. We have evidence, however, that including indirect emissions in the CBAM now will hinder these decarbonisation efforts because it will solidify the current high energy prices in our sector and spur carbon leakage. Losing European aluminium production because the CBAM design goes against its actual intentions isn’t only bad news for our bloc’s strategic autonomy but also hampers the EU’s efforts to stop global warming,” says Paul Voss, Director General of European Aluminium.
The recent study Assessment of European Carbon Border Adjustment Mechanism Regulation, conducted by CRU Group on behalf of European Aluminium, shows that if indirect emissions are included in the CBAM before the decarbonisation of the electricity network and existing carbon leakage measures are removed, European primary aluminium smelters will lose their economic viability over international competitors. This is because carbon-intensive aluminium producers in third countries will pay less indirect carbon costs than European producers using green electricity due to the EU’s unique electricity market design. Primary aluminium imports for semi-fabrication could increase by up to 43 % and lead to a total value add loss of up to 77 % if an even larger share of European production is replaced with carbon-intensive imports.
CBAM does more harm than good
“While we welcome the Parliament’s proposed review mechanisms to test the impact of the phase out of free allocation on industry, the CBAM as it stands today will unfortunately, even tragically, do more harm than good. The fact that the text as formulated by the Parliament is causing so much distress amongst precisely the European manufacturers it is designed to protect should give legislators pause for serious reflection. We trust that the trilogues will result in a more gradual phase-in of indirect emissions at a later stage so that our producers can compete on a more level playing field while the European electricity grid decarbonises. Including indirect emissions before the CBAM is properly tested would slow down our progress towards carbon neutrality by 2050. We can’t remain sustainability champions if aluminium production leaves Europe and investments dry up because we can’t compete with more carbon-intensive producers,” concludes Voss.
1 Europe refers to EU27 and EFTA countries here.
2 The carbon intensity of the primary aluminium production in Europe (EU, EFTA, UK) is approximately 6.8 kg of CO2 per kg of aluminium produced compared to a global average of 16.1 kg of CO2 and a Chinese average of 20 kg of CO2.