ALUMINIUM - Driving the deCARBONisation wave 🌊

Hi there! Welcome to European Aluminium’s newsletter, your window into the world of aluminium as we prepare for the 2024 EU institutional renewal. By shedding light on key industry developments and an in-depth exploration of our top 5 policy priorities for the upcoming policy cycle, our goal is to provide a more comprehensive perspective on how we can ensure a green transition made in Europe.

As the EU pushes forward with its ambitious Green Deal and climate policies, the aluminium industry stands at a pivotal moment. Our fully electrified primary aluminium production already leads the way with a significantly lower carbon footprint compared to the global average - around 6 tonnes of CO2 per tonne of aluminium - and in Europe we have a thriving recycling industry. Recycling aluminium is crucial for decarbonisation, as it consumes 95% less energy than primary production.

The Path to a Decarbonised Aluminium Industry in Europe

According to our study Net Zero by 2050: Science-based decarbonisation pathways for the European aluminium industry, our industry will require a starting figure of approximately €33 billion of investments into new technologies to be Paris-Aligned between now and 2050. If the EU wants to lead on industrial decarbonisation without losing its competitiveness, it must massively fund the transformative industrial decarbonisation technologies for the aluminium value chain. Many of these technologies will not be commercially available before 2030, be it switching to inert anodes, electrification of furnaces, hydrogen or Carbon Capture and Storage (CCS)/Carbon Capture and Utilisation (CCU). On this note, the Net Zero Industry Act is a first step in the right direction.

We also need quick and cost-effective green energy solutions for our industry. Electricity represents around 50% of the total emissions for smelting in Europe, with big differences among installations, depending on the carbon footprint of the grid from which the electricity is sourced.

Reducing the cost and decarbonising energy, in particular electricity, is crucial. When electricity becomes too expensive, production relocates or curtails. The price of aluminium is set on the global level at The London Metal Exchange. So, it is impossible for European primary aluminium producers to pass on any unilateral regulatory costs to customers without losing market share. Long-term Power Purchase Agreements (PPAs) can protect our industry against the uncertainties about costs, mainly due to national regulatory components affecting the price of electricity. A large portion of these are the EU ETS indirect costs embedded in the wholesale electricity price, which are also reflected in the ‘strike price’ agreed upon when signing RES PPAs.

How can these challenges be solved?

By boosting the number of renewables and green hydrogen in the EU energy system while protecting industry against system costs unique to Europe, we can ensure industrial off-takers will be ready to consume the newly available green energy, paving the way for a seamless switch to a low-carbon economy.

The continued possibility of indirect cost compensation under the ETS State Aid Guidelines beyond 2030 remains crucial to allow our industry to continue to sign long-term contracts and remain competitive. Additionally, strengthening the State Aid Guidelines on Climate, Energy, and Environment (CEEAG) to support the consumption of decarbonised electricity and gases will provide further incentives for industries to adopt cleaner energy sources.

Last, the EU Carbon Border Adjustment Mechanism (CBAM) needs to be implemented with caution and indirect emissions must remain outside of its scope. The CBAM remains a tool that is uncapable of reducing global emissions across our value chain or protect our industry’s competitiveness. As we design the post 2030 climate and energy framework it is equally crucial to reform the EU Emissions Trading System (ETS) to provide incentives for circular and strategic industries such as aluminium.

Watch the video below with our Director Climate & Energy, Emanuele Manigrassi to find out more 👇

WE ARE AT EUSEW 2024! 📢

Together with @Re-Source, we are organising the ‘Fit for 55: how to remove the barriers to decarbonisation in industry’ policy session as part of this year’s European Sustainable Energy Week (EUSEW). The session will take place on 13 June from 9:30 – 11:00 at the European Commission’s Charlemagne building!

The session will explore the challenges that energy-intensive industries, like the European aluminium industry, face when transitioning to green energy and potential solutions to address this issue. One significant challenge is the substantial costs and initial investments required for implementing new technologies and infrastructure.

📄Check out our joint op-ed in Euractiv here.

It's a balancing act between sustainability goals and financial viability. However, by addressing these challenges head-on, there's potential to find pragmatic solutions that benefit both industry and the environment.

We will also touch upon the slow adoption of Power Purchase Agreements (PPAs) and possible financial risks. Last but not least, we will explore how to balance the Green Deal with industrial competitiveness.

🗨️ Join us and register to hear from speakers from the European Commission, RE-Source Platform, European Investment Bank (EIB), Statkraft, Breakthrough Energy and MYTILINEOS S.A. ➡️ https://tinyurl.com/42jaep36

GET INVOLVED: JOIN THE CONVERSATION

Jump into the conversation and drop your thoughts on our manifesto and policy goals. Your insights and feedback are needed as we work towards a stronger, more resilient aluminium industry in Europe. Connect with us on LinkedIn, X and our website and stay updated on the latest developments! 💡

🔗 Get in touch with us ➡ [email protected]   

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