Welcome to Part 2 of the interview with Rachel Howard from Mission Possible Partnership. In this edition, we delve into the decarbonisation journey of the Australian aluminium industry. Ms Howard offers insights into the energy transition strategies of major players like Alcoa, Rio Tinto, and South32, and also highlights a couple of projects are even aiming for 100 per cent renewable. Aluminium recycling rate in Australia is 70 per cent and plays a pivotal role to attend decarbonisation.

To know the full conversation, read the interview

AL Circle: What is the current carbon emission rate from the aluminium industry in Australia and what specific reduction targets does the industry have for 2030? How are you progressing towards this goal?

Rachel Howard: I'm going to give you some broad answers here. Roughly carbon emissions in this sector are 35 million tonnes a year for scope 1 and scope 2 across the aluminium sector. It's about 7 per cent of our national emissions.

Our energy sources today are fossil-based and we are trying to transition to new energy sources. The intensity like the typical benchmark is 12 tonnes per tonne of emissions at smelting level.

You know 85 percent of smelting emissions comes from the electricity sources, which is scope 2 emissions. So, what the companies like Alcoa, Rio Tinto, South 32 are doing in this market are they have all made net zero commitments by 2050 and they are trying to do so by transitioning to renewable energy long term PPAs. Now, of the five projects we have Rio Tinto who has two for their smelting and refining projects in Gladstone, we have Rio’s Tomago smelter, and Alcoa in Victoria as part of that project pipeline. And we see them making different levels of steps. Rio has a couple of projects where they're moving to 100 per cent renewable. Tomago smelter in New South Wales and the Portland smelter by Alcoa in Victoria are making sort of first big leaps, which are partial transition to renewables.

AL Circle: In the context of decarbonisation, the aluminium sector is focusing on three main strategies: using recycled metal, adopting renewable energy, and deploying advanced technologies. Which of these methods do you believe is most viable in Australia, given the availability of resources and infrastructure?

Rachel Howard: We do see the projects that we are tracking are mobilising towards renewable energy sources. A couple of those projects are aiming for 100 per cent renewable and a few others are making their first big step of renewable transition.

If we look at Rio Tinto’s projects in Gladstone - the Boyne aluminium smelter, Yarwun alumina refinery, and Gladstone alumina refinery - they have two big 25-year PPA contracts in place - one with European Energy the other was with Windlab. Together, these agreements cover over a gigawatt of energy and represent some of Australia’s largest solar initiatives. Once fully operational, these projects are set to reduce carbon emissions by between two and four million tonnes per year.

One of the reasons that it's possible to do an ambitious renewable rollout is that Australia has good renewable endowments. There is pretty good co-location here for Rio with abundant energy resources in close proximity to facilities. For instance, solar farms are being laid out quite proximate to the refineries and smelters. So, I think across the projects, we're seeing more than 75 per cent emissions to be reduced, which we would call category one deep decarbonisation.

In Portland, Victoria consumes 10 per cent of the state's energy demand. Today, they have reached about 40 per cent renewable component after they signed an agreement with the energy provider AGL in 2024 that allowed them to replace up to 30 per cent of the coal-based power contract with renewable resource.

We desire to use renewable endowments and the ability to access renewable power within the proximity of these projects to help some deep decarbonisation.

AL Circle: Knowing that recycling is another vital way to achieve decarbonisation in the aluminium industry, could you please tell us the recycling rate in Australia and by what percentage it is being used in producing low-carbon metal?

Rachel Howard: In Australia, recycling rate for aluminium cans is around 70 per cent, only slightly below the global average (75 per cent). Because of the lack of remelt facilities, around 95 per cent of collected scrap (~450,000 per year) is exported.

Research published this month Enabling Development of Aluminium Recycling Capability in Australia, found that first-generation remelting projects remain commercially unviable under current conditions. Closed-loop recycling demonstrations (eg: Rio, Capral and Sims) have reached technical limits, and Government support for first-generation remelt facilities is needed alongside market confidence through recycled content standards and procurement signals.   

While recycling does not materially contribute to low-carbon aluminium in Australia today, the Aluminium sector is actively advocating to change this, see recycling in the national interest, and propose a way forward through evidence based finance and policy shifts.   

Question: What policy measures is the Australian government implementing to accelerate green industry transition, particularly in aluminium? How closely does MPP work with the government in making policies and securing foreign investments?

Rachel Howard: The flagship industrial policy supporting the transition to a clean economy is Future Made in Australia, a 22 billion dollar package for clean industry projects. If I drop down to the specific interventions there's a package of things in there. The ones which impact the aluminium sector first and foremost is the green aluminium production credit. This is a 2-billion-dollar pool of funding that rewards smelters with a per-tonne payment for green aluminium produced, offering support for up to 10 years. The credit is intended to help smelters transition to renewable electricity, with projects and producers able to bid for access.

The second big support measure in that package is innovation. So, through Australian Renewable Energy Agency, ARENA, is a green metals innovation fund. It's a 750 million dollar fund for projects like inert anode demonstration projects etc.

The third policy is access to concessional finance, which is particularly for renewable energy rollout. Through our special investment vehicles, particularly the Clean Energy Finance Corporation (Australia's green bank), there are funding tranches available with concessional interest rates, which, however, have not been deployed to clean industry sectors or to the aluminium sector yet. So, there is some deployment friction either in the conditions and risks that the green bank is willing to take on.

Finally, the green industrialisation policy in Australia also focuses on standards and certification. The country already has a tradable Renewable Energy Certificate scheme, and is expanding its efforts with the Guarantee of Origin scheme. This scheme directly links renewable energy generation to commodity production, with the green metals Guarantee of Origin currently in development.

Now, coming to the second part of the system, we are very much globally focused on demand stimulation measures that can provide the bankable offtake that's needed across the clean industry projects. What we prefer to do is to build a deep alignment with current and future projects or producers, identify the most critical barriers to bankability by bringing together industry finance and government, and navigate the negotiation space to determine practical, near-term solutions that meet the government’s needs for cost-effectiveness and strategic alignment. Over the years, we’ve seen measures introduced but not being deployed because they weren’t sufficient to secure the necessary bankability for business cases.

This issue often manifests on the ground, where forums like the Build Clean Now initiative serve as platforms for granular discussions. These forums allow us to directly engage with projects, ask them about their priorities and interventions, and then bring those insights to government to align with their strategic goals. Through numerous one-on-one conversations and in-depth consultations, we work to uncover areas of alignment. We then take this "ground truth" into global forums and advocacy efforts, pushing for solutions that drive progress in the clean industry.

So, we are an implementation organisation for multilateral initiatives, of which the most prominent is the UN-backed industrial transition accelerator. This initiative acts as a platform to carry insights from one COP to the next. For instance, at recent COP meetings, the Accelerator facilitated the delivery of an open letter signed by over a thousand companies, calling on governments to implement demand stimulation measures. The letter emphasised the need for secure customers in the clean industry sector. In response to this call, over 700 financial institutions collaborated to create a comprehensive demand policy playbook. This playbook outlined global case studies of successful demand stimulation measures, categorised by sector, and highlighted those likely to have the highest impact. It also provided detailed examples of what measures have been implemented in various markets, offering valuable global insights. These efforts are some of the practical ways the Multilateral Policy Platform (MPP) works with governments and industry to navigate the investment landscape. Our campaign over the past two years, "Build Clean Now," has focused on showcasing the projects that are ready for Financial Investment Decision (FID). With over a thousand clean industry projects in the pipeline, this global, multi-party initiative aims to accelerate the transition to a cleaner economy.

I can get you the specific numbers for aluminium. There are about 70 projects poised for Financial Investment Decision (FID), and a goal that we really want to draw a spotlight on for governments is to wrestle with those more advanced projects and just see year-on-year progress at getting a few of these first movers over the line to pave the way for a further scale-up.