European aluminium producers seeking exemption from carbon border tax

According to a recent report, European aluminium producers are seeking exclusion from the first phase of the European Union’s carbon border adjustment mechanism (CBAM), claiming that the initiative will put the industry at a competitive disadvantage to foreign rivals and do little to tackle climate change.

Gerd Götz, director-general of European Aluminium, said: “In view of the many open questions and the significant negative impact of the current CBAM approach . . . aluminium should not be included in the pilot phase.”

Green industrial conglomerate Mytilineos said the carbon border adjustment mechanism would encourage Chinese and Russian resource shuffling, meaning the aluminium producers from the two countries would redirect their low-carbon production to Europe, in a bid to avoid any CBAM levy, while selling less environmentally friendly output to the rest of the world.

Rusal, the Russian aluminium giant, has already announced plans to split its assets into a low-carbon aluminium company aimed at the European market and a new entity focused on the domestic Russian market.

Aluminium, a lightweight non-ferrous metal used in everything from beer cans to electric vehicles, is often referred to as solid electricity because of the large amount of power required for smelting the metal.

Smelters in Europe and neighbouring countries like Norway currently incur a carbon cost, which is embedded in their electricity prices. Consultancy CRC estimates European aluminium smelters are compensated for 75 per cent of their indirect emissions with state aid. If the current carbon compensation scheme is removed, smelters would see higher production costs as the CO2 price in Europe is trading at €50 a tonne at the present. This, as a result, will put the smelters at a competitive disadvantage to rivals in the rest of the world.

“The intention of reducing emissions is good but the devil is in the details,” said Jean-Marc Germain, chief executive of Constellium. “And there are some very significant details that would lead to material adverse impacts against the sought objective,” said Eivind Kallevik, executive vice-president of Hydro Aluminium Metal at Norsk Hydro.

“We have to remember the industry has shrunk significantly since 2008 due to the finance crisis and adverse market conditions,” he said. “This puts the whole industry at further disadvantage and increased risk of carbon leakage.”