When the European Union unveiled its Carbon Border Adjustment Mechanism (CBAM), the ambition was clear: to build a fortress against carbon leakage, shield domestic industries from unfair competition, and incentivise global decarbonisation. It was heralded as the world’s most sophisticated climate tariff, with a complex, bold, and precise outline.
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But as the legislation transitions from theory to implementation, a critical vulnerability has emerged. And it’s not in exotic energy systems or abstract accounting tricks. It’s in something far more mundane, yet deceptively potent — aluminium scrap.
As for the current plan, CBAM creates a multi-billion-euro arbitrage opportunity for foreign aluminium producers. And the loophole is alarmingly simple. Both pre-consumer and post-consumer aluminium scrap are excluded from CBAM’s emissions accounting. That oversight could render the EU’s climate fortress porous, not just at the edges, but at the very core of its aluminium trade policy.
Scrap as a strategy, but why?
Scrap has always been an integral part of the aluminium value chain. It is an emblem of circularity. Lightweight, durable, and endlessly recyclable, aluminium thrives in a loop. Every offcut in an automotive plant, every can returned to a redemption centre, and every façade removed from a demolition site can find its way back into furnaces around the world. The process, as well established before, saves up to 95 per cent of the energy required to produce virgin aluminium.
That’s the sustainability story. But there’s another side to it, which is a more opportunistic one. Under CBAM’s current accounting framework, aluminium scrap carries no embedded emissions. For importers into the EU, that’s a massive cost-saving lever.
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