China to add aluminium to the ETS

China will add the domestic electrolytic aluminium industry to its Emissions Trading Scheme (ETS).

The China Nonferrous Metals Industry Association has been working with government departments to formulate the rules for the industry's inclusion, which is set to happen "imminently".

The ETS largely covers the power industry, and although it is the world's biggest ETS, it has been subject to a fair bit of criticism since it started in 2021. The government has been working to modify some of the rules of the scheme to get better adherence.

AZ Global Managing Director Monte Zhang says the move will widen the schism between the lower-carbon producers in Yunnan and the rest of the industry. Plants in Yunnan, Sichuan, and anywhere else that doesn't use coal - most of China's primary metal - will not be subject to the extra cost. It comes at a time when the CNIA and other Chinese organisations have been promoting the Yunnan metal as "green" - a deliberate misnomer but a move to bolster premiums for the metal from that region.

Monte says that the current price inside China is around 80 RMB per tonne of carbon. That's a cost that the coal-based smelters will not be able to pass on.

It might seem strange to hear that an industry organisation is working with the government to impose an extra cost on its own industry. But China's CNIA is unlike other aluminium industry organisations such as the IAI, the Gulf Aluminium Council, or the industry organisations in Japan, Australia, Europe, the USA and elsewhere. In China, the CNIA is an arm of the government, and its main duty is to communicate government policy to its members. There have been attempts in the past to form a genuine industry association in China, but I am not up to date with how those groupings are faring.