This blogpost series by the European Liberal Forum engages with policymakers, industry experts and academics to contribute to a better understanding of how to shape the “Road to net-zero” in the context of the EU sustainable transition.
By Paul Voss, Director General of European Aluminum
Serving six out of the EU’s fourteen industrial ecosystems, aluminium is a critical component for the greening of our economy. From solar panels, wind turbines and batteries to electricity transmission, e-mobility and energy-efficient buildings, the road to net-zero is “paved with aluminium”.
An energy-sensitive industry in a global market
Due to its vital contribution to green technologies, forecasts estimate the global demand for aluminium will increase by 50% by 2050. In Europe, half of that demand can be met by recycled aluminium. But despite growing demand, Europe is becoming increasingly import-dependent because the unequal global competitive environment hinders our industry from decarbonising and remaining globally price competitive.
Between September 2021 and today, the European aluminium value chain has taken offline more than 900,000 tonnes of production due to surging energy prices and raw material shortages. Both are global phenomena, but only European companies are forced to halt, close or curtail their production, while international competitors continue building new plants and ramping up capacity.
Fostering Europe’s strategic autonomy with sustainable aluminium
But why does it matter to the EU where the aluminium comes from? After all, aluminium’s unique properties (lightweight, endless recyclability, high conductivity, and many more) do not depend on where aluminium is produced in the world. The answer is twofold: 1) aluminium produced in Europe is far more sustainable than aluminium produced elsewhere; 2) the European aluminium industry generates social and economic value that imports cannot compensate for.
When it comes to sustainable aluminium, the carbon footprint of the European primary production process is much lower than the global average, with only 6.8 kg of CO2 emissions compared to the worldwide average of 17kg CO2 per kg of aluminium produced.[1] European aluminium producers have reduced the carbon intensity of primary aluminium production by 55% since 1990 and will further decrease it by 70% by 2050 as the electric grids decarbonise.[2] Moreover, the semi-fabrication and recycling processes have further reduced carbon intensity, making European Aluminium members best-in-class producers.
The establishment of climate neutrality[3] as the main objective of aluminium industry in the context of the EU’s sustainability path is a critical step to continue driving the transition and thriving as a European industry. In order to reach the objectives of reducing CO2 emissions in aluminium operations, European Aluminium members are committed to using more renewable energy sources, boosting recycling, and exploring the circular economy potential of aluminium-containing applications and products.
Of course, sustainability is about far more than an industry’s carbon footprint; it’s also about the positive impact we can make on our employees, local communities, the economy, and society. Here too, the European industry has a clear edge. In 2015, the European aluminium industry already incorporated a holistic approach to sustainability in its Sustainability Roadmap, applying the highest environmental, social and governance (ESG) standards across the entire aluminium value chain, from sourcing raw materials to managing end-of-life products.
Equally important is the European aluminium value chain’s role in the continent’s industrial leadership ambitions. The European aluminium sector employs more than 1 million Europeans, directly or indirectly, operates 600 plants, and generates more than 40 billion euros in turnover every year. Moreover, aluminium companies in Europe are innovation catalysts for the circular economy, decarbonisation and disruptive technologies by investing hundreds of millions into research and innovation to achieve sustainability and development targets.
Unfortunately, only sustainability credentials and socio-economic value alone are not enough to thrive in the global market. Unfair trade practices such as China’s dumping and below-market finance, regulatory inconsistency in the EU’s climate and energy policies, and the EU’s unique electricity market design risk eroding price competitiveness.
If Europe cannot find effective solutions to safeguard and incentivise domestic excellence, the aluminium used for the EU’s strategic application will no longer come from the bloc’s economy but from Russian, Chinese and Middle Eastern exporters.
To that end, instruments like the Carbon Border Adjustment Mechanism (CBAM) are a commendable initiative to mitigate investment and carbon leakage – except that the EU’s proposal only works for the aluminium sector on paper.
CBAM: the devil is in the detail
The current one-size-fits-all CBAM design cannot tackle the unique challenges of the electricity-intensive industry. The CBAM, as it stands today, will require a lot more finetuning to eventually become a suitable measure for the European aluminium value chain and help stop carbon leakage.
In particular, the phase-out of national indirect carbon costs compensation schemes, while the electricity infrastructure in Europe has not yet fully decarbonised, penalises European aluminium companies. Recent studies show that a CBAM levy for most aluminium imports does not match European aluminium producers’ energy-regulatory costs.
The current energy prices have further spurred the global market imbalance – with dramatic effects on jobs and future investment plans. The electricity bills of European primary aluminium producers have increased by + 300% since October 2021, representing up to 80% of today’s aluminium sales price.[4] While this particular crisis may be temporary, it will have long-lasting effects on the European aluminium value chain.
And, of course, beyond these challenges, it is difficult to ignore the effects of the war and humanitarian crisis in Ukraine on our economy and the aluminium sector. Navigating this unpredictable geopolitical context while continuing to push forward to a “green” transition will require bold and decisive action from our industry and policymakers. A global level playing field with free and fair trade is needed, together with access to affordable, sustainable energy and predictable, coherent legislation to allow our industry to decarbonise and remain globally competitive. It would be useful for the EU policymakers to consider the industry’s vision in a bottom-up approach for a competitive and sustainable European aluminium industry. While producers are committed to complying with industry obligations in a joint effort to decarbonise, there is a need to run faster and further to maintain the sector’s sustainability frontrunner position in the highly competitive global raw materials market.
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[1] European Aluminium, Environmental Profile Report, 2018.
[2] European Aluminium, Environmental Profile Report, 2018. European Aluminium, Vision 2050, 2019.
[3] European Aluminium, Mid-Term Review of our Sustainability Roadmap Towards 2025, 2021.
Author bio
Paul Voss joined European Aluminium from Euroheat & Power, the association for the European district energy sector, where he acted as Managing Director for the past eight years. Mr. Voss is a long-term public affairs and governmental relations expert with 20 years of experience in the Brussels and energy sector. Paul Voss has studied in Canada, France and Belgium and holds a master’s degree in European Public Policy.
DISCLAIMER: Published by the European Liberal Forum. The opinions expressed in this publication are those of the author(s) and do not necessarily represent those of the European Liberal Forum.