Aluminium should share climate impacts down the supply chain

The carbon intensity of aluminium traded on the LME (London Metals Exchange) should be disclosed as part of the fight against climate change according to EN+, owner of Rusal. The production of aluminium uses a lot of electricity, which results in emissions of greenhouse gases when the electricity is generated using fossil fuels.  Rusal however, uses predominantly renewable electricity to produce aluminium. Competitors have dismissed this call for transparency as an attempt by the company to charge a higher price for its low carbon aluminium. 

In reality, it is conventional aluminium that should be priced higher in the market, to account for the environmental impacts of fossil fuel powered smelting. This is what the European Emissions Trading Scheme (ETS) was designed to achieve, by putting a price on carbon emissions in Europe. Unfortunately, most non EU producers don’t pay it. There is however another more serious problem with the ETS; the producers of primary aluminium, who are the emitters, pay the penalty rather than the final product manufacturer. Companies at the end of the supply chain therefore have less incentive to reduce the carbon intensity of their products by choosing low carbon aluminium.

So what if all aluminium products were taxed according to their carbon intensity?  This tax, lets call it CIT (Carbon Intensity Tax), would be proportional to the carbon intensity of the aluminium, and passed down the supply chain to the final product, rather like VAT (Value added Tax). It should be integrated with the ETS so the penalty of high carbon emissions is shared more fairly down the supply chain, rather than all being paid by the producer. Imports would be treated in a similar way. Receipts from the tax could be reinvested in recycling facilities.

CIT would make low carbon aluminium much more attractive to car, can and coffee capsule manufacturers. It has a carbon intensity of about 4 kg CO2/kg metal compared with 8-12kg CO2/kg metal, or even higher for fossil fuel smelted aluminium. Also, it is not just renewable aluminium that would benefit from a CIT. Recycled aluminium has an even lower carbon intensity of about 2.5 kg CO2 per kg metal. And for a circular economy, it is better to use recycled aluminium than any type of primary material, even low carbon, to avoid other types of environmental damage caused by bauxite mining and processing.

Critics will say that such a system is too difficult to operate or politically impossible. But greenhouse gas intensities are transferred down the supply chain to the final sales point in the biofuels sector. Verifiers check the greenhouse gas emissions statements of all large emitters in Europe. The separate elements of a system are already in existence and new technology, blockchain in particular, will make the administration easier. In other sectors, governments are imposing environmentally driven taxes.  The French and UK governments have announced plans to tax virgin plastic packaging to encourage the use of recycled plastic. 

If we are going to transition to a low carbon economy then assigning carbon emissions to products will help consumers to choose and governments to incentivise low environmental impact alternatives. Aluminium is known as ‘congealed electricity’ for a reason. It is logical that it should be one of the first commodities to be transparent about its carbon intensity.

With input from Naomi Williams

Published: 7 October 19

Back to news list