A golden opportunity for green aluminium, but who is benefitting?

Green aluminium has, for the first time, received a premium over standard prices in Europe according to a number of sources. But the term ‘green aluminium’ covers different types of aluminium all with reduced environmental impact, so which ones are achieving the premium? The recent news has been about low carbon primary aluminium, which refers mainly to aluminium smelted with renewable electricity but can also include recycled aluminium. Hydro, has publicly confirmed that it is getting a ‘good’ premium for its low carbon brands REDUXA and CIRCAL. 

But there has not been any news from the growing number of companies who have obtained independent certification to show that they are responsible producers, both reducing the carbon footprint of aluminium products and protecting biodiversity, the environment and the rights of indigenous people. These companies have gained certification to the ASI (Aluminium Stewardship Initiative) Performance Standard. ASI was set up several years ago as a multi-stakeholder initiative involving the industry and NGOs. 

All of the producers of low carbon aluminium mentioned in the recent announcements are ASI members, which is a good thing. (Full disclosure here, I am an ASI registered specialist). But other ASI members, the vast majority, might feel disappointed that they seem to be missing out on the premiums, despite their hard work. 

We should look at the drivers for sustainable aluminium for a possible rationale. Increasingly, there are financial reasons why companies will gain from making products with a low carbon footprint. There are also reputational arguments for both reducing the carbon footprint of products and producing them responsibly. 

The toughening of the European Emissions Trading System (ETS) to meet net zero and an EU proposal to bring in a carbon border adjustment mechanism, will penalise producers and importers of high carbon footprint aluminium and downstream products. It is not surprising then that these taxes on carbon might lead to a price premium for products which will be penalised the least. Consumers however care not only about the climate but also about recycling, biodiversity and people’s rights, and they are increasingly educated about sustainability schemes.  So where aluminium is used in consumer goods such as cars and packaging, subject to direct consumer choice, ASI certified suppliers might expect to receive a premium too. 

Hydro's REDUXA comes with a guaranteed carbon footprint of 4 ton CO2eq/ton. The ASI sets a higher carbon footprint limit of 8 ton CO2eq/ton, so, not the lowest currently achievable, but at least a factor of two lower than that for aluminium smelted with electricity from coal fired power stations, the worst polluters. Producers are therefore right to expect a  certain premium for their ASI certified products due to its lower carbon footprint and its alignment with consumer preferences. 

In the agricultural and forestry sectors, where sustainability schemes have been operating for longer, it is the norm that sustainably certified products attract a premium, although this may be volume limited.  It is true that supply chains in the aluminium sector are longer than for agricultural products so it will be less straightforward to pass on or share out the price differential. But these barriers can be overcome.

It is good news that certain producers of low carbon sustainable aluminium are receiving a dividend for their efforts to help the climate. Lets hope that ASI and its members do more to promote the reduced carbon footprint and other benefits of certified products, so that all companies can strike gold with their green aluminium. 

Published: 22 February 21

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