The London Metals Exchange, the world centre for industrial metals trading, said recently that they will launch a platform for trading low carbon primary aluminium made from renewable energy. This will be the first time a metal is traded based on its carbon footprint. The announcement comes as the world adapts to a ‘new normal’, which many are saying should be more sustainable than the ‘old normal’.
The LME announcement has generated considerable interest and raised a few questions. What will be the cut off, below which, a producer can call their aluminium ‘low carbon’? Companies using renewable electricity routinely quote a carbon intensity of 4 te CO2 eq /te, which is considerably better than aluminium smelted with coal fired electricity (about 20 te CO2 eq /te). It is this green aluminium that the LME announcement is probably talking about, as Rusal, a key supplier, has been instrumental in persuading the LME to make the change.
But producers of aluminium smelted with gas-fired electricity (8 te CO2 eq/ te Al) can also claim that they are better than the worst type of aluminium. They might also want to differentiate their product in the market. They would be justified in lobbying for their own category. They will not want to be lumped with ‘non-low carbon aluminium’ as the Chief Executive of the LME described conventional aluminium. Others will call it ‘grey’. Whatever the name, it is essential that the boundaries of the categories are clear and that independent certification is required to prove low carbon status. It is worth saying that this type of differentiation is routine in the biofuels sector. Prices for different carbon intensities of the same product are routinely quoted by traders and everyone copes.
This move should lead eventually to producers of aluminium car parts, building components and packaging passing on the carbon footprints of their products to customers. It would boost demand, not only for low carbon aluminium, but also for recycled aluminium, which has an even lower carbon footprint (2 te/CO2/te). Consumers will then be able to see that imports of aluminium products from China, and other parts of the world that rely on coal, have a much higher environmental impact than those made from aluminium smelted in Europe, where investment in renewables has been extensive. So even if companies can’t access the low carbon aluminium produced exclusively from renewable energy they can still source European smelted primary and recycled aluminium to reduce the carbon footprint of their products. Coming out of this current recession, companies will be expected to introduce greener more locally made products if they want to engage fully with customers, because most consumers don’t want a carbon copy recovery.
Published: 19 June 20
