CBAM IN THE ALUMINIUM SECTOR
The Carbon Border Adjustment Mechanism (CBAM), is a groundbreaking policy introduced by the European Union (EU) to address carbon leakage and support its climate-neutrality goals by 2050. This mechanism ensures imported goods, including aluminium, are subject to a carbon price equivalent to EU-produced goods under the EU Emissions Trading System (ETS). CBAM in the Aluminium Sector is particularly significant, as aluminium, due to its carbon-intensive production, is one of the key sectors directly impacted by this policy.
What is CBAM?
CBAM combats carbon leakage, which occurs when industries relocate to regions with less stringent climate policies or when EU goods are replaced by higher-carbon imports. By assigning a carbon price to imports, CBAM levels the playing field for domestic and international producers, while promoting sustainable practices worldwide.
CBAM’s Impact on the Aluminium Sector
With CBAM implementation already in its transitional phase, aluminium importers and producers face specific obligations:
- Emission Reporting (Ongoing Requirement): During the transitional period (2023–2025), importers must report direct and indirect emissions linked to aluminium production. This includes primary smelting (using electrolysis) and secondary smelting (recycling aluminium scrap).
- Embedded Emissions Calculations: CBAM requires a detailed calculation of embedded emissions:
- Direct emissions from fuel combustion or production processes like electrolysis.
- Indirect emissions linked to electricity consumption during production.
- Precursor emissions, from raw materials like alumina or recycled aluminium.
- Mandatory Certification (From 2026): As the transitional phase concludes in 2025, the obligation to purchase CBAM certificates will begin on January 1, 2026. These certificates will reflect the emissions embedded in aluminium imports and will align with the EU ETS price.
- Cost Mitigation via Sustainability: Producers can minimize CBAM-related costs by adopting low-carbon technologies, such as renewable energy-powered smelting.
Preparing for CBAM: Current Status and Deadlines
- Quarterly Reporting: Importers have been required to submit quarterly reports since October 2023, detailing:
- Quantity and origin of imported aluminium.
- Associated embedded emissions.
- Any applicable carbon pricing mechanisms in the country of origin.
- Authorization as a CBAM Declarant: Companies planning to import aluminium into the EU post-2025 should begin the application process to become an authorized CBAM declarant in 2025. Only authorized entities will be permitted to import goods covered by CBAM starting January 2026.
By now, importers should be accustomed to reporting, with the final transitional reports due in late 2025.
Challenges and Opportunities for the Aluminium Sector
CBAM presents both challenges and opportunities for businesses in the aluminium sector:
- Challenges: Compliance with CBAM reporting and certification introduces operational costs and demands accurate emissions monitoring across supply chains.
- Opportunities: CBAM encourages innovation, such as renewable-powered smelting or energy-efficient processes, which can reduce emissions and align companies with global sustainability trends.
CBAM has already begun reshaping the aluminium industry by enforcing carbon accountability across global supply chains. As the mechanism transitions to its full implementation phase, proactive compliance will be crucial. For businesses, this is not merely a regulatory hurdle but an opportunity to lead in sustainability and innovation.
Need help with CBAM compliance?
Carbon Complete offers expert CBAM services to ensure your business meets international environmental standards. With accurate carbon emissions reporting and strategic insights, we help you understand current regulations while preparing for future sustainability challenges.
