After having analyzed in detail the options proposed by the Commission and the European Parliament, we believe that a CBAM / carbon tax for the aluminum industry will not be an effective measure to reduce global emissions in our sector nor to protect our value chain from carbon and investment leakage.

This is due to several reasons, including:

  1. The differences and complexity of our production processes , value chain and global business models compared to other ETS sectors considered (steel, cement)
  2. The production of primary aluminum is characterized by a very intensive consumption of electricity, and therefore is much more exposed than other metals to the indirect costs of CO2 on the electricity supply of our processes.
  3. The complexity of our value chain and the challenges in measuring the CO2 content of aluminum products or aluminum components of products. If a CBAM does not cover the entire value chain (i.e. upstream and downstream, from primary product to final product), the downstream segment could be encouraged to relocate outside France and Europe
  4. The fact that indirect costs are decoupled from indirect physical emissions (due to the dynamics of the electricity market in Europe)
  5. Given the Chinese overcapacity and the availability of aluminum factories on a hydroelectric basis; a CBAM could easily be bypassed shifting trade flows (so-called source shifting) from low-carbon generation to Europe while preserving coal-based power generation and products from other parts of the world where no CBAM is in place. This will not lead to any reduction in global emissions , which must be the primary objective of CBAM to pass the OMC compatibility test.
A CBAM favorable to Chinese carbon production
  1. China has indicated that it wants to set up an ETS system that would exclude it from the scope of CBAM
  2. Considering only the scope 1 of primary aluminum does not reflect the reality of emissions and will have no deterrent effect on Chinese producers who massively export carbon-based semi-finished products.

For this mechanism to work for aluminum, we recommend:

  1. Take into account the specificities of our industry , including its electro-intensive nature, and the consideration of indirect emissions
  2. Maintain the measures to balance the competitiveness of French and European industry: free quotas and carbon compensation from the ETS system
  3. Avoid tax evasion by taking into account the entire value chain.

Without taking these recommendations into account, the aluminum industry alerts elected officials and the French and European administration of the eminent danger hanging over our industrial sector.

You will find the technical details in the appendix from our European association , with which Aluminum France agrees.

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