In a statement, European Aluminium, the point of contact for political insights, comments on the future of the European aluminum sector. It examines important developments in the industry. It addresses the key policy priorities for ensuring a competitive, low-carbon aluminum sector that drives Europe's green transition and strengthens its strategic autonomy.
The Carbon Border Adjustment Mechanism (CBAM) was designed to ensure that imported goods are subject to carbon costs comparable to those of European producers. Fundamentally, the CBAM aims to prevent carbon leakage, strengthen Europe's industrial base, and reward low-carbon production. For aluminum—a strategically important and indispensable material for Europe's clean technologies and defense applications—the proper implementation of this mechanism is critical to Europe's competitiveness and strategic autonomy.
As the EU finalizes the technical implementing provisions for the final CBAM period—which legally begins on January 1, 2026, and is accompanied by the obligation to surrender CBAM allowances from September 2027—and approaches the first full review of the regulation, announced earlier this year in the Action Plan for Steel and Metals, it is clear that the current design has structural flaws that could weaken the European aluminum value chain rather than protect it.
A study by Ramboll Management Consulting shows that CBAM increases the price of all aluminum sold in Europe, while foreign producers can reduce their reported emissions or avoid costs through loopholes in the design due to the treatment of scrap under the current CBAM. Combined with the phase-out of free allocation and the rise in raw material costs for the processing and recycling industry, the competitive gap will widen significantly.
Director of Climate Change and Energy, Emanuele Manigrassi, explains:
The right default values
For CBAM to work as intended, the CO2 costs applied at the border must be simple, fair, and difficult to manipulate. For aluminum, we believe this can only be achieved by relying primarily on default values. These are standard carbon values set by the EU based on how carbon-intensive aluminum production is in the country where the metal was originally smelted.
The default values should reflect the emissions from primary aluminum production in the country of smelting and apply to all aluminum products, including those made from scrap. This will prevent importers from declaring unrealistically low emissions or relying on unconfirmed information about the scrap content. Actual emissions should only be used for downstream steps such as remelting, casting, extrusion, or rolling. Default values must also be updated regularly and applied uniformly to all raw aluminum products, as distinguishing between primary aluminum content, pre-consumer, and post-consumer scrap at the border is unverifiable and poses a direct risk of circumvention.
To avoid major loopholes, countries that do not produce primary aluminum should not be given low default values based on recycled aluminum. Assigning very low carbon values to these countries would create an incentive for producers to ship primary aluminum to these countries, remelt it there, and then re-export it to the EU at lower declared carbon costs than its actual footprint. Some of the proposed default values for large aluminum-producing countries are also well below industry data, which would lead to competitive distortions. For this reason, the default values must include the surcharge required by the CBAM Regulation, which ensures that the default value is not set so low that importers prefer to pay the default carbon costs rather than report their actual (and often higher!) emissions.
Finally, the default values must be developed in consultation with industry to ensure that the values are based on real data and that the resulting CBAM system is credible and enforceable.
Other important fixes for a fair CBAM
Robust default values are essential—but they are not the only priority. Unfortunately, there are many other issues that need to be resolved to make CBAM fair and workable for the European aluminum industry.
For example, the CBAM also needs a credible export solution that protects the entire aluminum value chain. The option currently under consideration would only apply to EU ETS installations and would only compensate for the phase-out of free allocation. This would exclude the majority of downstream aluminum producers who export CBAM goods but are not covered by the ETS.
These companies will continue to face significant cost increases as both the CBAM and the ETS raise aluminum prices in the European market due to costs not incurred by their international competitors.
To be effective, the export solution must therefore also take into account these raw material cost increases and include downstream facilities that are exposed to global competition.
A crucial moment for the future of the CBAM
If, even after the corrections, the CBAM continues to harm the sector rather than support it, the inclusion of aluminum in its scope must be reconsidered.
With the Commission set to publish its review of the CBAM and the accompanying package on December 10, the coming weeks will be crucial in ensuring that the mechanism strengthens rather than undermines the European aluminum industry. We look forward to working with the co-legislators and all stakeholders to create a CBAM that works for the European aluminum value chain.
Source: european-aluminium.eu
