Posted on 12 Dec 2024
*Domestic primary producers have higher intensity than global average
*Global emissions from primary production declining due to energy switch
*CBAM impact on India to be limited due to exclusion of indirect emissions
Morning Brief: Aluminium will be essential for the low-carbon transition of the transport, construction and renewable energy sectors. However, the production of primary aluminium is highly emissions intensive. This is a paradox that confronts the global aluminium industry, much like steel.
As per International Aluminium Institute (IAI) data, global aluminium production, including both primary and recycled routes, grew by 4% y-o-y to 108.2 million tonnes (mnt) in 2022- as per latest available data with IAI.
However, greenhouse gas emissions from the industry showed a slight decline from 1.13 gigatonnes CO2e to 1.11 gigatonnes CO2e, and the GHG emissions intensity of primary aluminium production (the average quantity of emissions from the production of a tonne of primary aluminium) has been declining since 2019.
In 2022, intensity declined by 4.4% from 15.8 tonnes CO2e per tonne to 15.1 tonnes CO2e per tonne.
Challenges facing India
The carbon intensity of the top 13 primary aluminium producers (contributing approximately 40% to total global production) reflects that companies operating mostly in developed nations have already shifted to low-carbon power such as hydropower and solar, resulting in almost 50-60% lower emission intensity than those operating in developing nations.
India's average carbon intensity is around 18 tCO2e/tonne of aluminium, owing to usage of coal linkage and captive coal mines. The global average is 15.1 tCO2e/t.
A study conducted by ICRA shows that primary aluminium producers such as Hongqiao and Chinalco have lower emissions intensities compared with domestic producers such as Hindalco and Nalco. India's and China's reliance on coal-powered electricity and energy-intensive production processes amplifies their indirect emissions footprint.
These countries would need to hasten their transition to renewable energy and ramp up energy efficiency of their production processes.
CBAM impact
The European Union's Carbon Border Adjustment Mechanism (CBAM) is expected to have a negative impact on the domestic producers, especially the major manufacturers.
Admittedly, the carbon intensity of the domestic primary aluminium industry is higher than the global average. But the impact of the EU's Carbon Border Adjustment Mechanism (CBAM) on domestic exporters would be limited as the CBAM boundary at present is restricted to direct emissions in smelting and casting, and the share of direct emissions in the overall scheme is quite limited.
Also, the inclusion of indirect emissions is unlikely to happen in CBAM until the electricity grid in the EU is entirely decarbonised.
IAI data shows that emissions in the primary aluminium production process are highest in the form of indirect emissions of the smelting process which is over 9 tCO2/tAl- far higher than direct emissions from smelting and casting. In fact, the chunk of cradle-to-grate emissions in primary aluminium production is due to higher embedded emissions in power source.
Transition pathway
Due to emissions-intensive nature of primary aluminum production, which constitutes around 65-70% of global production of the metal, the International Energy Agency's (IEA) transition roadmap for the sector envisages a steady growth in recycled aluminium production from 36% in 2022 to 42% in 2030 and 56% by 2050.
Likewise thermal energy, indispensable for the production of alumina, will need to be decarbonised. The share of low-emissions thermal energy for production of alumina, non-existent at present, has to rise to around 16% by 2030 in consonance with the broader energy transition goals of the sector.
Source:BigMint
