How realistic are the EU’s climate targets?

As the voice of the aluminium industry in Europe, the industry association European Aluminium comments on the climate targets that the European Commission is planning for 2040. The targets are quite ambitious, but are they realistic?

It should be clear in advance: Aluminium must be seen as a material that is necessary for success; after all, it serves as the basis for various transition technologies that are needed to achieve the goals. For example, a good 21 tonnes of aluminium are needed for each MW of installed solar capacity. Increasing PV solar capacity from today's level (136 GW) to 320 GW by 2025 and 600 GW by 2030 – as proposed in the EU Solar Strategy – would require an additional four and ten million tonnes of aluminium, respectively. Large quantities of aluminium are also needed for the production of batteries, electric vehicles, wind turbines, heat pumps and hydrogen electrolysers. Overall, some studies indicate that the additional demand for aluminium in Europe will reach a good five million tonnes per year by 2040 in order to be able to meet the climate targets for the rapid energy transition – this corresponds to an increase of 30% compared to today's total aluminium consumption in Europe.

Moreover, compared to other energy-intensive industries, primary aluminium production is already electrified and Europe's carbon footprint is one of the lowest in the world: since the late 1990s, the European primary aluminium industry has reduced its total direct CO2 emissions by 55%. But to take a few steps further and continue decarbonisation, the aluminium sector needs a comprehensive regulatory framework that protects the industry from carbon leakage, incentivises investment in the necessary technologies – and realistic targets for further emissions reductions.

In order to create targets that are as realistic as possible and achievable for the industries, the plan for 2040 should include the following:

Realistic targets: The EU must focus on setting achievable and reasonable targets - for example, in the form of more flexible targets, new technologies and an appropriate emissions trading system (EU ETS).

Flexible targets: Instead of focusing only on numbers, climate targets should be accompanied by frameworks. Each target needs to be underpinned by clear policies, the development of public and large private infrastructure, and financial support for investments in line with scalable commercialisation of new technologies.

ETS at an appropriate pace: The ETS is the main instrument for reducing emissions in Europe. Currently, it is designed to reduce emissions to zero by 2040 (taking into account the speed of the linear reduction factor). The ETS sectors have reduced their emissions considerably. But without a measured approach to industrial exposure, the magnitude of carbon leakage will increase even further.

Ensure adequate protection against carbon leakage: Currently, electricity costs account for 40% of primary production costs, which are heavily influenced by the costs of the emissions trading scheme, which are passed on to the electricity price by electricity producers. These costs are currently mitigated by the indirect cost compensation scheme, which allows Member States to reimburse selected energy-intensive industries for part of their electricity costs. If indirect cost compensation were to be fully replaced by CBAM, EU generators would have to pay these indirect costs on top of more ETS costs and receive fewer free allowances. Overall, removing the current carbon leakage measures for primary aluminium production in Europe could lead to a 43% increase in costs.

Enough room for scalable carbon removal development: For hard-to-delete industries, new technologies will play a key role in reducing carbon emissions. The main barriers to the deployment of these technologies are the lack of an appropriate regulatory framework, access to storage, good transport alternatives and adequate financial support.

More investment opportunities: Climate targets should be accompanied by investment opportunities and support for critical value chains. State aid instruments should be made more flexible to accelerate investment in recycling and the production of low-carbon and recyclable metals to supply critical value chains. Aluminium should be included in the list of strategic raw materials and all relevant raw materials should be protected by the Net Zero Industry Act.

Please find the full response of European Aluminium here: 2040 CLIMATE TARGETS