Lord Barker, Executive Chairman of En+ Group, asked the London Metal Exchange to join the fight against global warming by requiring aluminium producers to declare the carbon footprint of every warrant traded on the LME
by Mario Conserva
The world aluminium industry is facing extraordinary challenges. New energy and resource-efficiency requirements in the development of transport, electronics, architecture, construction and other industries are the main drivers of demand. On the other hand, with a global population of 7 billion people, the Earth’s resources are under immense strain and, as set out in the Paris Agreement, addressing the climate crisis will be vital for the health of our planet. Considering the potential use of industrial materials in the low-carbon economy, aluminium and its alloys clearly occupy a strong position. As a materials, it is completely recyclable, has potential to be used in highly effective batteries, and can contribute to the global response to climate change through lightweight automotive parts and packaging for consumer goods, as well as components for energy efficient buildings. But aluminium is also one of seven “hard to abate“ sectors for which the reduction of emissions is of fundamental importance. To discuss this topic, we asked Lord Barker, Executive Chairman of the integrated hydropower and aluminium producer, En+ Group, a few questions.
What is your opinion on the worldwide demand for primary aluminium? Based upon your analysis, what impact will this growth scenario have on the balance between primary metal supply and demand, on a global and regional level?
Global primary aluminium demand is expected to grow at a CAGR of ~3.0% over the next 5 years. China has been responsible more or less for ~85% of global demand growth in recent years, while India is expected to become the fastest growing market in RoW and will bring the highest contribution to demand growth followed by North America, Europe and Asia, ex-China. Imbalance between deficit and surplus regions will increase seaborne trading, and metal production in the “surplus” regions will be mainly concentrated in the Middle East, Russia and India.
What’s your view on the relationship between recycled and primary aluminium? Should we all be shifting to circular models?
Recycling is a good solution for low carbon aluminium value chains; the ability to repeatedly recycle it without a loss of performance is one of the main advantages of the material and its alloys. According to the Mass Flow Model, developed by the International Aluminium Institute, recycled aluminium usage as a proportion of overall aluminium consumption is expected to rise 55% by 2030 compared with 2019. We should consider, however, that while aluminium demand is growing, the availability of recycled materials is limited. Moreover, switching to only recycled metal is not feasible, since a significant share of total aluminium consumption demands there are no impurities in the metal, which only primary aluminium can guarantee. More than 73% of worldwide annual aluminium demand is met by primary metal today, which accounts for the majority of the industry’s carbon footprint.
Do you see relevant connections between primary metal production capacity and sustainable production?
It is quite clear that excess capacity in the primary aluminium industry is one of the main factors hindering the transition to a low-carbon and environmentally sustainable economy. Producing primary aluminium requires a lot of electricity (12 to 15 KWh/kg of aluminium)and in some countries relies heavily on coal-fired power plants. In the past 20 years, most of the capacity growth has been with smelters powered by coal and other fossil fuels, generating 4 to 5 times more GHG emissions than hydropower reliant smelters. Carbon emissions from the burning of fossil fuels can be attributed to huge social costs through increased demand for public health care, harm to the environment, and the effects of climate change. This means not all primary aluminium is equal. Today, worldwide annual primary aluminium production exceeds 65 million tons. Almost two thirds derives from smelters which use fossil fuels. On this basis, it is clear the environmental impact of aluminium can be very different depending on how it was produced. We believe the world cannot afford to continue adding coal-powered production facilities. At the same time, many large end-users of aluminium are telling us specifically that they want low-carbon aluminium produced using renewable energy such as hydropower.
What proactive role do you think primary aluminium producers should have?
Aluminium can be a building block for the low-carbon economy: crucial for electric vehicles, sustainable packaging and energy efficient homes. To play this vital role, however, producers have to guarantee the metal is produced in a low-carbon manner. While smelters that rely on coal-fired power generate an average of 12.6 tonnes of carbon for each tonne of aluminium, producers like En+ Group, which use clean hydropower, can create the same amount of aluminium while emitting 2.6 tonnes of carbon. This should be the goal for the whole industry: to drive that carbon footprint down further.
So, you’re calling on the LME to require all producers disclose their carbon footprint?
You can’t fight carbon emissions without measuring them. Achieving science-based targets for carbon reduction requires accurate and reliable information in an easy format that everyone from institutional investors to end consumers can understand. As a first step in this process, every company in the sector should be far more transparent in disclosing the carbon content of the aluminium they produce. We believe this vital information should be clearly stated in any purchase or sale of warrants on the London Metal Exchange, providing an important foundation upon which we can implement carbon pricing and accelerate the shift to a low carbon economy. That is why En+ Group is calling on the LME to make disclosure of Level 1 emissions a core requirement of trading on the exchange—a revolutionary decision we hope will lead in the future to a new Low Carbon Aluminium asset class. The world has woken up to the threat of climate change, and recent climate debates around the world demonstrate the pressure for urgent action not only from governments but from big business too.
How would you sum up your view of where the aluminium industry needs to head over the coming years?
Our position is that global aluminium demand will only achieve its full potential if production transitions to a low-carbon model. Being the largest producer of low-carbon aluminium, we have a critical role to play. We are convinced that a modern industry like ours must increase transparency, which in turn can help secure our place in a transforming global economy.