The EU’s carbon border tax: aluminium trade at risk, steel sheltered Report

Insight 10 May 2021

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Report summary

The EU Commission is set to propose a carbon border adjustment mechanism in June. In metals, steel and aluminium are the top two carbon emitters. These industries must decarbonise if the world is going to reach a 2-degree warming scenario. So will the “border tax” clean them up? Working with our sister company, Verisk Maplecroft, we outline how the CBAM will meet the EU’s trade and climate objectives. And we use Wood Mackenzie’s Emissions Benchmarking Tool to assess the outlook on aluminium and steel.

Executive summary
- Aluminium trade disrupted, but no change for steel trade
- A CBAM will bring higher prices and help to reduce domestic carbon emissions, but an EU CBAM alone will not lower global emissions
The CBAM
- CBAM to marry EU’s trade and climate objectives
- Levelling the playing field
- Making the CBAM WTO compliant
- CBAM faces resistance from key trade partners
- Logistical nightmare with many potential issues
- CBAM to cover scope 1 and 2 (probably not scope 3) emissions
The Metals
- Steel and aluminium: metals’ top two carbon emitters globally
- Why is aluminium carbon intensive?
- Why is steel carbon intensive?
- How is the EU positioned on these commodities?
- Steel has been subject to the EU ETS for over a decade – has it worked?
- The aluminium industry has been excluded from the first three phases of the EU ETS
- The CBAM could disrupt aluminium trade flows
- but may not impact steel trade
- Business as usual for hot metal trade
- disruptive for aluminium – but the extent depends on the detail
The forecast
- How will the CBAM affect aluminium and steel?
- A CBAM will bring higher prices and help to reduce domestic carbon emissions
- but an EU CBAM alone will not lower global emissions

Tables and charts

This report includes 7 images and tables including:

Aluminium and steel proportion of global total emissions 2020
Aluminium and steel proportion of global total emissions 2020 (tonne CO2e/tonne product)
How have EU steelmakers escaped the ETS?

Emission intensities for EU and all other countries that send aluminium products to the EU
EU hot-rolled coil imports, emissions and margins
2020 scope 2 proportion of emissions by product
2019 import value by product