Supported by CBAM.Clarion.Engineer
Aluminium production is exceptionally sensitive to electricity prices and supply conditions. Yet, under the current CBAM treatment of listed aluminium goods, purchasing renewable electricity does not automatically reduce certificate liability. This creates a distinction between electricity’s industrial importance and its role in the current emissions calculation.
Direct emissions remain central to current CBAM treatment
For iron-and-steel and aluminium goods currently listed in Annex II, the existing CBAM calculation takes account of direct emissions. Renewable electricity procurement can deliver significant operational, customer, financing and decarbonisation benefits without automatically lowering current certificate liability through purchased-electricity emissions.
For aluminium producers, this distinction is particularly important. Electricity can dominate smelting costs and strongly influence a product’s carbon intensity, while the current Annex II treatment for listed aluminium goods focuses on direct emissions. Process sources, including anode consumption and perfluorocarbon emissions, therefore remain central to the current CBAM calculation.
Commercial teams need to assess two related but distinct dimensions: the economics of physical electricity supply and the emissions methodology applicable to the product. Both affect the business, but they do not necessarily use the same carbon boundary.
Renewable power remains a strategic asset
Renewable electricity can reduce operational carbon intensity, support customer requirements, strengthen corporate reporting and differentiate low-carbon aluminium products. Long-term power purchase agreements (PPAs) can also provide a foundation for new renewable generation projects by securing industrial offtake.
For lenders, the PPA should be valued according to its demonstrable effects on electricity costs, supply security and market positioning, rather than an assumed direct CBAM saving that the current calculation does not automatically provide.
Aluminium smelters with stable baseload demand can also provide valuable offtake for renewable energy portfolios. However, the contractual structure must establish who bears the costs of hourly shaping, balancing and imbalances. These costs can materially affect the delivered PPA price and should be identified separately rather than concealed within an environmental premium.
Proposed reforms could change future electricity treatment
The legislative proposal COM(2025) 989 would materially revise electricity treatment, including the methodology for electricity default values and certain conditions for using actual values. It would broaden the concept of physical PPAs to include intermediaries and change elements of the congestion and nomination framework.
The Council adopted its negotiating position on 12 June 2026, followed by the European Parliament on 15 September 2026. The proposal remains under interinstitutional negotiation and must not be treated as enacted law.
The same legislative file proposes expanding CBAM downstream coverage from 2028 to selected steel- and aluminium-intensive goods. Both institutions support expansion, but their proposed product lists differ and remain subject to negotiation. Until final legislation is adopted, the existing scope remains the operating baseline.
Separate power competitiveness from process-carbon compliance
Aluminium buyers and producers should assess electricity procurement against defined benefits in power costs, supply reliability, customer requirements and decarbonisation. Process-carbon compliance should be evaluated separately against the emissions categories and methodology applicable to the relevant product.
The commercial opportunity is substantial because aluminium production depends so heavily on electricity. Capturing that value, however, requires a precise distinction between what renewable power delivers industrially and what current CBAM rules recognise in the certificate calculation.
