Supported by CBAM.Clarion.Engineer
Decarbonising primary aluminium production requires commercial teams to distinguish emissions associated with electricity supply from direct process emissions generated by smelting technology. Renewable electricity can reduce the broader carbon footprint of production, but it does not eliminate the need to monitor and reduce emissions from anode consumption and perfluorocarbon (PFC) releases.
Current CBAM calculations focus on direct emissions
The European Commission published definitive-period sector guidance on 14 August 2026, including dedicated guidance for electricity, iron and steel, and aluminium. It refreshed its general CBAM questions and answers on 15 October 2026. These materials help explain implementation but do not replace the binding regulation and implementing acts.
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 therefore deliver substantial operational, customer, financing and decarbonisation benefits without automatically reducing current certificate liability through purchased-electricity emissions.
For primary aluminium producers, this distinction makes the separation of emissions sources particularly important. Anode-related CO₂ emissions and PFC emissions require their own monitoring and abatement measures. Under current CBAM rules for listed aluminium goods, these direct process emissions remain central to the certificate calculation.
Renewable attributes require controlled allocation
Contracts covering renewable electricity attributes should prevent the same environmental claim from being sold more than once, particularly when a renewable project supplies several industrial customers.
Electricity supply records and Guarantees of Origin (GoOs) can be reconciled to support appropriate claims, but ownership of a renewable attribute does not, by itself, establish that the electricity qualifies for a particular CBAM treatment.
The power contract should therefore form one part of a broader transition programme covering cell efficiency, anode management, process control and precursor data. Electricity traders can support the energy-procurement component without implying that renewable supply resolves the product’s entire embedded-emissions position.
Align investment planning with separate carbon models
Capital providers should incorporate both decarbonisation capital expenditure and PPA strategy into the same financial model while keeping their revenue and compliance effects distinct. A competitively priced renewable contract may improve cash generation and help finance process upgrades, even before the regulatory framework gives purchased electricity a broader role in the relevant CBAM calculation.
Customer contracts for low-carbon aluminium should specify whether the commitment relates to product carbon footprint, renewable electricity sourcing, a maximum emissions threshold or a disclosure requirement. Each type of commitment requires its own evidence and may support a different commercial premium.
Aluminium buyers should consequently separate power-cost competitiveness from process-carbon compliance and evaluate each transition measure against the benefit it can demonstrably deliver.
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 power purchase agreements 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 extending 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.
For primary aluminium, renewable electricity is an important decarbonisation lever, but it is not a substitute for reducing direct process emissions. Investors therefore need a disaggregated carbon model that reflects each emissions source and the specific regulatory treatment applicable to the product.
