With manufacturers slowly moving to use low carbon aluminum in their products, the reasons holding back adoption of the green metal are quickly fading.
“EN+ and other aluminum producers accelerated the development of low carbon aluminum shortly after the Paris Climate Agreement,” said Gregory Barker, executive chairman of EN+/RUSAL, the Russian aluminum producer. “With the green aluminum supply now flowing, aluminum buyers can fast track the world to a functioning green economy.”
Emissions fell by 17% in April at the height of the pandemic lockdowns reported in a May study in the Natural Climate Change journal. The decrease gives hard proof that that going green can occur quickly when you eliminate sources of carbon emissions.
While aluminum is one of the preferred metals used in electric cars, planes, electronics, construction, and beverage cans, it produces one of the larger carbon footprints. According to the Columbia Climate Center, smelting primary – newly mined – aluminum eats up 4% of the world’s electricity while spitting out 1% of the world’s CO2 greenhouse gases annually. More than 50% of that electricity comes from coal or oil-fired power plants located in China.
On average, producers emit 12 or more tons of CO2 per ton of primary aluminum. The newer green alternative emits less than 4 tons of CO2 per ton, according to the Aluminum Stewardship Initiative (ASI) consultancy.
“Low carbon aluminum emits three times less CO2 into the environment than primary aluminum made from coal-fired electricity. The big impact on reducing greenhouse gases occurs when manufacturers adopt the widespread use of low carbon aluminum,” says Barker.
Building a green economy requires a mix of economic policies, carbon tax credits, free-market access to buyers and sellers, dependable carbon labeling, consistent supply from producers, and market adoption by aluminum dependent manufacturers.
When the European Commission unveiled the Green New Deal for Europe in December 2019, they announced 50 economic policies and carbon tax incentives to make Europe the first carbon-free continent by 2050. According to Barker, Europe has the framework for what a green economy looks like, and the early indicators are promising.
In June 2020, the London Metal Exchange (LME) announced its goal of launching a low-carbon aluminum spot trading platform that allows buyers to purchase the new metal. The London Metal Exchange has signed a Memorandum of Understanding with the Aluminium Management Initiative (ASI) for collaboration in the price chains guilty of aluminium.
“Over the next five to ten years, consumers will say they want low carbon aluminum in their cars and beverage cans,” said Matt Chamberlain, CEO of the LME. “The LME will be the marketplace for buyers and sellers of low carbon aluminum, delivering pricing transparency, integration with low carbon certification, and verifying chain of custody.”
Chamberlain added that the labeling criteria for low carbon aluminium at the casting point are solid. However, a review that takes into account principles such as measuring the carbon grades of mining and uncooked transport to the smelter, ensuring that the rights of indigenous peoples, the country of origin’s carbon credits, business ethics and human rights still have a long way to go.
“EN/Rusal has already received ASI certifications for 3 production sites, and we are running to certify all our production plants,” Barker said. “We appreciate the fact that ASI certifies its low carbon content, but they also certify our company in 11 living spaces that other people care about.”
Chamberlain added that the LME defines metal specifications in terms of quality and purity, while manufacturers label their aluminum with its carbon content. He said: “We are seeing voluntary adoption of low carbon labelling through EN, Rio Tinto and Alcoa already underway.”
“Most other people are unaware that the LME has more than 500 authorized warehouses in the United States, Europe and Asia, where metals sold in our inventory can physically replace the distributor’s hands with the buyer. Copper today is of higher quality than copper sold through our replacement more than a hundred years ago. It is not unexpected to see the rise of low-carbon aluminum as a new asset class,” Chamberlain said.
According to Acuity Knowledge Partners, six corporations now produce 8 low carbon aluminium varieties, Ecolum from Alcoa in Canada, CBA P1020A in Brazil, Century Aluminium Natur-AI in the United States, Norsk Hydro’s REDUXA and Norway’s CIRCAL 75R in Norway, EN/RUSAL’s ALLOW in Russia, Rio Tinto’s RENOVATION in Australia and Elysis.
Using blank hydroelectric force for coal or oil electricity, NORsk Hydro, CBA and Rio Tinto produce less than four tons of CO2 consistent with a ton of aluminum.
At the forefront of innovation, Alcoa, Apple and Rio Tinto have a joint venture in Canada called ELYSIS with an exclusive fusion procedure that emits less than 2.5 tons of CO2. The joint venture plans to begin licensing the generation globally by 2024.
Barker has shown that RUSAL has sold more than one million tons of LOW ALUMINIUM in carbon allowed since 2017. To date, Norsk Hyrdo has produced approximately 10,000 tons of its CIRCAL and REDUXA and expects to produce 65,000 tonnes by 2021.
On July 21, Mexican producer Cuprum – one of North America’s five largest aluminum extruders – announced their low carbon plans with EN+ setting the stage for manufacturers having a plentiful supply of low carbon aluminum in Mexico and North America.
The charge consistent with low-carbon aluminum ton is not brabably available, as sales are now limited to sun-consistent transactions. As of July 21, the spot value of the $1,646 high-carbon high-carbon aluminum is consistent with the ton in the LME.
Acuity Knowledge Partners reported that the ELYSIS joint venture would reduce production costs by 15% over primary aluminum today. In their annual report, Norsk Hydro said that making low carbon aluminum is 20% higher today than for primary aluminum. Norsk’s CIRCLE-branded low carbon aluminum used in construction is a modest 2-3% higher.
“We aren’t pushing for a price differentiation on low carbon aluminum,” said Barker. “Once we establish the low carbon asset class, then demand from consumers will determine long term prices.”
Until open trade is opened through the customer’s call to start in markets such as the LME, pricing remains a mystery, with the exception of the few anecdotal reports in the public register.
Apple has set the benchmark for an effective ESG program (environmental, social and government) that other corporations could follow soon. As a component of its ELYSIS business partnership with Alcoa and Rio Tinto, Apple plans to use low-carbon aluminum on its phones and computers. The company revealed that aluminum accounted for 24% of its production carbon footprint. Apple will literally take a bite out of the apple through low-carbon aluminum to reduce its emissions.
According to the G-A Institute, in 2019, 90% of corporations in the S-P500 or 450 reported the functionality of their ESS programs. Indexed corporations such as Boeing Aircraft, Coca Cola, General Motors and soon Tesla continue to use dirty or dirty recycled aluminum in their products, despite their commitment to sustainable development.
With China producing 52% of the world’s aluminum and over 30% of the world’s manufacturing, companies dependent on China to make their products will not be accelerating the adoption of low carbon aluminum into their product supply chains anytime soon.
Barker added: “I hope China will move towards low-carbon aluminum as soon as possible. With so much global manufacturing, they can go a long way to reducing destruction through greenhouse gases on our planet.”
I am a New York City-based contributor to Forbes.com, where I cover all things digital and the CFO. Professionally, I guide large companies in the areas of digital
I am a New York City-based contributor to Forbes.com, where I cover all things digital and the CFO. Professionally, I guide large companies in the areas of digital transformation, innovation, and data science. Most recently, I led Silicon Valley-based machine learning and natural language processing company into an exit with a supply chain analytics company. I have a 20 year global (China, Europe, Israel, & USA) career performing C-suite (P&L) and consulting roles in the finance, government, media, tech/IT, and telecom sectors. I hold a BA in Mathematics from The Citadel.
My interests come with mentoring the next generation of leaders, as well as horseback riding, boxing and traveling to historic locations.