With the implementation of the EU Carbon Border Adjustment Mechanism (CBAM) and the deepening of the domestic carbon market, the electrolytic aluminum industry is facing certain transformationary pressures. By 2026, the implementation of CBAM will increase the carbon emission cost of aluminum in the European region by $20-$50. In 2027, the implementation of the paid allocation system in China will mark the official entry of the electrolytic aluminum industry into the "era of carbon costs", becoming a "dividing line" in the reshaping of the industry pattern. Against this backdrop, hydropower aluminum enterprises, with their low-carbon emission advantage, will gain structural development opportunities, while thermal power aluminum enterprises, due to the pressure of carbon emission costs, will face severe challenges.

The phased implementation of the EU CBAM

CBAM (Carbon Border Adjustment Mechanism, Carbon Border Adjustment Mechanism) is a policy established by the European Union to address "carbon leakage". It aims to ensure fair competition in carbon costs between imported products and EU domestically produced products by imposing a carbon emission fee on imported products. The implementation of CBAM will affect the cost of China's aluminum export enterprises. From the implementation path of CBAM, the construction of the overseas carbon market is divided into three stages: transition period, initial taxation and full implementation. From 2026 to 2033, during the initial taxation period, only direct emissions are taxed, which means that carbon tax is imposed on self-supplied electricity and processing links. After 2034, 100% direct taxation will be implemented.

The direct carbon emissions of the overseas aluminum electrolysis industry mainly come from anode consumption and anode effect, among which, anode consumption is the core source. According to the MRV (Monitoring, Reporting, Verification) data of the International Aluminum Association (IAI) and various aluminum smelting enterprises in 2024, the average direct emission of the aluminum electrolysis process is about 1.57 tons CO2e/ton of aluminum (of which, the carbon emission of anode consumption is about 1.42 tons CO2e/ton of aluminum, and the anode effect is about 0.15 tons CO2e/ton of aluminum). The European Commission has set the benchmark emission intensity of the aluminum electrolysis industry at 1.55 tons CO2e/ton of aluminum in 2026 according to the CBAM Implementation Regulation.

Overseas, there are significant differences in direct carbon emissions among different regions. In regions with green power, such as Norway, Canada, and Iceland, which rely on hydropower and wind power, the direct carbon emissions are mainly from anode consumption, approximately 1.2 to 1.5 tons of CO2e per ton of aluminum, due to the extremely low indirect emissions of electricity. In regions with thermal power, such as Southeast Asia (e.g., Vietnam, Indonesia) and the Middle East (e.g., Saudi Arabia), which partially rely on coal power, the direct emissions are slightly higher, approximately 1.6 to 1.8 tons of CO2e per ton of aluminum, due to the uneven quality of anodes and slightly higher consumption intensity.

Taking European aluminum smelters with high carbon emissions as an example, direct emissions are about 2 tons of CO2e per ton of aluminum, the EU carbon price is 90 euros/ton, and the free allocation in 2026 is 97.5%. Carbon tax = (2 - 1.55 × 97.5%) × 90 ≈ 44 euros/ton of aluminum (about 50 US dollars/ton). In 2026, the implementation of CBAM in the European region may lead to an increase in the cost of aluminum of 20 US dollars ~ 50 US dollars. With the rise in the EU carbon price, the cost gap between thermal power aluminum and green power aluminum is further widening.

Domestic carbon market

Three stages of construction implementation path

Domestic carbon market construction follows the logic of "pilot first, gradual expansion, and mechanism improvement", and is divided into three stages: initial implementation (2024-2026), deepening and improvement (from 2027), and full maturity (before 2030). The core goal is to build a carbon pricing system of "total control + quota management + market transactions", and to promote the green transformation of high-energy-consuming industries.

In 2026, all the carbon emission allowances in China's carbon market will be free. From 2027 to 2029, the construction of the carbon market will adopt the benchmark method and set up 5% to 10% of paid allowances. The impact on the electrolytic aluminum industry is the emergence of an industry gap of 3.4 million to 1.2 million tons per year, and the carbon cost changes from implicit to explicit. After 2030, the proportion of free carbon emission allowances in the electrolytic aluminum industry will decrease year by year. If the carbon price reaches 100 RMB to 150 RMB / ton, the cost of a ton of aluminum will increase by 200 RMB to 2000 RMB.

Domestic and foreign carbon emissions

Differences in accounting systems are benchmarked

The differences between domestic carbon market rules and EU CBAM in terms of carbon emission accounting system are focused on the seven dimensions of accounting boundary, emission source coverage, gas types, data quality, power emission factor, carbon price deduction and compliance requirements, which directly affect the calculation logic of enterprise carbon cost and market competitiveness.

The difference between the two may be the difference between "development stage" and "policy orientation". China is in the "late stage of industrialization", which needs to balance "economic growth" and "carbon reduction". Therefore, the rules focus more on the gas accounting of "core processes" in order to promote the reduction of corporate carbon emissions and reduce domestic carbon emissions. The EU rules focus more on the gas accounting of the "whole life cycle", aiming to balance the "carbon cost at home and abroad" and prevent carbon leakage. The construction of different carbon emission markets at home and abroad has a significant impact on the future cost of the aluminum industry, and aluminum export enterprises face a more complex carbon tax situation.

Carbon emission cost calculation differences

Impact on export enterprises

In 2026, the European CBAM (Carbon Border Adjustment Mechanism) will only levy on direct carbon emissions, and its collection cost formula is: CBAM cost = (Direct carbon emission of ton aluminum in aluminum smelting - EU free allocation × (EU carbon market price - China carbon market price) × exchange rate.

Among them, the carbon emission of aluminum electrolysis is divided into direct emission and indirect emission. Direct emission mainly comes from fuel combustion in the production process (such as natural gas and coal used for heating of electrolytic cells) and process (such as CO2 emission from the oxidation of anode carbon blocks). According to the "Carbon Emission Report of China Aluminum Electrolysis Industry", the direct emission of CO2 per ton of aluminum is about 1.8 tons, accounting for 14% of the total emission. Indirect emission mainly comes from the carbon emission of purchased electricity (grid coal-fired power or green power). If grid coal-fired power is used, the indirect emission of CO2 per ton of aluminum is about 11.2 tons (accounting for 86% of the total emission); if green power (hydroelectric, wind power, photovoltaic) is used, the indirect emission can be reduced to less than 2 tons (depending on the proportion of green power).

The EU free allocation is a carbon emission allowance without cost issued by CBAM to domestic enterprises to avoid "carbon leakage" (domestic enterprises transfer production capacity due to high carbon cost). The free allocation for the electrolytic aluminum industry is calculated based on the average emission intensity of the EU industry: EU free allocation (ton CO2e/ton of aluminum) = EU electrolytic aluminum industry benchmark emission intensity × free allocation ratio for tons of aluminum. The EU free allocation will decrease year by year (97.5% in 2026, 50% in 2030, and zero in 2034), and the CBAM cost for electrolytic aluminum enterprises will increase as the free allocation decreases.

Suppose a certain enterprise produces 1 ton of refined aluminum, using grid thermal power, with a carbon emission of 13 tons of CO2 per ton of aluminum (1.8 tons directly + 11.2 tons indirectly); the EU carbon price is 90 euros/ton of CO2, the Chinese carbon price is 100 RMB/ton of CO2, and the exchange rate is 7.8:1; the taxable emission = 1.8 tons - 1.55 tons × 97.5% ≈ 0.825 tons, the CO2 carbon price difference (RMB) = (90 euros × 7.8) - 100 RMB/ton of CO2 ≈ 602 RMB/ton of CO2, then the CBAM cost = 0.825 tons × 602 RMB/ton ≈ 496.65 RMB/ton of aluminum. Therefore, if the export enterprise uses thermal power aluminum ingot processing production and exports to the EU area after 2026, the overall cost will increase by 496.65 RMB/ton of aluminum.

To sum up, the wider the gap between the EU carbon price and China's carbon price, the higher the CBAM cost. If Chinese enterprises purchase carbon allowances or use CCER (National Certified Voluntary Emission Reductions) to offset carbon emissions through the national carbon market, it can reduce part of the cost of China's carbon price. For downstream aluminum export enterprises, the cost impact of CBAM on electrolytic aluminum mainly depends on the carbon emission intensity (thermal power aluminum > green power aluminum), EU free allowances (decreasing year by year) and the carbon price gap (EU carbon price > China carbon price).

As an integrated internet platform providing benchmark prices; On September 29th, the benchmark price of aluminum by SunSirs was 20,783.33 RMB per ton, an increase of 0.18% compared with the beginning of this month (20,746.67 RMB per ton).

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