context: In October 2023, MEE (Ministry of Ecology and Environment) issued directives for seven high-emission industries to commence emissions reporting and verification procedures. The inclusion of aluminium in the carbon market has been a long-anticipated development. This strategic step will help the industry adapt to future carbon tariff measures, including the EUs CBAM (Carbon Border Adjustment Mechanism). Aluminium will be the second most impacted industry by CBAM after steel, accounting for 0.7 percent of PRC exports to the EU.
MEE (Ministry of Ecology and Environment) issued a call for comment on two emissions accounting guidelines for the aluminium smelting industry on 15 March 2024. The Guidelines give a clear signal that aluminium will be the second industry after power generation to join the national carbon market (CP note: otherwise known as the emissions trading scheme), reports Caixin.
Aluminium smelting includes a range of production and processing enterprises. However, the Guidelines only set verification requirements for electrolytic aluminium. This is because it is the largest emitter in the industry, accounting for 4.5 percent of total PRC emissions, and has relatively simple production processes. 80 firms are set to be included, according to China Nonferrous Metals Industry Association.
Use of green electricity is one of the main ways firms will be able to offset indirect CO2 emissions. According to MEE data as of September 2023,
- annual electricity consumption of the electrolytic aluminium industry exceeded 500 bn kwH: approximately 6.8 percent of domestic power consumption
- more than 60 percent of production capacity uses self-owned coal fired power plants, with emissions intensity of products much higher than comparable products abroad that use clean energy
A number of firms have already begun increasing clean energy use in the form of distributed PV (photovoltaics) plus microgrid projects, or through market transactions with green power companies.
The Guidelines clarify that non-fossil energy sources such as wind and solar PV purchased through market transactions need to provide contracts, green power certificates and settlement vouchers. Green power certificates are not required for existing conventional hydro and nuclear power.