Avoiding irreversible climate change will require a dramatic cut in global emissions over the next few decades. The recent Stern Review and IPCC assessment reports suggest that by 2050 global emissions will need to be 50-85% lower than they are today (ENDS Reports 382, pp 34-36 and 388, pp 10-11 ).
Most cuts will come from developed countries and emissions reductions on this scale will require cutbacks in all parts of the economy. No sector will be left unaffected.
Aluminium production - with global emissions of around 250 million tonnes of CO2 equivalent - is a high-profile industry striving to come to terms with a future in a low-carbon economy.
Primary aluminium is so energy intensive that it is sometimes called solid electricity - each tonne takes about 15 megawatt-hours of electricity to produce.
On average, worldwide, nearly six tonnes of CO2 are emitted as a result of electricity generation to produce one tonne of aluminium smelted. This is despite more than half of production plants using hydroelectricity. On top of this, the production process directly emits about 3tCO2e per tonne. And another 2tCO2 are generated in bauxite refining.
But emission reductions are made even more difficult and compelling by the growing demand for aluminium. Globally, 34 million tonnes are produced annually and demand is increasing by 5% a year, according to the European Aluminium Association.
Most of this will be met by increases in production in Russia, the Middle East and China. China accounts for 27% of global aluminium production and just under a quarter of demand.
Living with a carbon price
Just 8% of global production - under three million tonnes - is produced by the 20 aluminium smelters in the EU. The UK has three primary smelters - at Lochaber in Scotland, Anglesey in Wales, and Lynemouth in north-east England. They produced nearly 370,000 tonnes of aluminium during 2005.
Only one UK smelter is powered by fossil fuel. The other two use hydroelectricity and nuclear power.
In common with other heavy industries, the European aluminium sector is under growing pressure to cut energy use and reduce emissions. But unlike the others, its direct emissions are not covered by the EU emissions trading scheme (EUETS).
One reason for the sector’s exemption is that it is highly exposed to global competition. European producers are among the most expensive in the world because of high energy and labour costs.
It was feared that adding a price for carbon to bills would tip the balance and wipe out the European industry overnight. That would not benefit the environment as production would simply shift to unregulated areas of the world.
Another reason for the exemption was that opportunities for cutting emissions are limited. The first two rounds of the EUETS only covered CO2 and this is an inevitable by-product of the aluminium production process with little scope for abatement.
The basics of the process are now more than a century old. They involve dissolving raw alumina in a 980°C bath of molten cryolite - a mineral comprised of sodium hexafluoroaluminate. An electric current is passed through the bath at low voltage but high current to split the alumina into aluminium and oxygen. The molten aluminium is collected, while the oxygen reacts with the carbon on the anode to produce CO2.
The final rationale for the exemption from EUETS was that most of the sector’s emissions come from electricity generation, and this is already covered by the trading scheme. So aluminium manufacturers are indirectly affected as power generators pass on the cost of carbon in the form of higher electricity prices.
Given that energy already accounts for about a quarter of the industry’s expenditure, it already has a significant incentive to use energy efficiently. Much of the low-hanging fruit in terms of efficiency improvements available to other sectors has long been plucked by the aluminium industry.
"We are a large energy user. We use 12% of Wales’ electricity and it’s expensive. Guess what, we’ve got our eye on that ball already. It’s a big part of our monthly expenditure, so of course we want to keep costs down," said David Bloor, managing director of Anglesey Aluminium Metal, the UK’s biggest primary smelter.
Temporary respite? But the exclusion from the EUETS may only be temporary. A review of the scheme by the European Commission is considering whether to include the sector from 2012. Not least because other sectors, like steel - which aluminium competes with - are already included.
Last year, a report from European environment agencies recommended the sector’s inclusion (ENDS Report 376, pp 14-15 ). Importantly, it suggested expanding the scheme to cover emissions of perfluorocarbons (PFCs), which are powerful and long-lived greenhouse gases produced by aluminium smelting.
Ann Gardiner of consultants Ecofys, who helped prepare the report, is not convinced aluminium producers have seen their energy prices rise as a result of the EUETS.
"It’s not clear that they get the price of carbon passed on in their energy bills," she said. "The arrangements for buying electricity are hard to unpick."
Some aluminium smelters, like Lynemouth, operate their own power plants while others have long-term contracts with electricity producers which have shielded them from the worst of recent energy price rises.
But this situation is unlikely to last. About half the electricity contracts will expire in the next three years, and producers will struggle to secure such favourable long-term deals after this.
The smelter in Anglesey draws its electricity from the ageing magnox nuclear reactor at Wylfa, due to close in 2010. The company has been exploring how to replace its energy supply. It tried, but failed, to secure a long-term energy contract, and has looked into building its own dedicated power plant.
"We considered three fuels: coal, gas and biomass," said David Bloor. Coal was ruled out because of its carbon intensity. "Let’s say it would be courageous for a company to opt for coal, we wouldn’t take on that risk."
Meanwhile, the high and volatile price of gas made it only marginally economic. That left biomass, but the company could not make the sums add up for that either.
"We looked closely at biomass, but the only way it gets anywhere near economic is because of the government subsidies offered for renewables. These are only guaranteed for the next thirteen years, but we are looking 20-30 years ahead."
The final option is to exist on a series of short-term hedges. This is common in parts of Europe, but it does not allow for long-term planning or investments.
"[Aluminium producers] are caught between a rock and a hard place," said Ann Gardiner, "There are very limited opportunities for reducing emissions. Reducing emissions of PFCs is where they can, but they have been doing so."
But David Bloor sees things differently. "It puts the government between a rock and a hard place," he said. "If we shut down, the slack will be taken up elsewhere in the world. There’s only one way you can make aluminium, so the emissions will continue."
"It may look good for an individual country’s figures, but shutting us down is not going to help climate change."
The past two decades have already seen the European industry lose ground to foreign competitors. Europe and North America only account for 27% of production, down from 53% in 1990.
But Tomas Wyns of Climate Action Network still thinks that aluminium production should be included in the EUETS. "All large point sources should be included in the scheme," he said. "There are ways of circumventing the competitiveness issue."
He suggested greater auctioning of EUETS allowances would produce revenues that governments could use to protect industries at risk from international competition. They could also lower labour taxes to offset the cost of carbon.
The EU’s complex state aid rules have been seen as an obstacle to such assistance in the past, but Mr Wyns insists the aluminium industry would be eligible for support because it is an important European industry and failure to protect it would cause economic damage.
He also thinks forcing the industry to factor in the cost of carbon would encourage it to come up with new and innovative ways of cutting emissions along the whole production chain.
"Once there’s a price for carbon, the whole economic circumstances of a company change," he said. "One of the most important ways of reducing emissions is through recycling; pricing carbon could make it more attractive to do more of that."
The recycling challenge
Aluminium is capable of being repeatedly recycled without losing quality. Recycling aluminium involves a simple remelt process that uses just 5% of the energy used to produce aluminium from ore. Maximising the recycled content of aluminium dramatically reduces its carbon footprint.
But again the sector is alive to the opportunities of recycling. According to the International Aluminium Institute (IAI), nearly three quarters of the aluminium ever produced is still in use. Worldwide, around a third of demand is met by recycled aluminium. The picture is even better in the EU where 61% of production is from recycled metal.
The challenge is sourcing enough used aluminium. The recycling rate in the UK is about 33%, but it varies by use. More than 90% of the metal used in large products like cars or in construction is recovered, but under half of the aluminium cans made are recycled and the figure is less than 10% for foil.
Cherry Hamson, of Alupro, the industry organisation that works to boost recycling, dismisses the idea that a price for carbon would increase recycling rates. "Recycling is totally economic already," she said. "Collectors can get £700-£800 per tonne compared to just £30-£40 for steel. The barrier is not cost, it’s simply getting it out of the households."
Applying a price of carbon of even €30 per tonne under the EUETS would increase the value of recycled aluminium by less than 10%.
Joan Chesney, the president of the Aluminium Federation insists the industry is doing all it can to improve recycling rates: "Recycling has been growing by 4% a year over the past two decades and it will continue to increase."
The industry has set a target to meet half of the worldwide demand with recycled metal by 2020.
She was also keen to highlight the contribution aluminium makes to reducing emissions in other sectors. The industry has conducted a series of life-cycle assessments (LCAs) to quantify the emissions savings from using aluminium in products like cars and trains.
It estimates that every kilogram of aluminium that replaces steel in a car saves 20kg of CO2 over the vehicle’s life.
"There has been a shift from sustainable production to sustainable consumption," said Joan Chesney. "Aluminium can make a huge contribution to cutting emissions through things like lightweighting the automotive sector."
PFC reduction effortsBut the industry still has to address its own emissions. Tetrafluoromethane (CF4) and hexafluoroethane (C2F6) are the two main PFCs emitted during aluminium smelting. They are , respectively, 6,300 and 12,500 times more powerful greenhouse gases than CO2 and account for about a third of aluminium production’s direct greenhouse emissions by CO2e.
They are formed when the level of alumina in a smelter cell drops to a point where fluorides from the electrolyte can combine with carbon from the anodes. These "anode effects" can be avoided by carefully monitoring the amount of alumina in the cells. Modern smelters use technology which makes it easier to manage the flow, but even in older smelters, it is possible to control levels to minimise PFC formation.
Reducing the frequency and duration of anode effects also improves the process’s energy efficiency.
The industry is on track to meeting a voluntary goal to cut global emissions of PFCs by 80% per tonne of aluminium produced by 2010. According to the IAI, global emissions were 78% lower in 2005 than in 1990. In absolute terms, emissions have more than halved from 86MtCO2e in 1990 to 31MtCO2e in 2005 despite a 64% increase in production.
"The industry has been pretty successful in sorting out its direct emissions," said Robert Chase, IAI’s secretary general. "PFC emissions have come down sharply. They’re now less than direct CO2 emissions."
But he thinks the industry can go further. He points out that the worst emitters produce five times more PFCs than the best, and a fifth of smelters are responsible for 65% of emissions.
The best performing smelters emit just 0.03tCO2e of PFCs per tonne of aluminium compared with an industry average of 0.96tCO2e. What is more, the worst performers are spread around the globe and not just in developing countries. This suggests there is still room for improvement in at least some European smelters.
Mr Chase thinks the industry could cut another 25MtCO2e off direct emissions simply by bringing the worst performers up to the level of the best.
Alternatives to the EUETS
One way of getting around the competitiveness issue is to introduce a global agreement to tackle the sector’s emissions.
International sectoral agreements are being considered as part of a successor to the Kyoto protocol. The G8 summit in Heiligendamm in Germany in June also floated the idea of tackling emissions on a sectoral basis.
The aluminium industry has travelled further down this path than other sectors. In addition to the PFC-reduction programme, the industry’s sustainable development initiative sets targets to improve environmental performance worldwide, including a target to cut energy use by 10% by 2020.
It benchmarks individual smelters against a range of indicators and identifies best practice. About 70% of global aluminium production is covered by the initiative and more than half of producers are currently in countries with no Kyoto commitments, including Brazil and China.
"We already have a global sectoral approach; it’s entirely voluntary but it’s delivering results," said Robert Chase. "Obviously we can’t get ahead of our members and they can’t get ahead of their governments, but we’re already seeing plants going further than their regulators require."
Voluntary agreements with governments have also delivered savings. UK aluminium producers have managed to cut their energy use by a third since 1990 as a result of an undertaking with the UK government. In return they receive a reduction in the climate change levy on their energy use.
The European environment agencies considered this option in their report, but ruled it out because voluntary agreements tend to result in less ambition targets, their outcome is less certain and they do not send a price signal for carbon.
Technology to the rescue?Technological advances are on the horizon which could dramatically cut emissions from aluminium production. Carbothermic smelting would allow the use of ores less rich in aluminium than bauxite, the current source of alumina, and could cut energy use by a third and emissions by a quarter.
But the real prize would be to replace carbon anodes with an inert material that does not react with the oxygen in alumina, and completely eliminate process emissions.
This has long been promised, but the industry has struggled to find an appropriate material. Alcoa filed a patent for a new inert anode made of nickel, iron and cobalt in 1991 and to date has spent more than $200 million developing the technology. It is now at the stage of commercial cell trials at its smelter in Massena, New York State.
Such a breakthrough could help the sector make a significant contribution to reducing production as well as consumption emissions. The question is whether regulators and the global climate can wait for the technology to be commercialised.