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When the tariffs kick in from 2026, primary aluminium producers exporting to Europe will have to buy EU-ETS certificates for the emissions.
The carbon tax that the European Union (EU) will impose on five bulk commodities will make India’s aluminium exports to Europe unviable, according to a report.
The tax that is part of the wider plan of the 27-member bloc, called Carbon Border Adjustment Mechanism (CBAM), to bring down net carbon emissions to zero by 2050 will add an incremental cost of $1,500-1,600 per tonne of aluminium that will be exported to the EU, the analysis by rating agency Crisil said.
However, Crisil added that during the initial phase of CBAM, exports to the EU will likely remain stable since domestic manufacturers (Vedanta and Hindalco) have strong greenhouse gas emission reporting standards, which will fulfill the requirement until 2025-end.
India exported $8.84 billion worth of aluminium and aluminium products, of which around 25% or $2.24 billion went to the EU, in the last financial year, according to commerce ministry data.
“India produces 4.1 million tonne (MT) of primary aluminium annually — amounting to 6% of global production —of which as much as 56%, or 2.3 MT, is exported. It is one of the lowest-cost producers of aluminium globally, owing to integrated operations and low costs of power generation since it uses coal-based captive plants,” the Crisil report said.
As India produces aluminium using coal-based captive plants, it sits at the upper end of the spectrum when it comes to emissions, the report said. The average greenhouse gas emission intensity of the domestic aluminium industry is one of the highest globally, at 21-22 tonne of carbon dioxide per tonne of aluminium.