Affordable, green energy is the lifeblood of our industry

30 Sep 2022

In this interview, our Director General Paul Voss draws on his extensive experience in the European energy sector to answer questions about the impact of EU energy policy and the energy crisis on the European aluminium industry.

What most excites you about working for the aluminium industry?

Before I was approached about this role, I had not given alumimium much thought. However, as I started researching, I quickly realised that we all use aluminium daily. This humble metal has a vital role in transitioning to a more sustainable energy system and a greener, more circular economy.

Today, I know that it is not only endlessly recyclable but it’s also a critical component in countless low-carbon technologies. Think about electric cars and renewable energy technologies such as wind and solar power, batteries, and electricity cables. Aluminium quite literally underpins the European energy transition.

Aluminium is strategic for the Green Deal in terms of sustainability and economic value. To give you some figures: we invest in innovation, generate good direct and indirect jobs for over 1 million Europeans, and create around 40 billion euros in turnover yearly. I am genuinely excited and proud to represent this industry!

Can you tell us about your previous experience?

I have around 15 years of experience in public affairs and the energy sector. Before joining European Aluminium, I headed the association for the European district energy sector and served as Head of Public and Industrial Affairs at a global leader in energy efficiency technology.

I hope my experience and network in the energy sector will see us working together more closely, particularly with the renewable power sector.

What do you see as the industry’s biggest energy challenge?

Unlike in many sectors, a big part of our production process is already fully electrified. Transitioning to green electricity is an important decarbonisation step, but access to affordable, low-carbon energy is simply too limited.

What’s more, electricity prices in Europe are significantly higher than anywhere else due to the bloc’s electricity market design and increased costs under the EU Emissions Trading Scheme. This is a real problem because European primary producers cannot pass on these unique costs since the London Metal Exchange globally prices aluminium.

As a result, imports from Russia, China or the Middle East increasingly meet the growing demand for our material. That’s not only bad news for our industry and Europe’s strategic autonomy, but also for our planet.

The carbon emissions of our primary aluminium production process are much lower than the global average, with only 6.8 kilograms of CO2 emissions per kilogram of aluminium produced compared to the global average of 17 kilograms and a Chinese average of 20 kilograms. Europe cannot build its sustainability and industrial ambitions on carbon-intensive, often state-subsidised dependencies.

How is the energy crisis affecting the industry?

The electricity bills of European aluminium producers have increased by + 300% since October 2021, representing more than 80% of today’s aluminium sale price. The war in Ukraine has further spurred energy prices due to the EU’s dependence on Russian gas and the coupling of electricity and gas markets.

As a globally traded commodity, this surge in energy costs is a real threat to our existence, and the threat is already materialising. Since October, the European aluminium value chain has halted or curtailed more than 900,000 tonnes of production, representing nearly half of the EU27 output.

And this is not just about capacity: countless jobs and investments in decarbonisation are also at risk! On the other hand, our global competitors have continued ramping up production because they do not have the same regulatory burdens and associated costs.

What can the EU do to help the industry navigate this crisis?

The Commission’s energy crisis toolbox and RepowerEU Communication are steps in the right direction. They allow for measures to overcome the immediate challenges, push for more renewable energy projects and open the way for newer energy sources such as hydrogen. But they fail to tackle the systemic energy-related burdens of European companies.

The EU’s regulatory framework needs deep evaluation and improvement to address these structural issues, but such a process requires three or four years – precious time European industry and workers do not have.

We need EU and national frameworks to facilitate the production, accessibility and consumption of decarbonised energy at globally competitive prices. Access to long-term power-purchase agreements, for example, is crucial to ensure production predictability and shield an energy-sensitive industry against extreme fluctuations in the energy market.

Financial guarantees at the Member State level would further support our efforts to accelerate the uptake of renewable energy projects.

What is your view on a Carbon Border Adjustment Mechanism?

While a CBAM might sound like a silver bullet against carbon leakage, it is not. The current one-fits-all solution cannot tackle the unique challenges of our energy-intensive industry. We are working with policy makers to finetune the proposal and make it a suitable measure for our value chain.

Overall, the CBAM must be tested and carefully reviewed before measures such as the inclusion of indirect emissions could potentially be phased in. We also need strong anti-circumvention measures to protect our competitiveness and export opportunities because the current CBAM proposal has loopholes our competitors could exploit.

Can you tell us more about the industry’s sustainability goals?

Sustainability, in the broadest sense of the word, is one of our top priorities. We were one of the first industries to launch a joint sustainability roadmap, and we want to continue to lead the transition to a responsible and green industry.

Our focus is on achieving climate neutrality by 2050, and we are working with energy operators, policy makers, and other stakeholders to establish an enabling legislative and funding framework to achieve our aim.

In parallel, our industry will maximise aluminium recycling and reduce its direct emissions by investing in breakthrough technologies.

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