FACE preliminary position on the EU Carbon Border Adjustment Mechanism (CBAM)

FACE welcomes any WTO consistent EU Carbon Border Adjustment Mechanism (CBAM) and other measures capable of fighting CO2 emissions in the world and levelling the playing field of EU industries at the same time. FACE calls for a very careful subsector-specific approach to such measures in the case of the EU aluminium sector. Given the net-importer status of the EU for primary aluminium and the long period of time needed to introduce a WTO compliant CBAM, FACE calls on the European Commission to urgently consider alternative measures with the same goal and effect as the proposed CBAM and which are available immediately. In particular, the Commission is invited to consider the pending requests for a further suspension of EU import duties on primary aluminium, focusing on low carbon primary aluminium (LCA). In the meantime, we need more clarity on the scenarii under preparation within the Commission services, in particular to assess the impact of the CBAM on our climate goals, on our competitiveness, on our jobs creation and innovation potentials, with special attention given to SME’s, which are the backbone of the economy and are vulnerable.

The Federation of Aluminium Consumers in Europe (FACE) is a Brussels-based association representing the interests of EU aluminium downstream (DS) transformers and manufacturers of semi-finished and finished products with aluminium and its alloys as main raw material.

FACE, founded in 1999, advocates for a level playing field of the EU DS aluminium sector and for environmental values. The goals of FACE and the proposed EU CBAM coincide: levelling the playing field for EU industries on the domestic and export markets and preventing escape of EU industrial production to third countries with lower or no CO2 emission costs.

But FACE is concerned that if the proposed CBAM does not take into account particularities of the EU aluminium sector, it may become a useless, if not counter-productive, trade policy measure.

The EU aluminium sector consists of two main subsectors:

Primary aluminium (PA), producers of unwrought metal (smelters, which transform alumina into PA; refiners and  re-melters, which produce secondary recycled aluminium from scrap);

DS, downstream aluminium transformers (extruders, rollers, foundry casters; manufactures of aluminium parts and components).

The global aluminium demand is predicted to increase by over 150% by 2050, supplied by primary and by recycled metal sources, with a trend that sees the primary/secondary ratio going from actual 3/1 to 5/3 in the next 20 years, primary remaining the key point for the aluminium growth in the next decades.

FACE considers that the two subsectors have been developing over the last 30 years in different way and should be treated separately when considering an EU CBAM.

Due to growing energy and labour costs, aluminium smelters, the main reference for the raw material, started relocating EU production to third countries long time ago. Today, the EU PA segment may cover only about 25 % of EU demand the rest being imported.

During the same period of time, the EU DS aluminium segment has been growing to meet EU demand and compete on third markets. Thus, the EU DS segment is completely import dependent of unwrought PA metal which surprisingly remains subject to EU import duties varying between 3 % – 6 %.

This on-going EU trade policy severely increases EU market prices of unwrought PA and negatively affects competitiveness of the whole EU DS segment which today represents approximately 90 % of total turnover and jobs in the EU aluminium sector. It is noteworthy, that most EU DS producers are SMEs.

CBAM as to the DS segment. As DS aluminium producers are paying growing ECT costs and are competing with unfairly priced imports, FACE fully endorses the introduction of a CBAM  for all imported aluminium semis and finished products in EU.

FACE would like to stress that the future CBAM must be WTO compliant and cover all products of all sectors with similar carbon footprint (and not only steel, cement and some other sectors as currently contemplated by the Commission), except for areas  which could be excluded on the basis of objective and transparent criteria, such as lack or non-existence of EU domestic production, like in case of the PA segment.

CBAM as to the PA segment. CBAM is not an appropriate measure for the PA segment from the point of view of the two pillars of carbon leakage. It would only increase costs of the DS segment further and lead to massive closures and/or leakage of that important sector of the EU economy abroad, and would become another EU trade policy measure, along with the current EU import tariffs on PA.

Instead of including the PA segment into the CBAM, the Commission is invited to consider immediately a PA import tariff suspension repeatedly requested by FACE and DS SME’s. Such suspension would perfectly serve the EU Green Deal and what the EU wants to achieve with the CBAM if the EU suspended the current import tariffs on low carbon PA  faster (within the next few months) and deeper (zero tariff). Such full tariff suspension would be a perfect example of a timely measure taken in harmony with several important EU policies, such as environmental, industrial and trade. Moreover, such measure would constitute an urgently needed economic stimulus for the EU aluminium industry in the COVID-19 context.