To reach net zero, the industry will need to increase use of clean power, improve the share of recycled aluminium and progress low-emission smelting and refining technologies.

Nearly 70% of the emissions from the aluminium production process arise due to electricity consumption during smelting.³⁴¹ This electricity requirement accounts for around 4% of global power consumption, with up to 70% sourced from fossil fuels (predominantly coal) and the remaining 30% from renewables, primarily hydropower.³⁴² Among the industrial sectors, it features one of the highest levels of renewable energy use for energy requirements. Process emissions during the smelting process contribute 13% to the emissions, while the use of fossil fuels for providing thermal energy across the value chain results in a further 13% of emissions.³⁴³

Both absolute emissions and emission intensity have remained stable over the past three years due to the smelting power mix remaining almost constant.

The energy intensity of primary aluminium is around 70 GJ/tonne, making it more energy-intensive than steel and cement on a per-tonne basis. Secondary aluminium production consumes just 5% of the energy required for primary production.³⁴⁴

Aluminium needs to reduce its absolute emissions by 80% to reach net zero by 2050.³⁴⁶ Achieving this reduction will involve switching to completely clean power sources for smelting – either renewables (solar, wind, hydro, nuclear, etc.) or through captive power plants retrofitted with CCUS.

Furthermore, accelerating the adoption of secondary aluminium is key. By 2050, secondary aluminium production is projected to constitute 50% of the production as per industry net-zero projections.³⁴⁷

Three leading decarbonization pathways have emerged. Two of these pathways are currently available: shifting to clean power and transitioning to secondary aluminium. The third pathway explores low-emission refining and smelting processes, which are still mostly in early stages and are expected to be commercially available by 2030 or after. Deploying these technology pathways can lead to production cost increase of around 40%.³⁴⁸

Clean power solutions for aluminium include; decarbonizing electricity input through renewable grids/purchase power agreements (PPAs) and using CCUS with captive power plants where access to renewables is not feasible. Using nuclear-powered small modular reactors is also an alternative, but the technology is still emerging. Between 30-35% of the current primary production is already through hydro-based electricity production.³⁴⁹ While renewables are cost-competitive in many areas, fossil fuels with CCUS come with a cost premium of up to 30% in some regions.³⁵⁰ Smelters need continuous access to electricity. Thus, assets switching to renewables with a lower capacity factor will need supporting technologies like battery storage, which can further add to costs. Innovative technologies like EnPot that, which enables smelters to vary energy consumption based on available power will also be key.³⁵¹

Maximizing secondary aluminium production has great potential for emissions reduction owing to its low-carbon footprint. Transitioning to secondary aluminium could result in up to a 25% reduction by 2050³⁵² by avoiding the loss of 15 million tonnes of metal at end-of-life. However, this has a strong dependency on increasing post-consumer scrap collection from current levels of 70% to near 100%.³⁵³ Also, technologies that improve scrap quality, like scrap sorting and purification technologies, will be vital. Secondary production is reliant on fossil fuels (especially gas) for heat. There is an opportunity to make this production process net zero by switching to cleaner energy sources like clean power, hydrogen, biofuels, etc.

Low-emission refining technologies like use of electric boilers, and mechanical vapour compression (MVR) will be critical to remove thermal energy emissions from the refining process. Electric boilers are already available and have been successfully tested across other industries. MVR technology is expected to be available after 2027. These technologies address the digestion process, which contributes 70% of refining energy consumption.³⁵⁴ The remaining 30% of energy is consumed by the calcination process, where technologies like hydrogen calciners or electrified calciners can reduce emissions. These technologies are still emerging, with TRL levels of 4-5. Low-emission refining technologies are expected to increase the production costs by 6-11%.³⁵⁵

Low-emission smelting technologies include inert anodes and CCUS. Inert anodes are critical to remove the process emissions during smelting and are expected to be commercially available after 2030 with a production cost increase of 9%. ELYSIS, a joint venture between Alcoa and Rio Tinto, is working on commercializing a patented inert anode technology with support from the Canadian government.³⁵⁶

CCUS in smelting applications is still in early stages, and with low CO2 concentrations in smelting flue gas, it is expected come with increased costs of carbon capture.

Aluminium decarbonization relies primarily on clean power generation for electricity in smelting, supported by clean hydrogen infrastructure for refining. CO2 transport and storage infrastructure will be required if CCUS technology is scaled, to address smelting process emissions. A total of 30%³⁵⁷ of the clean power infrastructure required already exists, while hydrogen and CO2 transport infrastructure are below 1% of what is required. The total infrastructure investment required to support the global aluminium industry is estimated at up to $630 billion through 2050.³⁵⁸

To decarbonize primary aluminium smelting, approximately 240 GW of clean electricity generation capacity is needed, requiring an investment of $490 billion. A significant challenge is proximity to clean power plants, with 30% of global smelting facilities currently at risk of having no access to clean power.³⁵⁹ These plants will either need to relocate or adopt CCUS technologies. For instance, numerous Chinese aluminium plants are moving to provinces with better access to low-carbon power,³⁶⁰ with up to 50% of their smelters at risk of no access to clean power.

The required hydrogen capacity for refining is estimated to be at 9.3 MTPA by 2050, necessitating an investment of $40-120 billion.³⁶¹ CO2 transport and storage infrastructure to support CCUS deployment in smelting will need a further
investment of up to $15 billion.³⁶²

The market’s capacity to accommodate a 40% per tonne green premium³⁶³ remains unverified beyond prototype projects. At present, less than 1% of aluminium adheres to industry net-zero thresholds for low-emission aluminium, as
implied by current net zero by 2050 scenarios. Still, the demand for green aluminium is growing stronger, evident by its inclusion in the scope of the FMC and several other offtake agreements. Also, consumer goods companies like Apple are increasingly targeting to source low-emission aluminium for their electronic products.³⁶⁴

A 40% increase in aluminium production costs translates to a 1-2%³⁶⁵ increase for end consumer industries such as automobiles or consumer goods.

To position the industry to fulfil low-emission demand, business model modifications may be necessary. This includes widening the scope of industrial customers beyond traditional applications. Aluminium is a critical metal from a technologies perspective, as the foundation of a net-zero future: electric vehicles (EVs), wind turbines, photovoltaics, and energy storage. Therefore, regions such as China,³⁶⁶ which are expected to witness a growth in demand for such technologies, will demand more low-emission aluminium as compared to other regions.

A business model shift that has been observed in the industry, which includes investing and prioritizing secondary smelting assets over primary.³⁶⁷ Companies are also introducing “low-carbon” products as part of their portfolio. For instance,
Alcoa is expanding its EcoSource™ low-carbon alumina brand to include non-metallurgical grade alumina.³⁶⁸ In 2021, Rusal launched ALLOW, 98% of which is claimed to be produced using renewable energy supplied by hydropower plants in Siberia.³⁶⁹

To incorporate transparency for end users, Rio Tinto has launched START, aimed at empowering end users to make informed choices about the products they buy.³⁷⁰ In a similar move, The London Metal Exchange (LME) announced the launch of LME passports. This digital register stores electronic certificates of analysis and sustainability credentials for LME-listed metals.³⁷¹ Price assessments of “low-carbon” aluminium by commodity research firms such as Standard & Poor’s (S&P) also provide transparency and enable consumer demand.³⁷² The industry, however, needs to adhere towards globally recognized, standardized definitions of low-emission aluminium, to comply with net-zero thresholds and boost demand signals.

Global aluminium production is highly concentrated, with China contributing 60%³⁷³ of the total output. However, it is also extensively traded, which means that both domestic and global regulations significantly influence aluminium production. The policy landscape for creating a low-emission aluminium industry is
still developing. Key producing regions require more robust and tangible policies, especially with regard to improving access to clean power infrastructure.

Public policies should be directed towards supporting the following aspects in the aluminium sector: facilitating clean power adoption and access to clean power infrastructure, promoting R&D alongside market-based approaches to accelerate early-stage low-emission smelting and refining technologies, and encouraging higher recycling rates through infrastructure buildout that improves sorting and purification of aluminium scrap.

The aluminium industry will require significant capital investment in low-emission smelting and refining technologies beyond power decarbonization. The capital requirements can be estimated with some degree of certainty for the predominant low-emission smelting technology, inert anodes. Retrofitting existing assets with inert anodes could require cumulative investments of $200 billion by 2050.³⁸¹ This implies annual investments of $7 billion, in addition to the regular annual CapEx
of $20 billion – an additional 38% investment.³⁸² Additional capital will be needed to improve refining, recycling and sorting processes.

To direct the capital towards transforming the industry, policy interventions like carbon pricing, subsidies/incentives and R&D funding for technology development will need to be adopted to guarantee returns. Large institutional investors and multilateral banks (World Bank, Asian Development Bank, etc.) can play a crucial role by providing access to low-cost capital linked to stringent emission reduction targets.

The business case for investment remains weak with additional costs of 38%³⁸³ and uncertainties around returns from low-emission aluminium. Current industry profit margins of 13%³⁸⁴ and WACC of 9%³⁸⁵ suggest that the industry is not
positioned to absorb these additional costs and generate sufficient returns to fund through its own generated cash flows.

There is a need for workable and increased support for funding for clean technology value chains across enterprises. A key development includes Canada’s innovation funding for inert anode technology through ELYSIS. Another notable development includes collaboration between top lenders to the aluminium
industry – Citi, ING and Societe Generale – and the Rocky Mountain Institute to develop a climate-aligned financing framework, currently in progress.³⁸⁶

Approximately 70% of large, publicly-traded aluminium companies consider climate change as a key consideration for their strategic assessment and integrate it into their operational decision-making.³⁸⁷ Meanwhile, 8% of companies are building basic emissions management systems and process capabilities. Finally, 21% of companies acknowledge climate change as a business issue.