Aluminium production is highly sensitive to electricity prices and supply conditions. Under the current CBAM treatment for listed aluminium goods, buying renewable electricity does not automatically reduce certificate liability. The approach creates a gap between electricity’s industrial role and its function in the emissions calculation.
Direct emissions in the current CBAM methodology
For iron-and-steel and aluminium goods listed in Annex II, the existing CBAM calculation accounts for direct emissions. Renewable electricity procurement can still provide operational, customer, financing and decarbonisation benefits without automatically lowering certificate liability through purchased-electricity emissions.
For aluminium producers, the distinction is described as particularly important. Electricity can dominate smelting costs and influence product carbon intensity, while the Annex II treatment for listed aluminium goods focuses on direct emissions. Process sources, including anode consumption and perfluorocarbon emissions, therefore remain central to the current CBAM calculation.
Two separate assessments for commercial teams
Commercial teams are expected to consider two related but distinct dimensions. One concerns the economics of physical electricity supply, while the other concerns the emissions methodology applicable to the product. Both affect business outcomes, but they do not necessarily follow the same carbon boundary.
The source material also links renewable electricity procurement to multiple business effects. These include reducing operational carbon intensity, supporting customer requirements, strengthening corporate reporting and differentiating low-carbon aluminium products. It also notes that long-term power purchase agreements can support new renewable generation projects by securing industrial offtake.
Power purchase agreements and cost allocation
For lenders, the valuation of a power purchase agreement should reflect demonstrable impacts on electricity costs, supply security and market positioning. This is contrasted with an assumed direct CBAM saving that the current calculation does not automatically provide.
Aluminium smelters with stable baseload demand can also provide offtake for renewable energy portfolios. The contractual structure must specify who bears costs for hourly shaping, balancing and imbalances. The source states that these costs can materially affect the delivered PPA price and should be identified separately rather than included within an environmental premium.
COM(2025) 989 and planned changes to electricity treatment
The legislative proposal COM(2025) 989 would revise electricity treatment in future calculations. It includes changes to the methodology for electricity default values and conditions for using actual values. The proposal would also broaden physical PPAs to include intermediaries and adjust elements of the congestion and nomination framework.
The Council adopted its negotiating position on 12 June 2026, followed by the European Parliament on 15 September 2026. The proposal remains under interinstitutional negotiation and is not treated as enacted law in the source material.
Downstream CBAM expansion beyond 2028
The same legislative file proposes expanding CBAM downstream coverage from 2028. It would extend coverage to selected steel- and aluminium-intensive goods. Both institutions support expansion, but their proposed product lists differ and remain subject to negotiation.
Until final legislation is adopted, the existing scope is described as the operating baseline. In parallel with electricity-related reforms, this would change which products fall under downstream CBAM obligations from 2028 if adopted as proposed.
Separating power competitiveness from process-carbon compliance
The source material calls for aluminium buyers and producers to assess electricity procurement against defined benefits. These include power costs, supply reliability, customer requirements and decarbonisation outcomes. It also states that process-carbon compliance should be evaluated separately against emissions categories and methodology applicable to the relevant product.
The commercial opportunity is described as substantial because aluminium production depends heavily on electricity. Capturing that value requires distinguishing what renewable power delivers industrially from what current CBAM rules recognise in the certificate calculation.