CBAM’s importance for the global aluminium industry

CBAM’s importance for the global aluminium industry How CBAM in its current and future forms could affect the trading relationship between UK exporters and the EU

Gabriel Rozenberg Cbamboo

An introduction to CBAM and its implications for the aluminium industry

Aluminium Federation, 30 November 2023

Gabriel Rozenberg CEO, Cbamboo Cbamboo

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Gabriel Rozenberg

Cbamboo

Founded Cbamboo in May 2023.

Previously worked in investment management and financial journalism

The operating system for the world’s carbon border taxes

CEO, Cbamboo

Cbamboo

Software platform for CBAM compliance and data, launching January 2024

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🏳 st

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Europe’s biggest ever carbon law A revolution in trade and supply chains A hugely complicated tax

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EU producers today get free allowances against ETS

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The EU is phasing these out – creating a risk of ‘carbon leakage’

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CBAM levels the playing field on carbon prices

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And it’s a model for carbon price regimes everywhere

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Thousands of EU businesses must now comply…

Every day: 30,000 tonnes of aluminium 30,000 tonnes of cement 50,000 tonnes of fertiliser 210,000 tonnes of iron and steel

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Imported by:

✈ Aerospace & defence

Automotive

Chemicals

Construction

Consumer

Energy

Engineering

Forestry

Manufacturing

Metals & mining

Paper & packaging

Pharma & life science

Power & utilities

Retail

Technology

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… with the world’s most complex tax

Compliance

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Report on your company

Report on your sales and purchases

Report on your suppliers, and their suppliers, down to the specific factory, for each product imported

Corporation Tax

VAT

CBAM

CSRD

EU ETS

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CBAM in a nutshell Non-EU Manufacturer / Distributor

Assess production process and relevant calculation methods.

Monitor emissions

Attribute emissions to production processes and then goods

EU Reporting Declarant

Collect data on precursor emissions and add these to your own emissions

Report on the specific embedded emissions of your CBAM goods

Share the CBAM emissions report with EU customer, for all installations & goods

Determine the scope of goods covered by CBAM

Identify all the parameters you need to report on

Receive CBAM data from suppliers

Collect data on carbon price due in third country

Definitive period Create CBAM reports and file with National Authority

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Contact your suppliers and request CBAM data

Jan 2026: purchase CBAM certificates in proportion to embedded CO2e

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From 2026, CBAM becomes a financial responsibility Product volume imported from China

Embedded Direct1 emissions

CBAM price (Average of weekly ETS)

Carbon price paid at origin

500 tonnes of aluminium

3 tonnes of CO2e per tonne

€85 per tonne of CO2e

€8 per tonne of CO2e

CBAM Cost

€115 500

Product Cost (at €2 000 per tonne) Cost increase % Cbamboo

€1 000 000 11.6%

1. As the regulation stands today, CBAM tax will only cover direct emissions for aluminium

Note: CBAM costs will be phased in progressively from 2026 (2.5% of total) to 2034 (100% of total)

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CBAM charge is phased in over nine years

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Scope of CBAM – Aluminium industry Aggregated goods category

CN Code

Product and description

Unwrought aluminium Aluminium products

7601 7603 7604 7605 7606 7607

Unwrought aluminium Aluminium powders and flakes Aluminium bars, rods and profiles Aluminium wire Aluminium plates, sheets and strip, of a thickness exceeding 0,2 mm Aluminium foil (whether or not printed or backed with paper, paper-board, plastics or similar backing materials) of a

7608 7609 00 00 7610

Aluminium tubes and pipes Aluminium tube or pipe fittings (for example, couplings, elbows, sleeves) Aluminium structures (excluding prefabricated buildings of heading 9406) and parts of structures (for

thickness (excluding any backing) not exceeding 0,2 mm

example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and

the like, prepared for use in structures

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7611 00 00

7611 00 00 – Aluminium reservoirs, tanks, vats and similar containers, for any material (other

7612

7612 – Aluminium casks, drums, cans, boxes and similar containers (including rigid or

7613 00 00 7614

7613 00 00 – Aluminium containers for compressed or liquefied gas 7614 – Stranded wire, cables, plaited bands and the like, of aluminium, not electrically insulated

7616

7616 – Other articles of aluminium

than compressed or liquefied gas), of a capacity exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment collapsible tubular containers), for any material (other than compressed or liquefied gas), of a capacity not exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment

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New obligations for non-EU aluminium producers What is in scope and not in scope of CBAM reporting obligations?

System boundaries: embedded emissions of basic aluminium products

Unwrought aluminium – primary smelting Alumina

Electricity

Pre-baked anodes

Primary smelting

Unformed aluminium

Anode paste (Søderberg route)

Optional: fuels

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CO2

PFCs

CF4 and C2F6

Input

CBAM good

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New obligations for non-EU aluminium producers What is in scope and not in scope of CBAM reporting obligations?

Unwrought aluminium – secondary melting

System boundaries: embedded emissions of aluminium (secondary smelting)

Aluminium scrap

Fuels

Secondary production (re-melting)

Unformed aluminium

CO2

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Input

CBAM good

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New obligations for non-EU aluminium producers What is in scope and not in scope of CBAM reporting obligations?

System boundaries: embedded emissions of basic aluminium products

Aluminium products production process

Unformed aluminium

Forming steps

(alloying, casting, extrusion, rolling, etc)

Basic aluminium products

Fuels

CO2

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Input

CBAM good

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Monitoring and reporting obligations for aluminium producers

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Figure 7-16, CBAM Guidance for Installation Operators, European Commission

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To send data to importers, you can use the EU’s Excel template (Other user-friendly systems are also available…)

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What must EU aluminium importers do?

Transitional period Oct 2023 to December 2025

Definitive period January 2026 onwards

- Collect the data you need to submit the first report, using default values where required.

- Continue monitoring your CBAM imports and submit the reports yearly.

- Communicate with your suppliers to obtain their emissions data as soon as possible.

- Analyse your supplier’s carbon risk to change your procurement strategy and/or renegotiate contracts in advance of tax implementation.

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- Monitor regulatory updates, as product scope will be broadened.

- Financially plan your CBAM certificate purchases to minimise impact on working capital.

- Optimise your procurement strategy to use less emissions intensive suppliers and lower your tax bill.

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Key facts Scope ❖

Aluminium producers must report on both direct and indirect embedded emissions in the Transitional Period.

❖

But the CBAM charge will only apply to direct emissions

❖

Commission hopes to include indirect emissions “as soon as possible”

Aluminium scrap ❖

No CBAM charge applies to scrap

❖

However, installation operators must measure the tonnes of scrap used and the percentage that is pre-consumer scrap

Timeline ❖

Full data on supplier emissions is mandatory from July 2024

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Limited data from suppliers (ie location of installations) will be required from the first report

Thresholds and fines ❖

The threshold for CBAM declarations is just €150

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Fines are €10-€50 per tCO2e of unreported emissions

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UK CBAM: ready, or not?

Treasury plans a UK CBAM in 2026

MARCH

“The changes proposed by the UK government are the furthest reaching carbon leakage measure proposed by any country to date. … will go beyond the EU’s own proposed measures” – Redshaw Advisors

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But deadlines are missed…

…as divergent prices store up trouble for UK plc

NOVEMBER

30 Nov: EUA €70.8 vs UKA €48.2

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The long-term opportunity for global aluminium

Carbon anode consumption + anode effects

Source: Net Zero by 2050: Science-based decarbonisation pathways for the European aluminium industry, European Aluminium, November 2023

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CBAM will reward capex for green breakthroughs

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CIM Magazine, 15/6/23. FT, 29/11/23

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Thank you!

Contact: Gabriel Rozenberg, CEO gabriel@cbamboo.com

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