The time for strategic, decisive action is now!

Interview with Giulia Forgnone, Director of Public Affairs & Communications, European Aluminium

More than 440 companies and over 130 associations have so far pledged their full support for the European Industrial Deal by signing the Antwerp Declaration – and the number is still growing! The declaration emphasises the need for a strong European industrial policy that complements and supports the Green Deal while safeguarding jobs in European industry. However, with the goal of climate neutrality by 2050 and the increasing investment requirements of industry, Europe faces major challenges, especially in the face of economic downturns and international competitive pressures. The declaration calls for open strategic autonomy to ensure the EU's resilience in a changing geopolitical landscape. It emphasises the importance of industry for innovation and production in Europe and argues for a European industrial package at the same level as the Green Deal to achieve these goals.

The European aluminium industry is in crisis mode, facing its biggest challenge since the 2008 market crash. Investments are increasingly being redirected to regions with more favourable economic environments, exacerbated by the high energy costs we're facing here. Coupled with this, the onset of the energy crisis has led to a drastic 50% reduction in the EU27 primary production capacity. This has resulted in halted production, site closures, and job losses across the sector. Additionally, we're contending with the issue of Chinese overcapacity, which introduces a significant market distortion, further complicating our ability to compete on a global level playing field. It's a critical moment for our industry, calling for strategic, decisive actions to safeguard our future and ensure the sustainability of our operations in Europe.

EU industries have spoken loud and clear, presenting concrete policy actions. Now, the ball is in the court of policymakers to heed these calls and work together with the industry to set the right framework for European industries to remain competitive on a global scale while realising the green transition. It's a crucial moment for collaboration and the success of our industries and economies depends on it.

Firstly, tackling the high costs of energy is paramount. Our sector's energy-intensity means we need abundant access to affordable green energy sources. Despite some easing from the initial spikes during the energy crisis, our energy expenses still significantly surpass those in other regions, impacting our ability to compete on a global scale.

Secondly, enhancing our raw materials security is crucial. Aluminium's role in enabling clean technologies, such as solar panels, electric vehicles and wind turbines, highlights the necessity of ensuring we have reliable access to it. This is not just about maintaining supply chains but about ensuring Europe can realise the green transition without being overly reliant on external sources.

Third, supporting investments to decarbonise the value chain and deliver a Net Zero European Aluminium industry by 2050: according to our decarbonisation pathways, the industry in Europe will need, between now and 2050, a starting figure of around 33 billion EUR developed technologies to electrify furnaces, switch to hydrogen or apply CCS/CCU to aluminium production. None of these technologies are commercially available today, which means that public and private finance will be crucial to make them happen by the next decade, alongside enabling conditions to maintain the competitiveness of existing plants still operating in Europe. The investment gap is huge, and a new European financing framework is needed to safeguard the EU’s internal market. The current EU budget lasts until 2027, so there needs to be a re-prioritisation of resources.

Fourth, more effective and new carbon leakage protection mechanisms beyond untested tools such as the EU Carbon Border Adjustment Mechanism (CBAM). The CBAM is not the right carbon leakage protection tool for aluminium and will do very little to reduce global emissions across the aluminium value chain. 

For a resilient, environmentally conscious, and globally competitive European aluminium industry, the foundation must be built on three pillars: ensuring a level global playing field; maintaining a continuous access to secondary raw materials (e.g. scrap) and other metals used as alloying elements; and securing access to abundant and affordable green energy. Given our industry's energy-intensive nature, the transition to green energy is not just an environmental necessity but a strategic imperative to maintain our competitiveness. This transition also requires significant investment in renewable energy sources and technologies that reduce energy consumption and carbon emissions.

Moreover, tackling the challenges posed by non-market economies, particularly the issue of overcapacity, is essential to maintain fair competition. The European aluminium industry needs robust trade defence mechanisms and policies that encourage fair trade practices, protecting us from market distortions and dumping.

To prevent investment and carbon leakage, as well as to ensure the aluminium industry's future in Europe, we must act swiftly to implement an industrial strategy that mirrors the ambition of global competitors. This means creating a supportive environment for investments through initiatives like a European Sovereignty Fund and facilitating production of strategic raw materials in Europe. Leadership is key, and an Executive Vice-President in the European Commission should spearhead these efforts to ensure cohesive policy implementation across the board. Without such decisive action, Europe stands to further lose its competitiveness in a crucial industry for the green transition.

Aside from everything I already mentioned, we need to double down on promoting circular products and improving our recycling efforts. This means making sure that there's a strong link between our raw materials, the clean energy we use, the related products and embedded components we make right here in Europe. We must build on the progress made with EU initiatives like the Green Deal Industrial Plan. We need to keep that momentum going, especially when it comes to the EU Critical Raw Materials and the Net-Zero Industry Acts, as well as strengthened state aid frameworks to support investments in shifting towards greener and more circular production processes.

To meet the urgent need for green energy solutions in the aluminium industry, a focused strategy is essential. The EU must prioritise accelerating Power Purchase Agreements (PPAs) to provide energy-intensive industries with stable access to renewable energy. Implementing a supportive legislative framework will also be key, encouraging investment in green technologies and making renewable energy more accessible and cost-effective. Additionally, enhancing the State Aid Guidelines to support decarbonised energy use will play a crucial role. By taking these steps, we can ensure a swift transition to green energy adoption within the industry, aligning with the objective to reach net-zero emissions by 2050.

In the face of growing challenges from non-market economies and carbon-intensive imports, a revitalised EU trade defence policy is paramount for the aluminium industry. The essence of our approach needs to pivot towards a more robust and agile defence mechanism. This means not just relying on traditional instruments, but also innovating in how we address unfair trade practices and protect our Single Market.

We've seen some commendable efforts from the European Commission, but it's clear Europe needs to step up its game. This involves initiating more proactive investigations, effectively implementing the existing trade defence instruments, and developing new measures, such as targeted tariffs, to counteract unfair competition. It's about safeguarding our industry's sustainability and competitiveness, ensuring we're not undercut by subsidised imports that don't meet our environmental standards.

In revising REACH, we're advocating for a balanced approach that respects both the need for socio-economic analysis and the goals of sustainable chemical management. It's about competing fairly on a global scale while pushing forward a circular, low-carbon future. Moreover, better monitoring on imports containing substances of concern is essential for maintaining the integrity of the European market and protecting our environmental standards.

Taking a step back to look at the bigger picture, it's vital that any environmental regulation strikes a balance between protecting the environment and supporting industry competitiveness. Simplifying reporting requirements and ensuring our legislation evolves with technological advancements will be essential in achieving this equilibrium.