Aluminium production is highly sensitive to electricity prices and supply conditions. Under the current CBAM approach for listed aluminium goods, buying renewable electricity does not automatically reduce certificate liability. This results in a separation between electricity’s industrial role and its function in the emissions calculation used for CBAM.
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 current certificate liability through purchased-electricity emissions.
For aluminium producers, this distinction is especially relevant because electricity can dominate smelting costs and influence product carbon intensity. However, the current 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.
Commercial teams are expected to evaluate two related but separate 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 apply the same carbon boundary.
Renewable power benefits and power purchase agreements
Renewable electricity can reduce operational carbon intensity and support customer requirements. It can also strengthen corporate reporting and help differentiate low-carbon aluminium products. Long-term power purchase agreements can provide a basis for new renewable generation by securing industrial offtake.
For lenders, a PPA should be assessed based on its demonstrable effects 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 offer valuable offtake for renewable energy portfolios.
The contractual structure needs to specify who bears costs related to hourly shaping, balancing and imbalances. These costs can materially affect the delivered PPA price. The source material indicates these elements should be identified separately rather than embedded within an environmental premium.
COM(2025) 989 changes to electricity treatment and downstream scope
The legislative proposal COM(2025) 989 would revise electricity treatment in future rules. 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 modify parts 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 within the source material. The same file proposes expanding CBAM downstream coverage from 2028 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 remains the operating baseline described in the source material.
Separating power procurement from process-carbon compliance
Aluminium buyers and producers are advised to assess electricity procurement against defined benefits such as power costs, supply reliability, customer requirements and decarbonisation. Process-carbon compliance should be evaluated separately against the 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.