Many countries have been aiming for carbon neutrality for over a decade, but recent factors have accelerated its progress. The road has been long and bumpy. China has been at the forefront of carbon neutrality policies since awareness of the potential problems of producing so much Carbon. By the time 2060 arrives, they plan on net zero emissions.
Chinese Plan contra European Plan
Shanghai Metals Market (“SMM”) has conducted an analysis of the development status and future of the Chinese low-carbon aluminum market. Carbon neutrality refers to a state of net-zero carbon dioxide emissions. The study examined three main areas: the development of global low-carbon policies, the current supply status of the low-carbon aluminum market, and the potential consumption trends within China. According to them, secondary aluminum will grow faster than primary aluminum in the long run due to these policies.
By 2030, China plans to reach peak carbon use and reach carbon neutrality by 2060 under the Chinese dual carbon policy. Four methods will be used to reduce emissions, divided into three phases, in order to achieve this. Their first stage is between 2020 and 2030, when they focus on reducing emissions by adjusting the industrial structure, conserving energy, developing clean energy sectors and reducing emissions from the demand side. They intend to reach their peak carbon consumption during this period. In the second stage, which is aimed between 2030 and 2045, the focus is on developing renewable and hydrogen energy sources, applications, and supporting materials with a side adjustment of low carbon supply. During the third and final stage, carbon dioxide emissions would be completely eliminated through the use of Carbon Capture Utilization and Storage (CCUS) technology. In order to achieve this decarbonization, carbon sequestration technology (which stage two focuses primarily on) and biological carbon sinks would be developed, which would reduce carbon concentration in the air by fixing it. As a consequence of this, the aluminum processing industry would be significantly impacted, requiring significant changes from traditional energy sources – thermal power – to hydropower energy sources. A major increase in the demand for low-carbon aluminum products will also likely be a result of the policy’s promotion. This may signal the beginning of a future trend when secondary aluminum demand will exceed primary demand.
As for the EU’s Carbon Neutrality initiative, the Paris Agreement outlines the plan and objectives of achieving net zero greenhouse gas emissions by 2050. In addition to integrating all sectors of society and economy, they intend to lead the way in advancing technological solutions that will contribute to the nation’s development. Power, industry, building, agriculture, and so forth are included here. A net zero greenhouse gas emissions target by 2050 is outlined in the Paris Agreement, which is part of the EU’s Carbon Neutrality initiative. In addition to integrating all sectors of society and economy, they intend to lead the way in advancing technological solutions that will contribute to the nation’s development. Forestry includes power, industry, construction, agriculture, and so induced by 10% year after year until it is completely abolished by 2035.
It is estimated that removing free quotas in the EU will result in an increase of 7.6% in aluminum prices, whereas CBAM will result in an increase of about 9% in aluminum exports from China to the EU. Additionally, there would be high levels of electrification, with electricity accounting for 58% of the sector’s energy use, and increased circularity, with around 50% of Europe’s base metal production now coming from recycled sources.
Due to the fact that the plans don’t take place until the 2050s, it is difficult to predict how they’ll affect greenhouse gas emissions, but 81% could be reduced compared to 1990. In addition to increasing production costs, the quotas would be removed, which could allow it to be scaled up on a large scale. Experts believe that between 2020 and 2070, steel production could increase by 87%. The same period would also see an increase of 167% in scrap availability, which would be used for Electric Arc Furnaces – a carbon neutral method for producing steel – resulting in increased growth and stabilizing the transition from carbon to Electric Arc Furnace (“EAF”).
The role of metals and minerals in the drive to net zero
As smelters are also trying to switch to renewable power, electrification processes and electric mobile fleets – as seen in the previous paragraph with EAF. Investments in technology aligning with these interests increase as a result of their interest in transitioning. The result is also that commodities will be prioritized, which will be necessary to reach net zero emissions. As a strain for companies, this transition will increase the cost of production by – anywhere from – 35 – 100% per tonne of steel by 2050 because testing, implementing new technologies, and training personnel will cost a lot more. A combination of technologies would also be more energy efficient. As a result, it is hard to predict which technologies or a combination of technologies will be used by companies because it depends on conditions as well. These conditions include but are not limited to energy cost and availability, industrialization, legal restrictions, and technological advances. From multiple potential scenario tests, Navigant Consulting (“Navigant”) and Steel Institute VDEh (“VDEh”) appear to be on the right track at the moment.
It is difficult to predict the future of such an ever-changing and developing transition, but the goods necessary for the transition will be in high demand and their value will rise over time. With the current instability of many global markets and prices, such as scrap for the EAF, investing in such endeavors might prove a good idea.
- SMM (2022): “Secondary Aluminium to Grow Faster than Primary Aluminium in Terms of Long-Term Supply and Demand under Dual Carbon Goals.” l https://news.metal.com/newscontent/101959934/Key-Takeaway-from-SMM-Automotive-New-Materials-Summit-Forum:-Secondary-Aluminium-to-Grow-Faster-than-Primary-Aluminium-in-Terms-of-Long-Term-Supply-and-Demand-under-Dual-Carbon-Goals-/
- WYNS T. et KHANDEKAR G. (2019): “Metals for a Climate Neutral Europe” l https://www.eurometaux.eu/media/1997/exec-summary-metals-2050.pdf
- STAUSHOLM J. (2022): “Metals and minerals are essential in the drive to net zero” l https://www.politico.eu/sponsored-content/metals-and-minerals-are-essential-in-the-drive-to-net-zero/
- EUROFER (2019): “Pathways to a CO2-neutral European Steel Industry” l https://www.eurofer.eu/assets/Uploads/EUROFER-Low-Carbon-Roadmap-Pathways-to-a-CO2-neutral-European-Steel-Industry.pdf
- WYK van B. (2022): “What is China’s “double carbon” policy?” l https://thechinaproject.com/2022/05/16/what-is-chinas-double-carbon- policy/#:~:text=China%20plans%20to%20reach%20peak,become%20carbon%20neutral%20by%202060.
- European Parliamentary Research Service (2022): “Carbon-free steel production” l https://www.europarl.europa.eu/RegData/etudes/STUD/2021/690008/EPRS_STU(2021)690008_EN.pdf
- WANG P. et al (2022): “Carbon neutrality needs a circular metal-energy nexus” l https://www.sciencedirect.com/science/article/pii/S2667325822001078
- EUROPEAN COMMISSION: “2050 long-term strategy” l https://climate.ec.europa.eu/eu-action/climate-strategies-targets/2050-long-term-strategy_en#:~:text=The%20EU%20aims%20to%20be,net-zero%20greenhouse%20gas%20emissions.