The aluminium associations of the United States, Europe, Canada and Japan welcome a new report by the Organisation for Economic Cooperation and Development (OECD), The climate implications of government support in aluminum smelting and steelmaking.

The report examines current government support provided to aluminum smelting and steelmaking firms. It finds that support has both increased output and greenhouse gas (GHG) emissions in the two sectors and shifted production to less efficient and higher GHG emitting plants, most notably in China and India. The report also highlights the expected benefits of alternative support measures that target the development and adoption of new climate technologies that are essential for the transition to net zero emissions (NZE) globally. 

The OECD report simulates removing existing government support and estimates that doing so would decrease global GHG emissions by 1%, while reducing global output by just 0.3%. These results are driven by China and India, which account for 96% and 89% of the emissions and output reductions, respectively. This is largely because China and India have a ratio of support to output between 1.8 and 7 times the world average, and GHG emission intensities that are one and a half to three times larger than in OECD economies.

In welcoming the report, Charles Johnson, president & CEO of The Aluminum Association; Paul Voss, Director General of European Aluminium; Jean Simard, President & CEO of the Aluminium Association of Canada; and Yasushi Noto, executive director of the Japan Aluminium Association emphasised: 

“The report highlights that addressing excessive subsidies and thereby ensuring a level playing field globally can be a cost-effective strategy to reduce emissions in hard-to-abate sectors like aluminium. Across aluminium supply chains today, high levels of support in China displace output from lower GHG emitting production systems, resulting in a much higher carbon footprint globally. Removing such harmful support is an essential element of the aluminium industry making the transition to net zero emissions globally.”

“Finding the right balance between government support and private sector spending on research, development and technology adoption at industrial scale is key to enabling a viable aluminium industry pathway to a sustainable future. The transition to NZE globally will require massive new investments, but the costs cannot be borne by governments alone. Additional private sector investments in electricity decarbonisation, near zero GHG emission smelting systems, and near 100% aluminium recycling rates are also needed. These investments are contingent on aluminium markets being fair, open to competition and free of aggressive state capitalism.”

“On behalf of our member companies and the 1.75 million workers they directly and indirectly support across the United States, Europe, Canada and Japan, we are fully committed to working with international organisations and with governments to ensure that responsibly and sustainably produced aluminium contributes to a clean energy economy globally.”