A discussion is currently taking place in Brussels regarding the exclusion of indirect emissions (Scope 2) for regulated aluminium products and materials under the CBAM regulation. Some stakeholders are proposing that those emissions should ultimately be included in CBAM for aluminium — primarily to safeguard the competitiveness of European low-carbon producers and ensure the economic return on their decarbonisation investments. The counterargument is that, although this move may initially appear climate-ambitious, it could in fact represent a misguided policy decision: it would introduce additional administrative and verification burdens, while simultaneously weakening the global position of Europe’s low-carbon aluminium producers — all without delivering clear climate benefits. Greenwashing of indirect emissions may not be as challenging for non-European actors as it might seem.
European aluminium producers are already facing high electricity and carbon costs, even when using 100% renewable energy. This is due to marginal pricing based on fossil fuels and the pass-through of EU ETS costs into electricity prices. The EU therefore partially compensates these costs through the Indirect Carbon Cost Compensation (ICC) scheme, which is now being gradually reduced.
If CBAM were to include indirect emissions while ICC is phased out, EU producers would face even higher costs — despite using clean electricity. At the same time, foreign competitors could easily bypass CBAM obligations by reporting low or zero emissions through certificates or green energy contracts, without this reflecting real system-wide emission reductions.
This represents a real risk. Both a German government non-paper and the Draghi report warn against the inclusion of indirect emissions for ICC-eligible sectors before 2030.
Industry’s Position: No Scope 2 Before Decarbonised Electricity
According to active industry lobbying, the proposed solution is as follows:
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- Indirect emissions should not be included in CBAM for aluminium until the European power mix is significantly decarbonised and carbon costs in electricity are considerably reduced. ICC must remain in place as a safeguard for low-carbon production and to prevent carbon leakage beyond 2030.
- If Scope 2 is eventually considered, it should be based on the average emission intensity of the electricity mix in the country of origin. Until then, ICC remains essential for producers paying high electricity prices inflated by carbon costs — even when using clean energy.
- CBAM should support the deployment of low-carbon technologies by ensuring that producers using climate-friendly production methods are not disadvantaged compared to higher-emitting competitors. A well-designed CBAM must be aligned with the EU’s climate and industrial objectives and create value for companies that align themselves with the goals of this policy.
Key Policy Recommendations from Industry Advocates
Advocates further propose to:
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- Use robust and harmonised emission calculation methodologies, based on actual data rather than generic or unverifiable figures.
- Avoid loopholes such as book-and-claim systems that do not reflect the physical flow of electricity or materials.
- Recognise and reward the efforts of low-carbon producers by allowing them to clearly demonstrate their performance.
A Phased and Controlled Introduction
The inclusion of indirect emissions (Scope 2) will likely depend on the ability of European authorities to design and control their phased introduction in line with the reduction of ICC compensation, or alternatively, they may only be incorporated into CBAM once ICC is completely discontinued.
