China’s Aluminum, Non-Ferrous Sector Faces Pressure from EU CBAM Rules

The policy imposes a carbon cost on certain imports into the EU.

SEATTLE (Scrap Monster): The European Union’s Carbon Border Adjustment Mechanism (CBAM), which took effect on January 1, is intensifying concerns across China’s aluminum industry, a sector directly covered under the new carbon pricing regime. The policy imposes a carbon cost on certain imports into the EU.

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While higher border costs are a key issue, greater uncertainty surrounds the future scope of the EU CBAM. Industry discussions focus on three critical questions: whether indirect emissions from electricity consumption will be included, whether additional non-ferrous metals will be covered, and whether China’s national carbon market can offset CBAM costs.

Indirect emissions account for roughly 80% of aluminum’s total carbon footprint but are currently excluded from CBAM calculations, largely due to electricity subsidies within the EU. Analysts say inclusion is unlikely in the near term given competitiveness concerns.

Expansion to other non-ferrous metals also appears limited, as EU ETS criteria restrict coverage. Meanwhile, significant carbon price disparities—€75 per ton in the EU versus about $10 in China—limit offset potential, though long-term reforms in China’s carbon market may gradually narrow the gap.

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