Carbon Border Adjustment Mechanism (CBAM), Pivot or Perish?


The European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM) tool comes into effect on the 1st October 2023. This transitional period of implementation is estimated to last until 31st December 2025. CBAM comes off the back of the EU’s Emission Trading System (ETS), an initiative to see the EU reach a 55% net reduction of Green House Gases (GHGs) by 2030.

CBAM is a carbon trading mechanism that is envisaged to assist in combating climate change and reducing GHG emissions through monitoring the production of carbon intensive goods that are imported into the EU. The aim is to promote clean manufacturing and limit carbon leaks, i.e shifting the manufacturing of carbon intensive industries and products to developing countries. This is done by imposing taxes on the embedded carbon content on goods imported into the EU. The hope is that it will encourage the importer to utilise more sustainable alternatives to produce their products. Companies that want to import goods produced outside the EU into the EU will have to purchase certificates corresponding to the amount of emissions generated in the production of those goods.

The industries which have been identified as the most carbon intensive and pose the highest risk of carbon leakage are the hydrogen and electricity, cement, fertilisers, aluminium, iron and steel industries. The CBAM transition period will focus on direct, indirect and embedded emissions from the above industries.

In summary, direct emissions focus on the emissions from the production of the good of interest. Indirect emissions relate to the production of electricity consumed during the manufacturing process of the goods. Embedded emissions focus on the precursor materials required in the production of the good.

From the industries cited as the most carbon intensive, of particular interest are the aluminium as well as iron and steel industries. Aluminium and iron are key metals in the construction, automobile, aviation, tools, appliances and water treatment industry. In addition, aluminium plays  a pivotal role for the green transition as it is used more and more in wind and solar energy applications, transmission and high voltage cables, batteries, and hydrogen fuel cells. Aluminium  and iron alloys are recyclable, with 75% of aluminium ever produced still in circulation.

The water treatment sector is unfortunately the black sheep of the industries described above. Potable water treatment makes us of aluminium and iron based salts (aluminium sulphate, ferric sulphate, ferric and ferrous chloride) in the coagulation and flocculation phase. Unfortunately, even with the extremely high energy costs and associated GHG emissions (discussed below), the industry has not yet adopted widely commercialised mechanisms to recover and recycle these spent metal based coagulants from water treatment residuals. The objective of this resource recovery would be geared towards promoting a circular economy and reducing the continued production of carbon intensive goods which are susceptible to carbon leaks.

Energy requirements and carbon footprint 

The production of aluminium is extremely energy intensive with about 17- 40 MWh of primary energy (depending on efficiency and specific aluminium ores used) required to produce roughly 1 tonne of aluminium through a combination of the Bayer process and the Hall-Heroult process.

The GHG emissions resulting from the production of aluminium range from 4 – 14 tonnes of carbon dioxide produced per tonne of aluminium. The range is a function of the carbon intensity of energy production. I.e China would have a much more carbon intensive process of energy production (14 tonnes Co2/tonne aluminium produced) since their electrical energy is predominately produced from fossil fuels than say Brazil (8 tonnes Co2/tonne aluminium produced). To put this into perspective, producing 1 tonne of aluminium yields more carbon dioxide emissions than burning 4 tonnes of oil.

The production of iron (and steel) while not as intensive as aluminium still requires large amounts of energy. 6 – 22 MWh of energy is required to produce 1 tonne of iron and steel. The range depends on the purity of the iron ore processed, the use of a blast furnace or electric arc furnace, if the final product is pig iron or steel, as well as the process efficiency of the specific manufacturer.

The GHG emissions of the iron and steel making process range from 3.6 – 5.3 tonnes of carbon dioxide produced per tonne of iron and steel produced.

In addition to this, further processing would be required to produce the metal based coagulants. Examples include the Chlor-Alkali process to manufacture chlorine (for ferric and ferrous chloride), and the Contact process to manufacture sulphuric acid (for ferric and aluminium sulphate).

Environmental waste

A byproduct of the production of Alumina from Bauxite utilising the Bayer process is red mud. Red mud is a highly complex slurry consisting of iron and silica rich oxides as well as rare earth metals (in some cases even radioactive elements). On average, for every 1 tonne of alumina produced, 1.5 tonnes of red mud is also produced. Aluminium plants on average generate about 150 million tonnes yearly of red mud that is stored in massive waste dams or evaporation ponds. The global average of stored red mud is approximately 3 billion tonnes.

Similarly, the production of iron (and steel) generates byproducts. For every tonne of iron generated in electric arc furnaces, 200 kg of byproduct are produced. In blast furnaces, for every tonne of valuable product, 400 kg of byproduct is produced. Fortunately most of this byproduct is slag and the global average of slag recovery sits at around 80% .

Pivot or perish?

As the transitional period of CBAM soon approaches, it will be interesting to see the effect of CBAM on both the manufacturers of aluminium and iron, as well as the end users, including amongst others potable water treatment plants.

In terms of aluminium, the largest producers globally are Brazil, Russia, India, China (BRIC). Of these countries, the largest suppliers to to the EU are China and Russia ( EU produces 9% of its aluminium needs, recycles 37% and imports 51%). These countries also happen to be the ones that produce aluminium with the most carbon intensive electricity (fossil fuels). As part of CBAM, will these oligopolies adopt cleaner energy practices or will they simply hike up the prices of commodities in order to account for taxes due, therefore passing on the burden to the end supplier (the water utility who will then likely pass on the bill to the consumer)? Some recent research in industry focused on lowering energy costs and carbon emissions points to the utilisation of new refractory materials that can withstand corrosive conditions and better insulate heat in the manufacturing processes. In addition, the use of new anode materials aimed at reducing resistance losses in mining circuits are being explored. Will these efforts be enough to pivot these mining oligopolies?

As for iron, the EU has 9 member states that mine and produce it. Of the 9, only Sweden and Norway produce significant quantities (30 megatons per annum). In comparison, globally these numbers are very small when compared to countries like Australia and Brazil which produce at least 10 times this. A further compounding issue is that most of the EU iron ore mines are underground vs the open cast mines in Australia and Brazil. As a function of this, profitability is an issue due to the competitive nature of the global industry (open cast mines within the same industry in general tend to be more profitable than underground). These two factors lead to the import of iron being more favourable to the EU. Ultimately, the same questions as aluminium arises for iron manufacturers.

Left only in the hands of the EU water utilities, if the iron and aluminium manufacturing houses fail to pivot and adapt to CBAM, will they opt to finally consider and implement effective circular economy strategies that promote the recovery and reuse of coagulation and flocculation chemicals in their treatment plants?



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