Plans to launch a "green aluminium" platform on the London Metal Exchange (LME) are facing opposition from two of the world's largest producers.
London Metal Exchange
India's Hindalco Industries and Norway's Norsk Hydro are both pushing back against the LME proposals to allow aluminium with a lower carbon footprint to be traded on its own separate platform from the standard metal.
The companies' opposition comes as a setback to the LME, the world's hub for the trading of industrial metals, which looked to establish the green metals platform to accelerate the production of aluminium in a more sustainable way.
The plans for the 2021 launch of a separate exchange platform for low-carbon metal were first announced in August. It would mark the first time in the LME's 143-year history that metals would be traded on the basis of the environmental impact.
The vast majority of aluminium is produced using natural gas or coal-fired power. While the lightweight metal itself is a vital part of the transition to a low-carbon economy - crucial for sustainable packaging, electric vehicles and green building - its production is responsible for around 4% of global greenhouse emissions, leading it to be classified at last year's UN Climate Summit as one of the "hard to abate" industries where global action is critical.
Aluminium produced using coal-fired power, for example, can emit as much as 22 tonnes of carbon for just one tonne of the metal.
The LME's reason for wanting to set up a low-carbon trading platform for aluminium was to determine whether or not customers would be willing to pay a premium for a greener version of the metal, which would in turn incentivise the sector to bring down its carbon footprint.
However, the FT reported Norsk Hydro CEO Hilde Merete Aasheim as saying that a separate platform for green aluminium risked weakening standards and undermining the efforts the industry had already made to decarbonise.
“We are a little bit afraid you will commoditise a specialised product,” she said. “There are a number of green products out there - you have to be precise about what is your [carbon] content, it’s not one standard calculation.”
She added that Norsk Hydro was concerned the LME proposals would "bundle together" several low-carbon standards and set a threshold for green aluminium that was too low.
Norsk Hydro, which uses hydropower to produce its aluminium, sells its product with a carbon footprint of under 4kg of CO2 for every 1kg of the metal produced. This is less than half that the European average of 8.6kg and much lower than the 20kg in China.
Satish Pai, Managing Director of Hindalco Industries, also told the FT that a focus on the energy used in the production of aluminium risked eclipsing other issues within the supply chain, such as bauxite mining.
“The concept of green aluminium is being hijacked for economic benefits by a few companies,” Mr Pai said. “It’s a concept that needs to be looked at from a holistic environmental and sustainability point of view across the whole value chain.”
“The LME is a place to bring buyers and sellers together [and] they should stick to their mandate,” he added.
The position taken by Norsk and Hindalco is at odds with other players in the sector.
Hydropower and metals group En+, which was formerly controlled by Russian oligarch Oleg Deripaska, said last month that the LME's plans did not go far enough, arguing that every producer of aluminium should be required to disclose its carbon footprint to the exchange.
“We welcome all views in respect of our proposed sustainability strategy and are considering the feedback we’ve received as part of the discussion paper process,” the LME said.
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