European Aluminium responds to ETS benchmark update

Today, the European Commission presented its updated EU Emissions Trading System (ETS) benchmarks for 2026–2030.

European Aluminium warned that this update risked undermining aluminium recycling and critical raw materials supply in Europe at a time when the EU is seeking to strengthen its circular economy, secure critical raw materials, and scale up clean industrial capacity.

The association called on the Commission and Member States not to apply the planned reduction of the heat and fuel fall-back benchmarks to aluminium recycling and alumina refining installations.

Instead, it urged them to maintain the 2021–2025 benchmark levels until dedicated benchmarks for these processes are developed for the post-2030 period.

ETS benchmarks determine how many free allowances industrial installations receive while they decarbonise.

For aluminium recycling and alumina refining, free allocation is not based on dedicated product benchmarks but on generic heat and fuel fall-back benchmarks applied across many different industrial sectors – an approach that does not reflect the reality of these processes.

Unlike other sectors under the fall-back approach, aluminium recycling and alumina refining require high and constant temperatures.

The use of alternative fuels such as biomass is not technically feasible at scale, while electrification options or other technologies remain limited in the near term.

Most efficiency gains have already been captured, and further decarbonisation will require major investment in technologies not yet commercially available at scale.

Paul Voss, Director General of European Aluminium, said: “ETS benchmarks are meant to reward efficiency and drive decarbonisation, but when they are not aligned with industrial reality, they start being all stick and no carrot.”

In practice, the updated benchmarks amount to a 50% cut compared with original Phase 3 levels – translating directly into higher production costs for recyclers and refiners whose technical decarbonisation options remain limited.

This is particularly difficult to justify from an environmental perspective, given that aluminium recycling uses around 95% less energy than producing primary aluminium, making it one of the most effective decarbonisation routes available in European industry today.

In a global market, this increased cost exposure directly becomes a competitiveness issue.

Aluminium and alumina prices are set internationally, meaning producers cannot simply pass these costs on to customers.

When ETS benchmarks increase the cost gap with competitors outside Europe, the result is not lower global emissions, but more imported aluminium, lost investment and weaker European industrial capacity. The stakes extend beyond aluminium.

Alumina refining also enables the recovery of gallium – a critical mineral essential for semiconductors, defence systems and advanced clean technologies – whose supply the EU has identified as strategically vulnerable.

Weakening the economics of European alumina refining also puts that supply chain at risk.

Mr Voss said that Europe’s industrial resilience relies on restoring the competitiveness of the aluminium and alumina value chains, both of which are recognised as critical raw materials.

He continued that applying benchmarks based on heat and fuel options inaccessible to aluminium recycling and alumina refining creates an unfair cost burden, which deepens EU dependency without providing any reduction in emissions.

He concluded: “This is a clear and correctable issue, and a targeted freeze limited to these installations would be a proportionate measure that is both legally and technically justified, without affecting the wider ETS system or triggering the cross-sectoral correction factor.”