Ahead of tomorrow's European Parliament vote in Plenary on the CBAM simplification proposals, a new third-party study by Ramboll Management Consulting, commissioned by European Aluminium, warns that the current design of the EU's Carbon Border Adjustment Mechanism (CBAM) would accelerate carbon leakage in the aluminium sector. The study assesses the potential impact of CBAM on the alumina and aluminium scrap markets in light of the European Commission's ongoing review to expand the mechanism's scope and address circumvention risks. Both materials are currently excluded from CBAM. The executive summary and full study are available on European Aluminium's website.

"CBAM, as currently designed, does not work for aluminium. For example, it creates a clear incentive to over-declare scrap content in products to avoid paying the fee at the border. Without urgent adjustments, it will punish European producers for being cleaner while rewarding importers with less transparency and fewer obligations," says Paul Voss, Director General of European Aluminium. "We strongly urge the European Commission to immediately pause the implementation of CBAM for aluminium — including the phase-out of free allowances — until key design flaws are fixed and the impact on our industry's competitiveness is properly assessed."

European Aluminium notes that its concerns are echoed by several Members of the European Parliament (MEPs) that have tabled amendments calling for a pause in CBAM implementation for aluminium until the necessary fixes are made. These calls come ahead of tomorrow's European Parliament plenary vote, where MEPs are expected to adopt their mandate for negotiations on the CBAM Simplification proposal.

"If the ongoing changes and the European Commission review show that CBAM continues to do more harm than good, aluminium should be removed from its scope entirely. It that case, the EU must also be ready to revert to existing carbon leakage protection measures and maintain them beyond 2030," Paul concludes.

The study highlights three critical issues that must be addressed to prevent CBAM from harming the European aluminium industry:

1.Unverified scrap content creates major risk of circumvention

The study highlights that the complexity of global scrap flows — particularly the challenge of verifying scrap content of aluminium in products — cannot be managed through CBAM's current design and reporting rules. Since scrap is currently assigned a zero-emissions value under CBAM, importers can over-declare scrap content to reduce or avoid carbon costs, with no reliable way to verify those claims. Furthermore, the current CBAM design is likely to cause significant resource reshuffling such that products with a higher scrap content are directed toward the EU market while more carbon-intensive products remain in other foreign markets. This creates a major loophole. Based on different scrap content scenarios analysed in the study, the financial incentive for circumvention is substantial: foreign producers could pocket between 3.6 and 6.5% of the London Metal Exchange (LME) aluminium price, the global reference price for aluminium trading. Meanwhile, EU producers continue to pay carbon costs across their full value chain. The study recommends assigning a default value based on primary aluminium, to all imported primary and secondary metal to avoid placing European industry at a systemic disadvantage while ensuring enforceable carbon pricing.

2.Alumina's inclusion could increase costs across the value chain

If alumina — the refined raw material used to produce primary aluminium — is added to the CBAM scope, modelling shows that its marginal price in the EU and EEA could rise by 12 to 16% by 2030, and by up to 24% by 2034. The inclusion of alumina could significantly raise raw material costs for primary smelters and downstream manufacturers. The study recommends postponing alumina's inclusion until all downstream sectors, including finished products, are covered under CBAM and an effective export solution is in place. The study proposes that a dedicated ETS product benchmark for alumina would be required to better reflect its emissions profile.

3.Including indirect emissions would harm the European aluminium industry

Including indirect emissions in CBAM would not level the playing field. Including indirect emissions in CBAM would significantly raise the fees and further increase the market premium on aluminium products in Europe, driving up prices across all downstream markets. This would lead to a sharp drop in both demand and supply, along with a high rate of substitution—well beyond what market elasticity models would normally predict. The price effects would be so severe that projecting future European demand and supply becomes highly uncertain.

The study shows that these market distortions are compounded by structural imbalances in how indirect carbon costs are applied. In Europe, electricity consumers face indirect carbon costs in electricity prices that are not correlated with the indirect emissions (due to marginal pricing), and compensation for these costs might be phased out if indirect emissions are included in CBAM. Producers in third countries do not face equivalent carbon costs, whereas CBAM also lacks robust mechanisms to verify electricity-related emissions. This creates a structural imbalance: EU producers remain fully exposed to indirect carbon costs, even when consuming decarbonised electricity, while producers in other countries are not. Third-country producers would also be able to selectively redirect low-carbon aluminium to the EU market (reshuffling) or simply declare that they have consumed decarbonised electricity, even if they have not (e.g. by relying on renewable energy certificates).

As a result, European Aluminium warns the immediate inclusion of indirect emissions risks seriously harming the European aluminium industry and all related downstream sectors. Expanding CBAM to cover indirect emissions can only be considered once grids in Europe and globally are close to fully decarbonised.

Read our position paper for more information.