Low-Carbon Aluminium: A Green Metal Market Takes Shape
20/02/2019
Management Quality Level
Aluminium producers’ average Management Quality score is 2.6, meaning that the average company in this sector is just over halfway between Levels 2 and 3. This score is about the same as the average score of all companies in the TPI database. However, the aluminium sector scores better on average than other carbon-intensive manufacturing sectors such as cement, paper and steel.
Five out of 12 aluminium producers are on Levels 1 and 2, while the remaining seven companies are on Levels 3 and 4. All the leaders in this sector are listed in OECD countries and several of them are diversified, with major operations in e.g. mining other commodities. By contrast, more than half of global primary aluminium production is located in China.
No company satisfies all Management Quality criteria: there are not yet any 4* aluminium producers.
The 12 companies in the aluminium sector are more likely than the average TPI company to have set quantified, long-term emissions targets and to have undertaken climate scenario planning, although the absolute number of companies undertaking climate scenario planning remains low (four out of 12).
Aluminium producers are less likely than the average TPI company to disclose Scope 3 emissions and to have incorporated ESG issues into executive remuneration.
None of the 12 aluminium producers discloses an internal carbon price.
Aluminium Producers' Carbon Performance The emissions intensity measure in this sector is Scope 1 and 2 greenhouse gas emissions from aluminium production, per tonne of primary and secondary aluminium produced. The majority of emissions are in Scope 2. Focus is on the two most emissions-intensive stages of aluminium production; refining and smelting. Emissions from aluminium recycling are also taken into account. Aluminium producers that are involved in neither refining nor smelting fall outside the scope of our assessment: Arconic, China Zhongwang and Nippon Light Metal.
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Aluminium producers’ emissions intensity varies widely, due mainly to the source of electricity used for smelting. For example, Norsk Hydro sources its electricity mainly from hydro-electric plants, while Alumina does so mainly from fossil power plants.
Only three aluminium producers have an emissions intensity that is currently aligned with the benchmarks: Alcoa, Norsk Hydro and Rio Tinto. Norsk Hydro’s current emissions intensity is almost as low as the Below 2°C benchmark in 2030.
Only two companies have a target to reduce their emissions intensity of aluminium production that extends to at least 2020: Alcoa and UC Rusal. Neither is aligned with the Paris Agreement targets.
