China is pushing its steel and aluminum industries to adopt cleaner methods by incorporating them into its carbon emissions trading system (ETS). China’s recent move to include aluminum and steel in its ETS marks a pivotal moment for industries that depend on these materials, particularly renewable energy.
Aluminum production in the United States is dropping rapidly and in the last two years, three plants have closed, leaving four running, with only two of them at full capacity.The U.S. was the largest aluminum producer in 1980, but now makes one percent of the world’s supply while China produces 60 percent.
Reducing carbon emissions from these two industries is crucial to China’s ability to meet its carbon neutrality targets by 2060. Including aluminium and steel in China’s ETS will likely have significant long-term benefits for global environmental efforts, as cleaner production of steel and aluminum will reduce the overall carbon footprint of the infrastructure that supports renewable energy.
The U.S. mining and metals industry analysts, Skillings Mining Review (SMR), comments that “while this decision represents a significant stride towards reducing the global carbon footprint of two essential commodities, it brings some short-term challenges for U.S. renewable energy projects.”
Switzerland-based industry analysts, MetalMiner Insights (MMI), note that China’s push for decarbonization could also spur innovation. As manufacturers shift to cleaner methods, MMI says the world is likely to see the development of low-carbon steel and aluminum technologies, which will eventually lower emissions throughout the supply chain for these key metals.
Although China’s decarbonization goal presents immediate hurdles for U.S. renewable energy providers, the long-term environmental benefits are still evident. China manufactures over 60% of the aluminum produced worldwide, and Chinese imports play a significant role in U.S. developments. As stiffer regulations drive up production costs for these essential components in China, American businesses will inevitably feel the impact.
The Biden administration’s tariffs on Chinese steel and aluminum, set at 25%, further complicate the supply chain. While intended to protect domestic industries, these tariffs have increased the cost of importing these metals. As a result, renewable energy projects in the United States may face delays and higher expenses in the short-term.
Steel and aluminum are vital to building and operating infrastructure for solar, wind, and other forms of renewable energy. Thanks to its corrosion resistance and light weight, aluminum is a key component in wind turbines and solar photovoltaic (PV) systems. Manufacturers looking to harness renewable resources use aluminum in over 85% of solar PV components, including inverters and frames.
China is now the major global producer of aluminum and the United States will likely be importing more from China over time.
Unless the U.S. is able to significantly to reduce its reliance on imports, the additional costs identified by industry analysts are likely to be long term and consistent with the continued decline in US manufacturing capacity.
