European Aluminium has called for the EU to expand the product scope of the Carbon Border Adjustment Mechanism to include downstream products made entirely or partly from aluminum to avoid market distortions, it said in a paper released Aug. 21.

The association strongly suggested widening the scope, saying that if this was not done, upstream aluminum would carry a carbon cost, while imported finished products would not, which would incentivize production relocation and a surge in imports of aluminum-containing goods.

It pointed out that this would undermine CBAM's objective to prevent carbon leakage.

The paper follows a report commissioned in May, which found CBAM's current design could penalize European aluminum producers for being cleaner while rewarding importers with less transparency and fewer obligations.

EA said the initial focus should be on products with a significant and easily identifiable aluminum content, such as automotive components, building materials and packaging, as they represented the most direct and immediate downstream applications of aluminum and were at the highest risk of leakage if excluded.

It noted that the further downstream a product was, the lower the relative share of CBAM-covered material in the final product's total value. Therefore, the lower the cost impact of CBAM, the more value-adding steps were included after the raw material stage.

"This justifies starting CBAM scope extension with products closely related to primary aluminum goods... A key technical challenge lies in identifying aluminum-rich products, especially where products fall under mixed CN codes or have multi-material composition," it said.

The association suggested addressing this challenge by developing thresholds for aluminum content; requiring certified declarations or using proxies for aluminum content; and creating new CN codes or sub-codes for aluminum-based products currently falling under mixed classifications.

"Moreover, if indirect emissions are to be included in CBAM before the scope is extended to downstream products, European aluminum will become too costly to process locally -- shifting manufacturing abroad and increasing embedded emissions," it said.

Address circumvention risks

EA also called for CBAM to comprehensively address circumvention risks to prevent carbon leakage while maintaining fair competition.

It said these risks included resource shuffling, unverifiable emissions claims, and regulatory loopholes that benefited importers over European producers.

"Our key proposal is to structurally eliminate these risks by applying a single default value approach across the aluminum value chain," it said.

The association said the most significant aluminum circumvention risk was the scrap and secondary route loophole, as there was currently the ability to use and over-declare scrap -- assigned zero emissions -- and low-carbon aluminum content to reduce CBAM costs, despite no reliable means of verification.

"Recycled aluminum is indistinguishable from primary aluminum, and no customs or analytical method can determine its share in a finished product. Similarly, low-carbon primary aluminum cannot be physically distinguished from high-carbon metal," EA explained.

To address this, it said the system should include a single default value based on the average direct CO2 emissions intensity of primary aluminum production in the country of smelting, or the world average if the country-specific information was unknown.

The association said the default value should be levied on the volume of embedded aluminum in the imported product; there should be no differentiation between primary and secondary production routes or between scrap types; and also be no requirement to report scrap content, which would become irrelevant under this system.

Limit emissions reporting

It said actual emissions reporting should be limited strictly to downstream processing stages -- such as casting, extrusion, rolling and remelting -- where traceability was feasible; sub-installation reporting or disaggregation based on product types or production route should not be permitted; and the default value should be revised periodically to reflect decarbonization progress in the country of origin.

The association said emissions reporting must also be done at the full installation level, covering the entire manufacturing site to close attribution loopholes and prevent the selective use of low-carbon inputs for EU-bound products, while continuing high-emission production for other markets.

It said this would ensure imported goods did not benefit from carbon cost exemptions unavailable to EU producers.

EA also suggested lowering the proposed annual import threshold from 50 mt to 5 mt and limiting it to genuine prototypes or test volumes to safeguard CBAM's integrity, as using the larger volume risked enabling circumvention through shipment splitting or use of multiple legal entities.

"Full application of CBAM across all volumes is essential to maintain fair competition and protect the EU aluminum value chain," it said.

"CBAM must not reward circumvention or superficial decarbonization claims. It must reward real emissions reductions, verified and comparable with EU standards," the association said.

It noted that the single default value approach was a transparent and enforceable method to prevent resource shuffling and safeguard the competitiveness of the European aluminum industry, otherwise CBAM risked penalizing companies making genuine decarbonization efforts.