As the second-largest aluminium producer globally, India has long relied on its vast 3.9 billion tonnes of bauxite reserves and a well-established production ecosystem to drive industrial growth, as per a recent survey by the Indian Bureau of Mines. Yet, global trade dynamics are shifting rapidly, and the future belongs to low-carbon aluminium. The European Union, which is one of India’s key trade partners, has placed sustainability at the core of its economic policies. This, in turn, has made carbon emissions a trade determinant rather than just an environmental metric.
The EU’s Carbon Border Adjustment Mechanism (CBAM), set for full implementation in 2026, will impose a carbon tariff on high-emission imports including aluminium. This policy is aimed at curbing carbon leakage — and ensuring that European industries are not undercut by more carbon-intensive imports from non-EU countries.
For India’s aluminium producers, this policy has stark implications. With CBAM poised to reshape European imports, India’s reliance on carbon-heavy production methods puts it at a potential disadvantage. A twofold challenge lies ahead — modernizing production while maintaining cost competitiveness.
But where does India stand today in this transition?
Aluminium industry: Strengths and challenges
India ranks among the world’s top aluminium producers, yet its production methods are highly carbon-intensive. According to CEEW’s Evaluating Net-zero for the Indian Aluminium Industry 2024 report, nearly 80 per cent of the industry’s emissions stem from coal-based electricity consumption. Globally, 39 per cent of aluminium smelting is powered by renewable energy, including hydropower—a sign that low-carbon production is both viable and competitive, says the World Economic Forum in its Aluminium Industry Net-Zero Tracker 2024. So, India can build on its existing efforts to accelerate this shift. This stark disparity highlights India’s most pressing challenge: aligning its production with global sustainability standards.
This disparity becomes even more evident compared to China, which dominates global aluminium production with a staggering 59 per cent market share. Meanwhile, India, despite being the second-largest producer, contributes only 6 per cent. Despite such an overwhelming production capacity, China has prioritised serving its massive domestic demand — and has yet to aggressively pursue sustainability-led exports.
This presents a rare window of opportunity for India. If the country can transition faster to low-carbon aluminium production, India has a unique chance to position itself as the leading supplier of green aluminium to Europe.
With CBAM set to change European import dynamics, the race to establish a foothold in this market has already begun.
CBAM and the window of opportunity
The EU’s CBAM may be a regulatory shift — but it also has the potential to be a catalyst for transformation. Aluminium producers who act swiftly to reduce carbon intensity will gain a competitive edge in the European market. However, the industry must transition now to avoid being left behind.
CBAM’s phased implementation allows time for adaptation, but by 2026, only low-carbon aluminium will be viable for European buyers. India’s failure to modernize would lead to a double disadvantage — potentially facing CBAM tariffs and also losing out on lucrative trade agreements.
Bilateral trade between India and the EU stood at over $137 billion in FY24, but the aluminium industry has room to capitalise further on this relationship as mentioned in a press release by PIB. India’s lack of a Free Trade Agreement (FTA) with the EU further complicates access. However, if the efforts to formalise an FTA with sustainability incentives pay off, it could make a significant difference for India’s aluminium sector. That said, trade agreements alone will not be enough — India must take bold steps to modernize its aluminium industry and align with global sustainability standards.
A roadmap for green aluminium transition
For India to establish itself as a leader in sustainable aluminium exports, decisive action is required across policy, trade, and technology. This is an opportune time for the government to introduce incentives such as tax breaks, subsidies and financing schemes to ease the transition to green aluminium. Without such support, Indian producers will struggle to adopt renewable energy and modernise production infrastructure.
Leading industry players are already spearheading this transition. Vedanta Aluminium has introduced ‘Restora,’ India’s first low-carbon aluminium brand, and secured 1.3 GW of renewable energy through long-term agreements to power its operations. Similarly, Hindalco Industries plans to achieve 30 per cent of its energy mix from renewable sources by 2030, aiming for net-zero carbon emissions by 2050.
Clean energy is another crucial aspect of this transition. India’s aluminium smelting power mix still depends primarily on fossil fuels. This is in stark contrast to countries like Norway and Canada, which have nearly eliminated fossil fuel reliance in their aluminium industries by leveraging renewable energy sources. If India is to compete on a global scale, it must scale up renewable energy adoption through long-term Power Purchase Agreements (PPAs) and direct government intervention.
Beyond the energy transition, India must also strengthen its trade agreements with the EU. A dedicated India-EU Free Trade Agreement that incentivizes green industrial exports could significantly enhance the competitiveness of Indian aluminium in European markets.
Additionally, a sustainable aluminium industry cannot thrive without a skilled workforce. Transitioning to hydrogen-based smelting, carbon capture and inert anode technology will demand expertise that India’s current workforce may not be fully equipped for. However, by partnering with European institutions and industry leaders, India can successfully develop workforce training initiatives and ensure that the domestic workforce is upskilled for green aluminium production.
The road ahead: India’s defining moment in global trade
The global aluminium trade is shifting, and India is at a crossroads. The choices made today will determine whether the country emerges as a leader in the low-carbon economy or risks losing ground in a rapidly evolving market. European buyers are already recalibrating supply chains to prioritise sustainability, and those who fail to adapt will struggle to compete.
For India, this is more than an environmental responsibility—it is an economic imperative. If India seizes the moment, it can emerge as a dominant supplier of low-carbon aluminium in the European market. The path forward is clear: act now, innovate, and lead. The nations that move first will define the future of sustainable trade.
The author is MD &CEO, Taural India
