First Public Consultation of the ACT Aluminium Methodology - long version. Accepting comments until July 8, 2021.

Last updated 2:30pm Jul 6

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Thank you for taking the time to review the ACT Aluminium methodology.

We understand the document is long. Feel free to focus only on specific sections.  We are most interested in getting your feedback on the following sections:

  • Indicator 2.4 Contribution to low carbon electricity generation
  • Indicator 4.2 Pre-consumer scrap reduction
  • Indicator 4.3 Recycled scrap traceability
  • Weighting tool
  • Examples of what could be included within “low carbon” R&D, patents and business models
  • Integration of physical risks and adaptation in ACT

 

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Aluminium

(version 0.5 – June 2021)

Acknowledgments

ADEME and CDP warmly thank the members of the Technical Working Group for their inputs and feedbacks on the methodology (see list of members in annex).

Technical coordination:

Marlène DRESCH (ADEME)

Dua ZEHRA (CDP)

   
ACT co-founders:

 

 

supported by:  
 

Technical assistance provided by:

Eliott RABIN, Nikolaos KORDEVAS, June VERGE KEMP (I Care & Consult)

Guillaume AUDARD, Aurore PHILIPPE-DELVIGNE (Solinnen)

Quality assurance and quality control on development phase provided by :

André PEDROSA-RODRIGUES (Eco2 Initiative)

Patrick HARDY (Climate Check)

© CDP Worldwide & ADEME 2021. Reproduction of all or part of work without licence of use permission of CDP Worldwide & ADEME is prohibited.

 

1. Introduction

The 2015 United Nations Climate Change Conference (COP21) in Paris strengthened the global recognition of limiting dangerous climate change. Political agreement was reached on limiting warming to well below “2 degrees” and pursuing efforts to limit temperature rise to “1.5 degree” above pre-industrial levels. The Assessing low-Carbon Transition (ACT) Initiative measures how ready a company is to transition to a low-carbon economy. The ACT initiative aims at helping businesses to drive their climate strategy, their business model(s), their investments and operations, and set targets compatible with a low-carbon pathway. The general approach of ACT is based on the Sectoral Decarbonization Approach (SDA) developed by the Science-Based Targets Initiative (SBTi) in order to compare a company’s alignment with a low-carbon world (compatible with 2°C - or beyond - climate change scenarios), the application of which is described in the ACT Framework [1]. The ACT Aluminium methodology aligns with other reporting frameworks where applicable (e.g. CDP, TCFD, EU Taxonomy).

[1] ACT Initiative, «ACT Framework, version 1.1,» 2019.

It is important to note that the choice of low-carbon scenario might differ between each ACT sectoral methodology, so it is not always possible to compare assessment results across sectors. In addition, the methodology itself is scenario agnostic; it means that companies within the same sector could be given two different scores if the scenario chosen in the benchmark was to change.

 

Why do we need to develop a methodology for aluminium sector?

Aluminium is the second most-used metal in the world in terms of metric tonnes produced after iron, hence the most used non-ferrous metal worldwide [2]. The aluminium industry is currently responsible for 2% of global GHG emissions and generates about 1.1 billion tonnes of CO2e annually [3]. Primary aluminium production is highly energy-intensive, with electricity making up a large share of the energy consumed.

[2] Maan_aluminium, «Aluminium: the green metal,»

[3] International_Aluminium_Institute, ghg_emissions_aluminium_sector_21_july_2020_read_only_25_september_2020, 2020

 

Aluminium is a key metal, especially in the context of the energy transition thanks to its qualities (lightness, strength, durability, electrical and thermal conductivity, formability and recyclability). Aluminium can be used for lightweight vehicles, solar energy (solar energy systems use aluminium for various components, including for mounting and framing solar PV panels and for reflectors in concentrating solar power systems) and in the electric power grid and electrical cables along with copper [4]. Aluminium demand is thus expected to grow and reach 174 Mt of aluminium in 2050 (86 Mt for primary aluminium production, 88 Mt for recycled aluminium production) [5].

[4] EA, «IEA Report: Aluminium,» 2020

[5] I. A. Institute, «Global metal flow,» [En ligne]. Available: https://recycling.world-aluminium.org/review/global-metal-flow

A low-carbon world therefore requires a low-carbon transition of the aluminium sector.

Even though aluminium can be recycled almost infinitely [6], the recycled aluminium production route, which consumes around 5% of the total energy consumption compared to the primary aluminium production route [7], will not be sufficient to meet the growing demand for aluminium, all the more that aluminium also has the particularity to have an important expected lifetime. Indeed, of the estimated 1,5 billion metric tonnes of aluminium that have been produced since 1880, three quarters are still in use [8]. In 2019, 36% are located in buildings, 25% in electrical cables and machinery, and 30% within transport applications [5]. However, demand met from scrap is expected to grow from around one third of the current aluminium production to 50-60% in 2050 [6].

[6] WEF_Aluminium_for_Climate_2020, «World Economic Forum,» 2020

[7] T. JRC_Institute_for_Energy_and_Transport, «Energy Efficiency and GHG Emissions: Prospective Scenarios for the Aluminium Industry,» 2015

[8] International_Aluminium_Institute, «https://alucycle.world-aluminium.org/public-access/,» 2020.

Alongside material efficiency strategies, R&D is needed on innovative alternative production methods that reduce primary production process and combustion emissions, and more energy-efficient equipment and operations would be beneficial.

Given the considerable amount of electricity consumed in the aluminium sector, decarbonising the power sources would help reduce indirect emissions and is thus a key complement to reducing direct aluminium emissions. Moreover, the aluminium can play a role in providing flexibility to the power grid as aluminium smelters consume a great amount of electricity. This might be a key topic especially in a context of an increasing share of intermittent electricity production means (photovoltaic and wind turbines).

All of these diverse levers of the Aluminium sector transition will be addressed by the ACT assessment methodology.

 

1.1. Introduction to Aluminium

Two main routes are currently used to produce aluminium:

  • Primary aluminium production. It starts with the mining of bauxite, which is then refined to obtain the alumina (aluminium oxide). The alumina is then smelted through the electrolysis process to produce aluminium that is cast to obtain aluminium ingot. Aluminium smelting produces aluminium dross (similar to iron slag), which can be recycled into aluminium metal and aluminium oxide. Aluminium oxide has a variety of industrial uses which includes being used in paint, dye, concrete, explosives, and fertilizer. Anode production is also included in the primary route, as it will be used during the electrolysis and its associated CO2e emissions are included in the low carbon pathways selected.
  • Secondary aluminium production or recycled aluminium production. The aluminium is produced entirely from scrap in this route. There are two different types of scrap that can be recycled in the secondary route: pre-consumer scrap and post-consumer scrap. Both remelters and refiners will be involved in the secondary routes. Refining is different from alumina extraction, which can also be called alumina refining. Pre-consumer scrap is the scrap generated during the processes to produce aluminium. Companies can process the scrap they generated themselves (internal scrap remelting) or buy it from scrap traders. Post-consumer scrap is recycled aluminium from end use products (e.g. vehicles, buildings etc.). It often requires chemical treatment to remove impurities through refining.

A more detailed description of the aluminium production is presented in the figure below. At the top of the figure, the primary production route is described with the bauxite mining and the anode fabrication, which are the two main inputs before the smelting step of aluminium through electrolysis. At the right of the figure, the scrap is represented and will be used in the recycled aluminium production route. Both routes will enable to create semi-finished aluminium products [7].

 

Figure 1: Overview of the aluminium production processes

 

 

The figure below shows the overview of the aluminium recycling process [10].

[10] European_Aluminium, «Recycling aluminium: a pathway to a sustainable economy,» 2015.

 

Figure 2: The recycling process of aluminium

 

The aluminium recycling industry is comprised of remelters and refiners that will not process the same type of scrap. Remelting and refining will be considered as “routes” to produce aluminium.

  • Remelters will process new scrap, which is a surplus of materials arising during the production of aluminium before being sold to end consumer, to produce aluminium alloy ingots. This remelting takes place at cast houses of primary aluminium smelters. Remelters will also process a small share of old scrap, which is the aluminium material recovered after an aluminium product has been recycled at the end of its lifetime.
  • Refiners will produce also aluminium alloy ingots from the bulk of the old scrap collected. Refining is necessary as the aluminium content of old scrap is often lower than of new scrap, which requires then additional efforts to remove impurities. Refiners will also process new scrap [7].

To summarise, remelting and refining do not concern the same scrap used as inputs in terms of proportion, they do not have the same processes, and they do not produce the same type of aluminium outputs. The following figure provides more details on the different outputs and different next processes for the remelting and refining routes [11].

 

Figure 3: Focus on the remelting and refining routes and processes

 

Even if aluminium can be recycled almost infinitely, a lack of available scrap limits the potential of this route. Indeed, secondary aluminium materials, or scrap, are not available in sufficiently high quantities or lack of quality [12]. The recycled aluminium production route, comprised of both the remelting and refining routes, accounted for more than 50% of the total aluminium production worldwide in 2019 [13].

Aluminium is used in a wide range of applications and industries. The following figure highlights the global end use of aluminium as of 2019 [6]. The Transport and Construction industries account for more than the half of all aluminium consumption in the world.

 

Figure 4 : Global aluminium flow

 

Some definitions of the end use highlighted above:

  • Consumer durables: as any type of products purchased by consumers that are manufactured for long-term use. As opposed to many goods that are intended for consumption in the short term, consumer durables are intended to endure regular usage for several years or longer before replacement of the consumer product is required. Just about every household will contain at least a few items of this nature.
  • Foil stock: aluminium prepared in thin metal leaves with a thickness < 0,2mm

 

1.2. GHG emissions in the aluminium sector

The International Aluminium Institute provides a comprehensive table (see Figure 5) highlighting all CO2e emissions of the aluminium value chain. The columns of the following graph are the eight steps of the value chain, and each line is a CO2e emissions post to cover the global carbon footprint of the aluminium sector accounting for more than 1 GT of CO2e emissions per year [19].

 

Figure 5: 2018 total aluminium sector emissions (Mt CO2e) heat mapped, by process and source (*recycling of pre- and post-consumer scrap)

Furthermore, the carbon footprint of the aluminium production depends on the route. Indeed, the secondary route requires much less energy and does not use carbon anodes that are responsible for direct CO2e emissions during the electrolysis for example; therefore, this route emits less CO2e.

 

1.2.1. Primary route

In the primary production route, the bulk of the CO2e emissions comes from the electricity CO2e emissions of the electrolysis process and its electricity consumption, as well as from the alumina extraction step of the value chain. Electrolysis requires a great amount of electricity, and about 60% of the power consumed by the aluminium industry is self-generated and not purchased from the grid [4]. When the electricity is bought from the grid, the emissions of CO2e of the electrolysis step can vary a lot depending on the electricity carbon intensity of the country where the plants are located.

The following figure provides an overview of the different CO2e emissions at each step of the value chain for the primary route [6].

 

Figure 6: Main CO2e emissions of the aluminium primary production route

 

 

1.2.1.1. Alumina extraction

Alumina is the aluminium oxide coming from bauxite. In the Bayer process, bauxite is washed with a hot solution of sodium hydroxide at 250 °C, dissolving aluminium hydroxide. The other components of bauxite do not dissolve and can be filtered out as solid impurities (red mud). Afterwards, the hydroxide solution is cooled and the aluminium hydroxide precipitates out. When heated to 1050°C, the aluminium hydroxide decomposes to alumina, giving off water vapour in the process [7].

The main CO2e emissions come from:

  • The combustion of fossil fuel to heat the furnace (main post of CO2e emissions of this step)
  • The calcination of calcium carbonate

 

1.2.1.2. Anode fabrication

With alumina, carbon anodes are the second main raw materials needed to produce primary aluminium. The production of anodes consists in baking a mixture of hard calcined petroleum coke, recycled anode butts, and coal tar pitch at 1150°C. The most common case for primary aluminium producers is to have an on-site anode plant, but some smelters also procure carbon anodes externally. The anode production process requires a consumption of about 2,8GJ/t of anode of thermal energy (mostly natural gas) and 0,4 GJ/t of anode of electricity [7].

The main CO2e emissions come from:

  • The baking of anode (thermal energy and electricity)
  • The coke calcination to produce these anodes

 

1.2.1.3.  Aluminium smelting

The process of aluminium smelting is called Hall-Héroult and involves dissolving the alumina (Al2O3) in molten cryolite (Na3AlF6), and electrolysing the molten salt. The presence of cryolite reduces the melting point of the alumina, facilitating electrolysis. In the operation of the cell, aluminium is deposited on the cathode, while the oxygen from the alumina is combined with the carbon from the anode to produce CO2 [7].

The electrolysis process is therefore based on the electrical reduction of aluminium oxide to pure aluminium and uses electricity as the main energy carrier. Fossil coal in the form of carbon anodes is used to facilitate the electrical reduction, resulting in CO2 and CO emissions. In addition, there are disturbances in the process, so-called ‘anode effects’, where an insufficient amount of aluminium oxide is dissolved in the electrolyte bath, resulting in the emission of perfluorocarbons (PFCs). Therefore, the climate impact from electrolysis maybe divided into three parts [20]:

  • GHG emissions due to the use of electricity
  • The emission of CO2 and CO due to the consumption of anodes
  • The emission of PFCs during anode effect

However, PFC emissions have greatly reduced. Overall contribution to emissions intensity globally has fallen from ~30% in 1990's to ~5% today. indicates that the mean PFC emissions intensity was of 0,55 tCO2e/t aluminium in 2019.

 

Figure 7: Total PFC CO2e emissions all technologies included [9]

 

With regards to Europe and PFC’s, substantial progress has been made over the past years to reduce the CO2e emissions of PFC to a low level of tCO2e/T aluminium, as shown in Figure 8 [10].

 

Figure 8: Total European aluminium CO2e emissions reduction [10]

 

 

1.2.1.4. Primary casting

Thermal energy is required to produce aluminium ingot from liquid aluminium that is the output of the smelting step, as well as a small quantity of electricity. The CO2e emissions come therefore from this energy consumption.

 

1.2.2. Recycled aluminium production route

 

1.2.2.1. Aluminium production (remelting and refining)

Two sub routes can be defined in the secondary routes, as they are different in terms of process and in terms of actors involved.

Remelting: it concerns the aluminium production mainly from new scrap, but also a small part from old scrap. It consumes around 3,8 GJ/metric tonnesof aluminium ingot of thermal energy, and 0,45 GJ/metric tonnesof electricity, which is far less compared to the 37 GJ of thermal energy and 58 GJ of electricity as for the primary aluminium production route [7]. Overall, the secondary route consumes therefore around 5% of the total energy consumption compared to the primary aluminium production route.

Refining: the bulk of the old scrap will be recycled through refining, but new scrap will also be refined. Refining is necessary to remove impurities, and the downstream of the refining sub route will not be the same as the remelted one (e.g. casting and secondary casting for the refining sub route, and it will produce different types of manufacturing products than the ones of the remelted sub route).

 

2. Principles

The selection of principles to be used for the methodology development and implementation are explained in the general ACT Framework Table 1 recaps the principles that were adhered to when developing the methodology.

Table 1: PRINCIPLES FOR IMPLEMENTATION

RELEVANCE - Select the most relevant information (core business and stakeholders) to assess low-carbon transition.
VERIFIABILITY - The data required for the assessment shall be verified or verifiable.
CONSERVATIVENESS - Whenever the use of assumptions is required, the assumption shall be on the side of achieving a 2° maximum global warming.
CONSISTENCY - Whenever time series data is used, it should be comparable over time.
LONG-TERM ORIENTATION - Enables the evaluation of the long-term performance of a company while simultaneously providing insights into short- and medium-term outcomes in alignment with the long-term.

 

3. Scope

 

3.1. Scope of the document

This document presents the ACT assessment methodology for the aluminium (AL) sector. It includes the rationales, definitions, indicators and guidance for the sector-specific aspects of performance, narrative and trend scorings. It also includes an experimental scoring on physical risks and climate change adapatation. It was developed in compliance with the ACT Guidelines for the development of sector methodologies, which describe the governance and process of this development, as well as the required content for such documents. It is intended to be used in conjunction with the ACT Framework, which describes the aspects of the methodology that are not sector specific.

 

3.2. Scope of the Sector

This section aims to specify which type of companies the ACT aluminium methodology can assess.

 

3.2.1. Aluminium sector value chain

This part aims to highlight all the steps of the aluminium value chain that exist.

The aluminium value chain can be divided into eight main steps as highlighted by IAI [19]:

  • Bauxite mining
  • Alumina extraction
  • Anode production
  • Electrolysis
  • Casting
  • Recycling (that could be split in to remelting vs refining)
  • Semis production
  • Internal scrap remelting

A simplified version of this value chain into five steps proposed by ACT is:

  • Mining (of bauxite)
  • Alumina extraction
  • Aluminium smelting (recycled aluminium production route through remelting and refining included here)
  • Aluminium product shaping
  • Manufacturing

The main processes involved in these activities are presented in the figure below.

 

Figure 9: Simplified Aluminium value chain

 

 

3.2.2 Scope of the actors

The ACT methodology relies on the principle of relevance and therefore only the companies that have both significant climate impact and significant mitigation levers can be covered by the ACT methodology.

All companies involved in producing aluminium or alumina will be covered by ACT Aluminium methodology.

The only companies of the aluminium value chain that will not be covered by ACT are:

  • pure player bauxite mining,
  • pure player anode producers
  • manufacturer of semi-finished and finished products.

The next figure highlights the total list actor’s types covered by ACT. ACT will not ask companies to which type of actor they correspond, but at which step of the value chain they operate (or plan to operate) in order to simplify and not have too many types of actors. This will also enable to assess all kind of aluminium companies that are present at different steps of the value chain, and to capture the fact that not all aluminium companies focus their business activities at the same steps of the value chain.

 

Figure 10: Companies that can be assessed by the ACT Iron & steel methodology

 

There are mainly two types of activity classification: NACE (Europe) and ISIC (International). NACE and ISIC codes will enable to understand which activities are covered by the ACT methodology, and therefore which type of actors. A company can have multiple activities and be assessed with this methodology if one of those is in the scope.

 

3.2.3. NACE

 

3.2.3.1. Activities covered by the scope of the ACT aluminium methodology

The following NACE codes are included in the scope of the ACT Aluminium document:

  • 24.42: Aluminium production:
  • Production of aluminium from alumina
  • Production of aluminium from electrolytic refining of aluminium waste and scrap
  • Production of aluminium alloys
  • Semi-manufacture of aluminium

24.53: Casting of light metals:

  • Casting of semi-finished products of aluminium, magnesium, titanium, zinc etc.
  • Casting of light metal castings

 

3.2.3.2. Activities outside the scope of the ACT aluminium methodology

  • 25: Manufacture of fabricated metal products, except machinery and equipment
  • 27: Manufacture of electrical equipment
  • 28: Manufacture of machinery and equipment
  • 29: Manufacture of motor vehicles, trailers and semi-trailers
  • 30: Manufacture of other transport equipment
  • 07.29: Mining of other non-ferrous metal ores
    • Mining and preparation of ores chiefly valued for non-ferrous metal content:
      • Aluminium (bauxite), copper, lead, zinc, tin, manganese, chrome, nickel, cobalt, molybdenum, tantalum, vanadium etc.
      • Precious metals: gold, silver, platinum
  • 38.32: Recovery of sorted materials
    • Wholesale of metals and metal ores (46.72)

 

3.2.4. ISIC

 

3.2.4.1. Activities covered by the scope of the ACT aluminium methodology

The following ISIC codes are covered by the scope of the ACT Aluminium methodology:

  • 2420: Manufacture of basic precious and other non-ferrous metals
    • Production of aluminium from alumina
    • Production of aluminium from electrolytic refining of aluminium waste and scrap
    • Production of aluminium alloys
    • Semi-manufacturing of aluminium
    • Production of aluminium oxide (alumina)
    • Production of aluminium wrapping foil
    • Manufacture of aluminium (tin) foil laminates
  • 2432: Casting of non-ferrous metals
    • Casting of semi-finished products of aluminium, magnesium, titanium, zinc etc.

 

3.2.4.2. Activities outside the scope of the ACT aluminium methodology

  • 0728: Mining of other non-ferrous metal ores
    • Aluminium (bauxite), copper, lead, zinc, tin, manganese, chrome, nickel, cobalt, molybdenum, tantalum, vanadium etc.
  • 2394: Manufacture of cement, lime and plaster
    • Manufacture of clinkers and hydraulic cements, including Portland, aluminous cement, slag cement and superphosphate cements
  • 2732: Manufacture of other electronic and electric wires and cables
    • Manufacture of insulated wire and cable, made of steel, copper, aluminium

 

3.2.5 Rationale for the scope

Bauxite miner pure players are excluded as

  • Bauxite mining accounts for only 0,2% of the CO2e emissions of the aluminium sector [12]
  • The emissions reduction levers are very different for bauxite miners than for other players such as alumina players and smelters
  • Integrated companies involved in the mining step will be assessed on the mining part

Anode producer pure players are excluded as

  • Anode manufacturing does not account for a large part of the CO2e emissions in the aluminium value chain (3%) [12]
  • The emissions reduction levers are very different for anode producers than for other players

Integrated companies involved in the anode step will be assessed on the anode part Manufacturer of semi-finished and finished products are excluded as

  • Manufacturing is negligible in terms of CO2e emissions for the aluminium sector
  • Manufacturing is excluded from low-carbon scenarios for aluminium sector (International Aluminium Institute, IEA…)
  • Even integrated companies involved in the manufacturing will not be assessed on their manufacturing activities

 

4. Boundaries

The Boundaries Section specifies which emission sources this methodology takes into account.

 

4.1. Reporting Boundaries

The reporting boundaries for the aluminium sector are presented in the following diagram:

 

Figure 11: Aluminium sector reporting boundaries

 

Aluminium companies will be assessed for each type of activity where they are involved in. Scope 1+2 emissions shall be reported separately for each of the 8 steps of the value chain, and process-specific pathways will be used as benchmarks for calculating some indicators. Moreover, upstream Scope 3 (purchased alumina or aluminium, ancillary materials, transport) will always be included for some indicators for the steps of the aluminium value chain where the company does not operate. Those 8 steps are the following ones, as described in the diagram above:

  • Bauxite mining
  • Aluminium refining
  • Anode production
  • Electrolysis
  • Casting
  • Recycling
  • Semis production
  • Internal scrap remelting

All modules and indicators will not use the entire reporting boundaries, depending on which actions / levers they have to capture:

  • For example, Module 2 (Material Investment) will not consider ancillary materials and transport CO2e emissions as they will be Scope 3 for the aluminium companies, and as Module 2 focuses on company’s own processes.
  • However, Module 4 (Sold product performance) will assess the global carbon footprint of the aluminium products sold by the company, including all steps of the aluminium value chain and all CO2e emissions posts including here the ancillary materials and transport CO2e emissions. Refer to the details of each indicator for further details.

Regarding the electricity consumed, especially at the electrolysis step, it can be either self-generated by the aluminium company or purchased from the grid. If the electricity is self-generated, ACT will ask the Scope 1 emissions of the power plants for the electricity without including the electricity that will be sold to external customers or to the grid. And for the purchased electricity, ACT will ask Scope 2 CO2e emissions. This data will be asked for calculating the Scope 1+2 of the company for the corresponding modules.

 

4.2. Rationale

The bulk of the CO2e emissions in the aluminium sector occurs at the alumina extraction and the smelting steps of the value chain. The boundaries could have been set to include only these high-emitting processes. Nevertheless, the methodology takes into account that:

  • CO2e emissions comes mainly from the alumina extraction and the smelting steps for now; but when progress will be made, especially to decarbonise electricity, the other steps will become a greater share of the emissions of the sector
  • There are decarbonisation levers that can be triggered on other steps of the aluminium value chain
  • The sector makes efforts to disclose the CO2e burden of aluminium using a life-cycle assessment approach, enhancing the fact that the whole value chain of aluminium should collaborate and take its part in the decarbonisation of the aluminium sector
  • unlike most of other industrial sectors, current CO2e emissions are available for each stage of the value chain through the work of IAI. The IAI studies emissions at a unit process level, which allows for greater granularity on the opportunities for decarbonisation across the value chain. [19]

Therefore, a cradle-to-gate approach has been chosen to cover the emissions and thus the reduction emissions levers broadly.

The value chain has been split into 8 steps, in accordance with the work undertaken by the International Aluminium Institute to develop low carbon pathways for each of these steps. Therefore, the ACT development team was able to build on this work.

 

5. Construction of the data infrastructure

 

5.1. Data sources

In order to carry out a company level assessment, many data points need to be gathered by sourcing from various locations. Principally, ACT relies on the voluntary provision of data by the participating companies. Besides, external data sources are consulted where this would streamline the process, ensure fairness, and provide additional value for checking, validation and preparation of the assessment narrative.

 

5.2. Company Data request

The data request will be presented to companies in a comprehensive data collection format. The following data will be requested:

Data requested to the company
GHG emissions (on scope defined in module 1,2 & 4 in quantitative indicators), for each step of the aluminium value chain where the company operates
Activity data (e.g. metric tonnes) for each step of the aluminium value chain where the company operates
Reduction targets in intensity, including the project activity data. Milestones and past targets are also to be provided
Assets/plants with activity and CO2e emissions data
Quantitative and qualitative data on low carbon electricity (self-generated electricity assets, demand management, grid etc.)
R&D in low-carbon technologies
Low-carbon Patenting Activity
Data on scrap management, both pre- and post-consumer scrap
Environmental policy and details regarding governance
Management incentives
Scenario testing
List of environmental/CSR contract clauses in purchasing & suppliers’ selection process
List of initiatives implemented to influence suppliers to reduce their GHG emissions, green purchase policy or track record, supplier code of conduct
Client policy
List of initiatives implemented to influence client behaviour to reduce their GHG emissions
Company policy on engagement with trade associations
Position of the company on significant climate policies (public statements, etc.)
List and turnover or invested capital (or other financial KPI) of activities in new businesses related to low-carbon business models
Current position and action plan of the company towards the identified low-carbon business models

 

5.3. Performance indicators

The performance indicators have been conceived following the main principles described in Section 2.

Table 2: Performance indicator overview

 

The companies will be assessed against the indicators corresponding to the steps of the value chain where they operate. In green when the indicators are specific to ACT Aluminium. A cross indicates this step of the value is assessed – if it is relevant for the company – by the corresponding indicator (see Table 3 and Table 4).

Table 3: Performance quantitative indicators

 

Table 4: Performance qualitative indicators

 

Some indicators will be evaluated through a maturity matrix. Maturity matrix contains five levels of evaluation that are associated with scores given to the company for each indicator. Depending on the indicator, it might be possible to obtain only some score. Some of the indicators might be divided into sub-dimensions that are evaluated individually before the score is aggregated to obtain the indicator score.

 

 

5.3.1. Targets

 

5.3.1.1 - AL 1.1 Alignment of scope 1+2 and Scope 1+2+3 emissions reduction targets

Description & Requirements AL 1.1 Alignment of scope 1+2 and Scope 1+2+3 emissions reduction targets
Short description of indicator A measure of the alignment of the company’s Scope 1+2 and Scope 1+2+3 emissions reduction targets with their low-carbon benchmark pathway. The indicator will compare the trend of company’s target pathway to the trend of company’s benchmark and thus identify the gap between both pathways at the target year, which is expressed as the company’s commitment gap. The best score between the Scope 1+2 and the Scope 1+2+3 will be kept, hence the fact that Scope 1+2+3 targets are not mandatory but might improve the score of this indicator. Moreover, the score for Scope 1+2 is limited to 75% and cannot reach 100% to encourage and reward companies including Scope 3 in their targets.
Data requirements

The relevant data for this indicator are:

  • Targets information for each relevant scope 1+2 GHG emissions sources (Target year, emission reduction between reporting year and target year, coverage)
  • Targets information for each relevant scope 1+2+3 GHG emissions sources (Target year, emission reduction between reporting year and target year, coverage), and information on what is included in the Scope 3 (which steps of the value chain, which CO2e emissions posts)

The benchmark indicators involved are the following:

 

How the assessment will be done

The analysis is based on a trend ratio between the company’s scope Scope 1+2 (or Scope 1+2+3) emissions target and the company benchmark (see 4.1 to know what ACT takes into account in scope 3). Trends are computed between reporting year and the longest time horizon of the target.

The company’s target pathway is the decarbonization over time, defined by the company’s Scope 1+2 (or Scope 1+2+3) emissions reduction target. To compute it, a straight line is drawn between the starting point of the analysis and the company’s target endpoint.

The company benchmark pathway is the company specific Scope 1+2 and Scope 1+2+3 emissions low-carbon benchmark pathway. See section 6.1 for details on the computation of this pathway.

The company achieves the maximum score if the company’s target pathway and the company benchmark pathway are aligned (commitment gap = 0) and also if the targets are covering most of the company’s scope 1+2 (or scope 1+2+3) emissions at reporting year.

Calculation of score:

1) Trend ratio

The score is calculated by dividing the company engagement of reduction by the specific benchmark emission intensity reduction between the reporting year and the target year through the trend ratio:

where EIc(Yt) is the company Scope 1+2 (or Scope 1+2+3) emissions intensity at target year, EIc (Yr) is the company direct emissions intensity at reporting year, EIb(Yt) is the company’s benchmark direct emission intensity at target year and EIb(Yr) is the company’s benchmark direct emission intensity at reporting year.

The commitment gap of the company is equal to (1- trend ratio). Thus, when the company’s target pathway is aligned on the company’s benchmark, the trend ratio is equal to 1 and the commitment gap is 0 (see next figure).

 

Figure 12: Trend ratio and commitment gap

 

2) Final Score

The final score assigned to the indicator is calculated as follows (see Annex 4 for a graphic illustration of the different cases):

 

Targets that do not cover > 95% of Scope 1+2 (same for Scope 1+2+3 targets) emissions are not preferred in the calculations. If only such targets are available, then the score will be adjusted downwards in proportion with % coverage. If the target coverage of total company emissions at reporting year (CYr) represents less than 95%, the final score is equal to:

Final Score = Score x Target coverage of total company emissions (CYr)

Scope 1+2 targets at global level and covering the required emissions are preferred for this indicator. Should several targets be assessed (e.g. per geography), the consolidation of the scores assigned to each target will be based on the share of emissions covered by the targets. Moreover, the target with the longest time horizon is also preferred in the calculation compared to short-term targets. This is the same for Scope 1+2+3 targets.

A score will be computed for Scope 1+2 targets, and another one for Scope 1+2+3 targets. Then, the best score between the Scope 1+2 and the Scope 1+2+3 will be kept, hence the fact that Scope 1+2+3 targets are not mandatory but it will reward companies setting Scope 1+2+3 targets (if the score is better than the Scope 1+2 score). To reward companies setting Scope 1+2+3 targets and therefore including Scope 3 in their targets, the score for Scope 1+2 targets will be capped at a maximum of 75% while the score for Scope 1+2+3 targets will be set at 100%. Therefore, companies that set at least one target for Scope 1+2+3 will be rewarded for doing so.

Rationale AL 1.1 Alignment of scope 1+2 and Scope 1+2+3 emissions reduction targets
Rationale of the indicator

Relevance of the indicator:

Scope 1+2 and scope 1+2+3 emissions reduction targets are included in this ACT methodology for the following reasons:

  1. Targets are an indicator of corporate commitment to reduce emissions, and are a meaningful metric of the company’s internal planning towards the transition.
  2. Targets are one of the few metrics that can predict a company’s long-term plan beyond that which can be projected in the short-term, satisfying ACT’s need for indicators that can provide information on the long-term future of a company.
  3. For the sector, scope 1+2 emissions represent a high source of emissions depending on which steps of the value chain the company operates. A GHG emissions reduction target should be assigned to them.

Scope 3 emissions are also included to assess the whole aluminium value chain and all CO2e emissions posts, which enable to have an indicator focusing on decarbonizing the whole aluminium value chain. However, as not all companies have Scope 3 targets, this is not mandatory to have one.

Scoring rationale:

Targets are quantitatively interpreted and directly compared to a low-carbon benchmark build from the company’s current level of emissions at reporting year and converging toward the 2050 value of the sectoral benchmark relevant for this source.

Comparing the trends gives a direct measure of the commitment gap of the company. It was chosen for its relative simplicity in interpretation and powerful message.

NB: In previous ACT methodologies, the calculation was based on the difference between the company’s target and the company benchmark 5 years after the reporting year. The analysis is now based on the difference between the company’s target and the company benchmark at the target year. The previous version assumed that the emission reduction would be linear between reporting year and reporting year + 5, which could affect the result as the low-carbon pathway is not linear, the new version avoid this assumption by using directly data at target year.

Scope 3 is considered by the methodology in target setting, as it is the greatest CO2e emissions post for downstream actors.

 

5.3.1.2 - AL 1.2 Time horizon of targets

Description & Requirements AL 1.2 Time horizon of targets
Short description of indicator A measure of the time horizons of company targets. The ideal set of targets is forward looking enough to include a long-time horizon that includes the majority of a company’s asset lifetimes, but also includes short-term targets that incentivize action in the present.
Data requirements

The relevant data for this indicator are:

  • Target year information for each relevant emissions sources (Year for each reported, target id)

The benchmark indicator involved are the following:

 

How the assessment will be done

The analysis has two dimensions:

  • A comparison of: (a) the longest time horizon of the company’s targets, and (b) the long-term point fixed by ACT assessment methodology.
  • The company has interval targets that ensure both short and long-term targets are in place to incentivize short-term action and communicate long-term commitments.

 

Dimension 1 - Target endpoint: The company’s target endpoint (Te) is compared to LT, a relevant time horizon for the sector- 30 years is proposed for the aluminium sector, as it may be use as a proxy of aluminium plants average lifetime.

The company’s target endpoint (Te) is equal to the longest time horizon among the company’s targets, minus the reporting year:

The analysis compares Te to LT. This analysis measures the horizon gap:

The company’s target endpoint is scored according to the following scoring table:

 

Dimension 2 - Intermediate horizons: All company targets and their endpoints are calculated and plotted. The ideal scoring company does not have intervals between target endpoints larger than 5 years from the reporting year.

Measurements are done in five-year intervals between the reporting year and LT.

The company’s targets are compared according the following scoring table:

An example is illustrated in the figure below.

 

Figure 13: Examples of horizons of intermediate targets set by the company and corresponding scores on dimension 2 of the indicator 1.4

 

Aggregate score: Dimension 1: 50%, Dimension 2: 50%

For all calculations:

  • If the company reports “year of target establishment” in the data request, then the calculations may be redone using this as the baseline instead of the reporting year. The company can attain up to 80% of the maximum score with this alternate calculation. The baseline that results in the higher score will be used for the final score.
  • Targets that do not cover > 95% of emissions are not preferred in the calculations. If only such targets are available, then the score will be adjusted downwards in proportion with % coverage.
Rationale AL 1.2 Time horizon of targets
Rationale of the indicator

Relevance of the indicator:

The time horizon of targets is included in this ACT methodology for the following reasons:

  • The target endpoint is an indicator of how forward-looking the company’s transition strategy is.
  • Aside from communicating long-term commitments, short-term action needs to be incentivized. This is why short time intervals between targets are needed. A 5-year interval is seen as a suitable interval to ensure company is taking enough action, holding itself accountable by measuring progress every 5 years.

 

5.3.1.3 - AL 1.3 Achievement of past and current targets

Description & Requirements AL 1.3 Achievement of past and current targets
Short description of indicator A measure of the company’s historic target achievements and current progress towards active emission reduction targets. All the scopes of the company are considered. The ambition of the target is qualitatively assessed and is not included in the performance indicators.
Data requirements

The relevant data for this indicator are:

For each target set in the past 10 years:

  • Base year
  • Start year
  • Target year
  • Percentage of reduction target from base year in absolute emissions
  • Percentage of reduction target achieved in absolute emissions
  • Percentage of reduction target from base year in emissions intensity
  • Percentage of reduction target achieved in emissions intensity
  • Percentage of scope 1+2 or scope 1+2+3 emissions covered by the targets
How the assessment will be done

For the performance score, this indicator is assessed on two dimensions, whereby companies achieve the maximum score if:

Dimension 1: The company has achieved all previous emissions reduction targets with a target year in the past 10 years. If all past targets are indeed achieved, the highest score is obtained. If not, the achievement ratio a is computed as follows:

where  E(tref) is the level of emissions of the company on the year the target was set,  T(thorizon)is the target the company set (a given level of emission at a given horizon year, now past), and E(thorizon) is the effective level of emission reached by the company on the year of horizon of the target.

A threshold is set for scoring at 0.5: if the company has achieved less than 50% of its own past target, it shall receive a zero score.

If the company has several past targets over the last 10 years, the ratio a shall be computed for each target, and the average of all a ratio shall be kept for scoring.

 

Dimension 2: The company is currently on track to meet an existing emissions reduction target, whereby the ratio between the remaining time period and the level remaining to target achievement (Progress Ratio p) is not lower than 0.5:

 

The highest score is attained if p is 1 or higher. A percentage score is assigned for any value between 0.5 and 1.

 

Aggregate score - Dimension 1: 25%, Dimension 2: 75%

 

Figure 14: CALCULATION OF THE ACHIEVEMENT OF PREVIOUS TARGET INDICATOR

 

For all calculations:

  • Companies which do not have targets with target years in the past but only with target years in the future are not assessed on dimension 1, but only on dimension 2. Their score for this indicator is based on Dimension 2.
  • Targets that do not cover >95% of the company’s GHG emissions scope 1+2 or scope 1+2+3 are not preferred in the calculation of dimension 2, but are not penalized, as other indicators already penalize for not having a large coverage in the target.
  • If the company has multiple targets in different scopes that can be assessed according to the above criteria, then the score is an average score based on the progress ratios of all targets assessed.

The performance score does not assess the ambition level of previous targets, and therefore dimension 1 has only a low weight in the final performance score. This information is also qualitatively assessed in the narrative analysis, which will take another look at the following dimensions:

  • Achievement level: To what degree has the company achieved its previously set emissions reduction targets.
  • Progress level: To what degree is the company on track to meet its currently active emissions reduction targets.
  • Ambition level: What level of ambition do the previously achieved emissions reduction targets represent.
Rationale AL 1.3 Achievement of past and current targets
Rationale of the indicator

Relevance of the indicator:

The historic target ambition and company performance is included in this ACT methodology for the following reasons:

  • The ACT assessment looks only to the past to the extent where it can inform on the future. This indicator is future-relevant by providing information on the organizational capability to set and meet emission reduction targets. Dimension 1 of this indicator adds credibility to any company claim to commit to a science-based reduction pathway.
  • Dimension 2 of this indicator adds value to the assessment of comparison to the company’s performance with respect to their targets in the reporting year.

Scoring rationale:

Previous target achievement is not straightforward to interpret quantitatively. Therefore, the performance score makes no judgement of past target ambition and leaves it to the assessment narrative for a meaningful judgement on the ambition level of past targets.

  • Dimension 1 of the performance score will penalize companies who have not met past targets in the past 10 years, as this means the company has lower credibility when setting ambitious science-based targets
  • Dimension 2 uses a simple ratio in order to compare targets. The threshold 0.5 was chosen as it allows companies some flexibility with respect to the implementation of the target, but it does have the ability to flag companies that are not on track towards achievement. When p is lower than 0.5, the company needs to achieve more than twice the reduction per unit of time than the target originally envisioned.

 

5.3.2. Material Investment

 

5.3.2.1 - AL 2.1 Past performance for aluminium assets, per step of the value chain

Description & Requirements AL 2.1 Past performance for aluminium assets, per step of the value chain
Short description of indicator Measure of the alignment of a company's past emissions intensity with its low-carbon benchmark pathway and past absolute emissions with the sectoral benchmark. Each step of the value chain where the company is involved will be assessed against a specific low carbon pathway.
Data requirements

The relevant data for this indicator are:

  • Carbon intensity and activity from reporting year to Y-5 and other information if necessary (geography, …) regarding material investment
  • Other data per asset (activity, decommissioning year etc.)

The benchmark indicators involved are the following:

 

How the assessment will be done

This indicator is assessed on two dimensions:

Dim 1: Trend in past emissions intensity (50%)

The analysis is based on the Past Action ratio (Apast) which represents the ratio between the company’s recent (reporting year minus 5 years) emissions intensity from material investment trend gradient and the company’s benchmark recent (reporting year minus 5 years) emission intensity trend gradient.

 

Figure 15: COMPARISON OF TREND IN PAST EMISSIONS AND TREND IN COMPANY'S BENCHMARK

 

Calculation of score:

Past Action ratio (Apast) is calculated by dividing the company’s emission intensity from material investment trend (between reporting year and reporting year minus 5 years) and the historic benchmark emission intensity (between reporting year and reporting year minus 5 years):

where EIC(YR) is the company emission intensity at reporting year, EIC(YR − 5) is the company emission intensity at reporting year minus 5, EIB(YR) is the historic benchmark emission intensity at reporting year and EIB(YR − 5) is the historic benchmark emission intensity at reporting year minus 5.

The final score assigned to the indicator is calculated as follows (see Annex 4 for a graphic illustration of the different cases):

 

As each step of the value chain will be assessed, a weighted average based on the CO2e emissions corresponding to each step will be done to get the final score of dimension 1.

Dim 2: Alignment of past performance with sectoral carbon budget (50%)

Use past data on emissions for the assessed company and compare it to the sector benchmark.

This dimension assesses the alignment of the company’s recent absolute emissions with the past sectoral carbon budget. The recent emissions and carbon budget are measured over a 5-year period to the reporting year (reporting year minus 5 years).

Basically, one should calculate the grey area of the graph in the figure below, multiplied by the company’s activity during the corresponding years. Then, compare this area to the sectoral carbon budget during the same period.

 

Figure 16: Comparison of past performance and carbon budget defined by sector benchmark

 

The past performance ratio PP is computed:

 

Where EIC is the past emissions intensity of the company, EISB is the sectoral emissions intensity benchmark, and A is the activity.

 

The same calculation and weighted average between all steps of the value chain where the company operates will be applied for dimension 2.

Aggregate score - Dimension 1: 50%, Dimension 2: 50%

Rationale AL 2.1 Past performance for aluminium assets, per step of the value chain
Rationale of the indicator

Relevance of the indicator:

Past performance indicator is included in this ACT methodology for the following reasons:

  • Dimension 1 (trend in past emissions intensity) shows the speed at which the company has been reducing its emissions intensity over the recent past. Comparing this to the low-carbon benchmark pathway on the same historical period gives an indication of the scale of the change that should have been made within the company to bring it onto a low-carbon pathway. Recent emissions intensity performance indicates the company’s progression towards the future emissions intensity necessary to decarbonize in-line with a low-carbon scenario.
  • Dimension 2 (Alignment of past performance with sectoral carbon budget) helps the company having an overview of its emissions exceedance in the recent past. This dimension also intends to remind that the carbon budget is set for the global economy and that each sector and each company has a defined carbon budget that cannot be exceeded to reach the overall long-term objective of limiting global warming. The sector benchmark is defined for the next years, assuming it was respected for the past years where it was already defined. The emissions overshooting the benchmark in the past correspond to accumulated CO2 that will remain in the atmosphere for decades. Hence, a company having already exceeded the benchmark should further its efforts to decrease its emissions in the near and remote future. This dimension is a ratio of the values of the emissions over a period of time in the past, as companies are very unlikely to provide data for the same period. What is considered here is the emission excess compared to the sectoral carbon budget, proportionally to the period of time.
  • While ACT aims to be as future-oriented as possible, it nevertheless does not want to solely rely on projections of the future, in a way that would make the analysis too vulnerable to the uncertainty of those projections. Therefore, this measure, along with projected emissions intensity and absolute emissions, forms part of a holistic view of company emissions performance in the past, present, and future.
  • This indicator is future-relevant by providing information on the organizational capability to meet emission reduction that is aligned with the benchmark. This indicator adds credibility to any company whose past emissions intensity were aligned with their historic benchmark and whose past carbon budget did not exceed the sectoral carbon budget.

Scoring rationale

Comparing the trends gives a direct measure of the past action gap of the company. It was chosen for its relative simplicity in interpretation.

In former ACT methodologies, dimension 1 of the indicator compared the trend in past emissions to the trend of the future benchmark, comparing the past efforts of the company to what it will have to do in the near future. But as benchmarks are not linear - drops can occur when new mitigation technologies are released (e.g. massive implementation of CCS) -, it may be not relevant to compare different timeslots. Therefore, the trends are compared on the same timeslot (reporting year - 5 to reporting year).

 

5.3.2.2 - AL 2.2 Locked-in emissions

Description & Requirements AL 2.2 Locked-in emissions
Short description of indicator Measure of the company’s cumulative GHG emissions implied by the company’s installed and planned assets over a 15-years period from the reporting year. These locked-in emissions are compared to a theoretical portfolio with a similar locked activity per year and benchmark emission intensity. The only assets to be assessed for this indicator are for the alumina extraction and electrolysis steps of the value chain as they are the most carbon intensive ones.
Data requirements

The relevant data for this indicator are:

  • Carbon intensity and activity from reporting year to Y+15 and other information if necessary (geography, …) regarding material investment
  • Other data per asset (activity, decommissioning year etc.)

The benchmark indicators involved are the following:

 

How the analysis will be done

The analysis is based on the ratio between the company’s installed and planned emissions for the 15 years after the reporting year [LEF(t)], and the emissions budget entailed by the company’s carbon budget [B(t)] over the same period of time.

LEF(t) is calculated as the total cumulative emissions implied by the lifetimes of currently active and confirmed planned assets that are going to be commissioned soon. If unknown, the commissioning year of projects is estimated from the project status (e.g. bidding process, construction, etc.) and data on typical project periods by plant type.

LEF(t) is calculated as the company’s locked-in carbon emissions, up until the chosen time period t, which is derived by taking the area under the company’s future locked-in emissions curve. This curve in turn is derived from the company’s intensity pathway CAG, multiplied by activity AG:

The next figure illustrates locked-in emissions of one facility and of the whole company.

Figure 17: Computing Locked-in emissions from facility

 

B(yr + 15) is calculated as the company’s carbon budget up to reporting year + 15 years, which is derived by taking the area under the absolute emissions reduction curve. This curve is derived from the company benchmark pathway (CBScopes12) by multiplying it by the projected activity AP for the company:

The company’s benchmark is computed from the company’s current emissions at reporting year and the level of carbon intensity defined by the sectoral benchmark presented in section 6. The carbon budget is illustrated in the figure below.

 

Figure 18: Carbon budget derived from the company's benchmark

 

Depending on the data availability, the computation of these areas may not be as straightforward as the equations shown and will be done by approximation, but the principles will hold.

The locked-in ratio (rLB) is illustrated in the next figure, and calculated as follows:

Figure 19: Illustration of the locked-in ratio

 

To be able to give a score regarding the amount of carbon budget consumed, the level of activity performed with the existing and planned assets needs to be taken into account. Therefore, in a similar way to locked-in emissions, the level of activity that the company is able to perform thanks to the existing and planned assets, per year. It is called the secured activity and is illustrated in the figure below.

 

Figure 20: Secured activity by the company

 

The secured activity is compared to the level of activity projected by the company up to reporting year + 15 years. If the company does not have any projections or not up to reporting year + 15 years, it will be considered that its market share will remain constant and its activity will evolve at the same rate as the sector and sectoral projection of activity are used (see section 6.1). The company’s projected activity is illustrated in the figure below.

 

Figure 21: Projected activity

 

The secured activity ratio rSA(yr+15) compares the secured activity up to (yr+15) with the projected activity up to (yr+15). It is illustrated in the following figure.

 

Figure 22: Secured activity ratio

 

Calculation of the score:

rSA is used as a threshold value for the scoring:

 

 

This means that if the company has planned its activity and its locked-in emissions are lower than the carbon budget, it gets 100%, but if the locked-in emissions exceed by more than 50% its carbon budget, it gets 0%.

The case rSA > 1 is unlikely to happen as the company is unlikely to have existing or planned assets able to meet or exceed the projection of activity until (yr+15).

Rationale AL 2.2 Locked-in emissions
Rationale of the indicator

Relevance of the indicator:

Locked-in emissions are included in this ACT methodology for the following reasons:

  • Absolute GHG emissions over time are the most relevant measure of emissions performance for assessing a company’s contribution to global warming. Furthermore, the concept of Locked-in emissions allows a judgement to be made about the company’s outlook in more distant time periods than ones of the investment plans.
  • Analysing a company’s locked-in emissions alongside science-based budgets also introduces the means to scrutinise the potential cost of inaction, including the possibility of stranded assets.
  • Examining absolute emissions, along with recent and short-term emissions intensity trends, forms part of a holistic view of a company’s emissions performance in the past, present, and future.
  • The approach using the secured-activity ratio is a coherence check between the company's ambition for emissions reduction, and its investments (and the inevitable emissions associated). It allows showing the leeway for future investments and alerts for the cost of inaction and the risk of stranded assets.

The only assets to be assessed for this indicator are for the alumina extraction and electrolysis steps of the value chain as they are the most carbon intensive ones.

 

5.3.2.3 - AL 2.3 Future performance of aluminium assets, per step of the value chain

Description & Requirements AL 2.3 Future performance of aluminium assets, per step of the value chain
Short description of indicator Measure of the alignment of a company's future emissions intensity of assets with its low-carbon benchmark pathway. Each of the value chain where the company is involved will be assessed against a specific low carbon pathway.
Data requirements

The relevant data for this indicator are:

  • Carbon intensity at reporting year and Y+5, other information if necessary (geography, …), regarding material investment
  • Other data per asset

Note that all the data need have already been filled for the locked-in emissions indicator.

The benchmark indicators involved are the following:

How the assessment will be done

The analysis is based on the Future Action ratio (Afuture) which represents the ratio between the company’s future (reporting year plus 5 years) emissions intensity from material investment trend gradient and the company’s future benchmark (reporting year plus 5 year) emission intensity trend gradient.

Figure 23: COMPARISON OF TREND IN FUTURE EMISSIONS AND TREND IN COMPANY'S BENCHMARK

 

Calculation of score:

Future Action ratio (Afuture) is calculated by dividing the company’s future emission intensity from material investment trend (between reporting year and reporting year plus 5 years) and the future benchmark emission intensity (between reporting year and reporting year plus 5 years):

where EIc(YR) is the company emission intensity at reporting year, EIc(YR + 5)is the company emission intensity at reporting year plus 5 years, EIB(YR) is the benchmark emission intensity at reporting year and EIB(YR + 5) is the benchmark emission intensity at reporting year plus 5 years.

The action gap of the company is equal to (1 − Afuture). Thus, when the company’s future emissions pathway is aligned on the company’s benchmark, the Future Action ratio is equal to 1 and the action gap is 0.

The final score assigned to the indicator is calculated as follows (see Annex 4 for a graphic illustration of the different cases):

 

As each step of the value chain will be assessed, a weighted average based on the CO2e emissions corresponding to each step will be done to get the final score of indicator 2.3.

Rationale AL 2.3 Future performance of aluminium assets, per step of the value chain
Rationale of the indicator

Relevance of the indicator:

Trends in future emissions intensity from material investment are included in this ACT methodology for the following reasons:

  • The trend shows the speed at which the company needs to reduce its emissions intensity for the coming years. Comparing this to the low-carbon benchmark pathway gives an indication of the scale of the change that needs to be made within the company to bring it onto a low-carbon pathway.
  • ACT aims to be future-oriented. Therefore, this particular indicator, with projected emissions intensity, forms part of a holistic view of company emissions performance in the past, present, and future.

Scoring rationale

Comparing the trends gives a direct measure of the future action gap of the company. It was chosen for its relative simplicity in interpretation; it is aligned with most of the other forward-looking indicators. Indeed, the indicator looks at a fix point in the future and assesses the capacity of the company to deploy a range of low-carbon assets in the short term.

 

5.3.2.4 - AL 2.4 Contribution to low carbon electricity generation

Description & Requirements AL 2.4. Contribution to low carbon electricity generation
Short description of indicator An analysis of the contribution of the company to increasing low carbon electricity generation and to decommissioning fossil fuel based electricity generation assets.
Data requirements

The relevant data for this indicator are:

  • Qualitative data on the low carbon electricity strategy to fill the maturity matrices

Emissions intensities and self-generated electricity volume (MWh)

How the assessment will be done

The assessment will assign a maturity score based on the company’s contribution to low-carbon electricity assets.

Dimension 1 – Contribution to additional low-carbon electricity generation assets

This indicator aims at rewarding companies which contribute to the development of new low-carbon electricity generation assets, either because they have invested in their own low-carbon electricity generation assets* or through a long-term Corporate Power Purchase Agreement (CPPA) with local or co-located renewable energy generators [12].

* Low carbon electricity generation is defined according to the European Union Taxonomy [27]

 

Dimension 2 – Contribution to grid flexibility

Grid flexibility is key to enable the integration of more non-dispatchable power generation. This dimension aims at assessing the contribution of the company to grid flexibility.

 

Dimension 3 - electricity carbon intensity from the company’s assets

Dimension 3 will be assessed only for companies which self-generate electricity. It aims at ensuring companies invest enough to reduce the GHG emission intensity of the electricity they self-generate. The carbon intensity of the self-generated electricity will be assessed for reporting year (Y) and Y+15 years.

Calculation of score for dimension 3:

Future Action ratio (Afuture) is calculated by dividing the company’s future emission intensity trend for self-generated electricity (between reporting year and reporting year plus 15 years) and the future benchmark emission intensity for power production that is based on the SDA from Science-Based Targets (between reporting year and reporting year plus 15 years):

where EIc(YR) is the company self-generated electricity emission intensity at reporting year, EIc(YR + 15) is the company self-generated electricity emission intensity at reporting year plus 15 years, CBLCT(YR) is the power production benchmark emission intensity at reporting year and CBLCT(YR + 15) is the power production benchmark emission intensity at reporting year plus 15 years.

The action gap of the company is equal to (1 − Afuture). Thus, when the company’s future emissions pathway is aligned on the company’s benchmark, the Future Action ratio is equal to 1 and the action gap is 0.

Two special cases are possible:

  • If the company did not self-generate electricity at reporting year, but plans to self-generate electricity at reporting year plus 15 years, then EIc(YR) is undefined. In this case, the GHG intensity of the purchased electricity at reporting year will be used for EIc(YR).
  • If the company self-generated electricity at the reporting year, but plans not to self-generate anymore at reporting year plus 15 years, then EIc(YR + 15) is undefined. In this case, the GHG intensity of the purchased electricity at reporting year will be used for EIc(YR + 15).

The final score assigned to the indicator is calculated as follows:

 

Calculation of final score

The final score will be calculated as follows:

 

Rationale AL 2.4. Contribution to low carbon electricity generation
Rationale of the indicator

Electricity consumption is the main CO2e emissions of the aluminium value chain, and 60% of the electricity consumed by the aluminium sector in the world is self-generated.

Additional low-carbon electricity generation assets will be needed in every country, even in countries with already low carbon electricity mix. As big electricity consumers, aluminium companies shall contribute to enable more low-carbon electricity generation assets being connected to the grid, by direct or indirect investment, and by enabling more grid flexibility through demand-side management.

Moreover, investing in low-carbon electricity assets imply important Capex investments. As a consequence, rewarding companies making these investments in low carbon electricity assets is key. Y+15 has been chosen as the target year for the carbon intensity of the self-generated electricity, as it requires some time to invest in low-carbon power plants.

 

5.3.3. Intangible investment

 

5.3.3.1 - AL 3.1 R&D spending in low-carbon technologies

Description & Requirements AL 3.1 R&D spending in low-carbon technologies
Short description of indicator A measure of the ratio of R&D costs/investments in low-carbon technologies. The indicator identifies the ratio between the company’s R&D investment in low-carbon technologies and total R&D investments.
Data requirements

Relevant and external sources of data used for the assessment of this indicator:

  • % of R&D costs/investments in low-carbon technologies of the company over the last 3 years over the total R&D costs/investments of the company over the last 3 years.
How the assessment will be done

R&D Investment Share

The assessment is based on the ratio of the company’s ‘annual R&D expenditure on low-carbon technologies’ over the last 3 years to the company’s ‘total annual capital expenditure in R&D’ over the same span of time.

Final Score

The ratio will be compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for companies indicating a higher level of maturity, which means a higher share in R&D costs/investments in these technologies.

The matrix is provided below:

 

Defining ‘Low-carbon technologies’:

Relevant sectoral roadmaps have been used to define a list of low-carbon technologies for the sector. It includes technologies to decarbonise the production assets and improvements of sold product carbon performance. The technologies have been classified as mature and non-mature.

 

DEFINING ‘NON-MATURE R&D’

A Technology Readiness Level (TRL) should be used to assess the maturity of a technology. Higher scoring levels of this indicator exclude research in technologies that are already considered mature in terms of market penetration, to incentivise a focus on those technologies that have a higher need for R&D investment, in order to break through technical barriers and reduce the levelized costs of deploying these technologies.

Technologies are considered “non-mature” if TRL ≤ 8.

To formalize this distinction in the analysis, the company is asked for a detailed breakdown of R&D expenditure in Section 3 of the data request. Since defining what type of R&D is ‘non-mature’ is theoretically difficult, the classification is inversed, and done based on the principle of exclusion. This methodology excludes only those low-carbon technologies that are considered mature in terms of market position and levelized cost.

The following lists give high-level categories of mature and non-mature technologies (more details on the annex section “Low-carbon technologies landscape). The categories are intentionally broad to allow the analyst to assess the company’s presented technologies; given the technologies achieve electricity decarbonization, direct emissions reduction or recycling & resource efficiency. These high-level categories come from relevant sectoral roadmaps: IAI [19], IEA [4] [25], European Aluminium [10], World Economic Forum [6]. They represent the main emissions reduction levers for the aluminium industry.

The list of mature technologies is:

  • Electricity decarbonization
    • Low-carbon electricity self-generation
    • Energy efficiency
    • Other
  • Direct emissions reduction
    • Substitute to thermal energy (green hydrogen / electrification / biomass)
    • Refinery and cast house electrification/fuel switching
    • Other
  • Recycling & resource efficiency
    • Ecodesign to facilitate the post-consumer scrap collection or extend the lifetime of aluminium products
    • Technologies to improve the quality of the scrap
    • End-of-life scrap collection technologies
    • Integration of heat exchangers to vary energy consumption and production levels
    • Other

The list of non-mature technologies is:

  • Electricity decarbonization
    • CCS/CCUS
    • Multipolar cells
    • EnPot (and other electricity demand management technologies)
    • Other
  • Direct emissions reduction
    • Inert anodes
    • CCS/CCUS
    • Other
  • Recycling & resource efficiency
    • Elimination of pre-consumer scrap generated during the processes
    • Elimination of all metal losses during casting and recycling
    • Other
Rationale AL 3.1 R&D spending in low-carbon technologies
Rationale of the indicator

Relevance of the indicator:

R&D in low-carbon technologies is included in the ACT assessment for the following reasons:

  • To enable the transition, the aluminium sector relies heavily on R&D to activate mitigation levers: electricity decarbonisation, direct emissions reduction, resource efficiency. There are technological stakes relies heavily on the development of low-carbon solutions to replace its currently high emitting systems
  • R&D is the main proactive action to develop these technologies.
  • R&D is also one of the main tools to reduce the costs of a technology in order to increase its market penetration.
  • Aside from technology, companies can also invest into R&D on operational practices to optimize the carbon impact where they have direct responsibility.
  • Lastly, the R&D investment of a company into non-mature technologies and practices allows for direct insight in the company’s commitment to alternative technologies that may not currently be part of its main business model.

Relevance of the indicator’s 3-year time horizon

Expenditures over the 3 last years are used for the indicator to consider that expenditure for major R&D projects may not be linear over years.

 

5.3.3.2 - AL 3.2 Company Low-carbon Patenting Activity

Description & Requirements AL 3.2 Company low-carbon patenting activity
Short description of indicator A measure of the company patenting activity related to low-carbon technologies. The indicator identifies the ratio between the company’s patent activity for the last 5 years and average patenting activity of the company (patenting activity means a number of patents).
Data requirements

Relevant and external sources of data used for the assessment of this indicator:

  • % of patenting activity in low-carbon technologies of the company over the last 5 years over total patenting activity of the company over the last 5 years
How the assessment will be done

Past low-carbon patents activity ratio

The assessment is based on the ratio of the company’s patenting activity dedicated to low-carbon technologies over the last 5 years to the company’s total patenting activity over the same span of time.

Final Score

The ratio will be compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for companies indicating a higher level of maturity, which means a higher share in low-carbon technologies patenting activity.

The matrix is provided below:

 

Defining low-carbon technologies Patents:

See previous indicator.

The following lists give high-level categories of low-carbon technologies. The categories are intentionally broad to allow the inclusion of a diversity of technologies; given the technologies achieve electricity decarbonization, direct emissions reduction or recycling & resource efficiency.

The list of climate change mitigation technologies is:

  • Electricity decarbonization
    • CCS/CCUS
    • Multipolar cells
    • Low-carbon electricity self-generation
    • Energy efficiency
    • EnPot
    • Other
  • Direct emissions reduction
    • Inert anode
    • Substitute to thermal energy (green hydrogen / electrification / biomass)
    • Refinery and cast house electrification/fuel switching
    • CCS/CCUS
    • Other
  • Recycling & resource efficiency
    • Elimination of pre-consumer scrap generated during the processes
    • Elimination of all metal losses during casting and recycling
    • Ecodesign to facilitate the post-consumer scrap collection or extend the lifetime of aluminium products
    • End-of-life scrap collection technologies
    • Technologies to improve the quality of the scrap
    • Integration of heat exchangers to vary energy consumption and production levels
    • Other
Rationale AL 3.2 Company Low-carbon Patenting Activity
Rationale of the indicator

Relevance of the indicator:

The indicator on low-carbon technologies patenting activity is complementary to the one dedicated to R&D in low-carbon technologies, as it monitors the technology diffusion whereas R&D expenditures monitor the technology development.

It is included in this ACT methodology for the following reasons:

  • To enable the transition, the sector where there are technological stakes relies heavily on the development of low-carbon solutions to replace its currently high emitting systems
  • Patent data are commensurable because patents are based on an objective standard (OECD 2015)
  • Patent data measure the intermediate outputs of an inventive process, where R&D data expenditures measure the input (OECD 2015)
  • Patent data can be disaggregated into specific technological fields (OECD 2015)

Relevance of the indicator’s 5-year time horizon

Patents applications are typically disclosed 18 months after their filing date (OECD 2015). To avoid the effects of this “publication lag” and smooth the ratio used for the assessment, the indicator monitors the last 5 years of the company’s patenting activity.

 

5.3.4. Sold product performance

 

5.3.4.1 - AL 4.1 Cradle-to-gate aluminium carbon footprint

Description & Requirements AL 4.1 Cradle-to-gate aluminium carbon footprint
Short description of indicator An analysis to measure if the company aluminium product cradle-to-gate CO2e emissions (until the last steps of the value chain covered by the company) of the aluminium products sold are aligned with a sectoral aluminium decarbonization pathway that will be company specific based on the last step of the value chain where the company operates.
Data requirements

The relevant data for this indicator are:

  • Scope 1+2 CO2e emissions of the steps of the value chain where the company operates at reporting year and Y-5
  • Scope 3 upstream emissions at reporting year and Y-5, with ancillary material & transport CO2e emissions included
  • Volume data (e.g. metric tonnes of bauxite ores, metric tonnes of alumina extracted etc.): the denominator of the carbon intensity to be used will be the last step of the value chain where the company operates, at Y-5 and at reporting year
  • The company is to indicate which steps of the aluminium value chain it considers in the data it provides (both CO2e and activity volume data). This will be used to compute the company’s low carbon pathway

The benchmark indicators involved are the following:

How the assessment will be done

The analysis is based on the Past Action ratio (Apast) which represents the ratio between the company’s recent (reporting year minus 5 years) emissions intensity from cradle-to-gate Scope 1+2+3 CO2e emissions trend gradient and the company’s benchmark recent (reporting year minus 5 years) emission intensity trend gradient.

 

Figure 24: COMPARISON OF TREND IN PAST EMISSIONS AND TREND IN COMPANY'S BENCHMARK

 

Calculation of score:

Past Action ratio (Apast) is calculated by dividing the company’s emission intensity from cradle-to-gate Scope 1+2+3 CO2e emissions (between reporting year and reporting year minus 5 years) and the historic benchmark emission intensity (between reporting year and reporting year minus 5 years):

where EIC(YR) is the company emission intensity from cradle-to-gate (until the last step of the value chain where the company operates) Scope 1+2+3 CO2e emissions at reporting year, EIC(YR − 5) is the company emission intensity from cradle-to-gate Scope 1+2+3 CO2e emissions at reporting year minus 5, EIB(YR) is the historic benchmark emission intensity at reporting year and EIB(YR − 5) is the historic benchmark emission intensity at reporting year minus 5.

The final score assigned to the indicator is calculated as follows (see Annex 4 for a graphic illustration of the different cases):

 

Rationale AL 4.1 Cradle-to-gate aluminium carbon footprint
Rationale of the indicator

Relevance of the indicator:

This indicator is meant to ensure that companies collaborate along the value chain to provide a low-carbon aluminium at the gate of the sector .

Cradle-to-gate is included in the ACT assessment for the following reasons:

  • The trend shows the speed at which the company has been reducing the carbon footprint of their aluminium. Comparing this to the decarbonization pathway gives an indication of the scale of the change that needs to be made within the company to bring it onto a low-carbon pathway.
  • While ACT aims to be as future-oriented, it nevertheless does not want to solely rely on projections of the future, in a way that would make the analysis too vulnerable to the uncertainty of those projections. Therefore, this measure, along with projected emissions intensity and absolute emissions, forms part of a holistic view of company emissions performance in the past, present, and future.

Scoring rationale:

Comparing the trends gives a direct measure of the past action gap of the company. It was chosen for its relative simplicity in interpretation.

 

5.3.4.2 - AL 4.2 Pre-consumer scrap reduction

Description & Requirements AL 4.2 Pre-consumer scrap reduction
Short description of indicator The company demonstrates that it has a comprehensive strategy at corporate level to reduce scrap within its own operations. Only companies present at the semis production step will be assessed for this indicator.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • What are the commitments (target, timescale)? What is the applied method? How is the strategy’s monitoring done?
How the assessment will be done

The analyst evaluates the description and evidence of the scrap reduction strategy for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points is allocated for elements indicating a higher level of maturity.

Best-practice elements to be identified in the scrap reduction strategy include:

  • Basing it on an exercise costing of the value of scrap
  • Commitment to reduce scrap in direct operations (covers all operations and whole organisational boundary)
  • Using targets with end dates for scrap reduction
  • Having interim targets
  • Management at a high level within the organisation
  • Monitoring, reporting and verification processes included to track progress
  • Continuous improvement/learning feedback mechanisms
  • Commitments to employee education
  • Linking the scrap reduction strategy to the development of circular economy business models
  • Linking the scrap reduction strategy to the core business strategy
  • Linking the scrap reduction strategy to core business operations (procurement, product design)

The maximum score (100%) is assigned if all of these elements are demonstrated.

The maturity matrix used for the assessment is the following:

 

Rationale AL 4.2 Pre-consumer scrap reduction
Rationale of the indicator

Relevance of the indicator:

Any pre-consumer scrap which can be avoided should be avoided in order to reduce the global carbon emission intensity of aluminium final products. Reducing pre-consumer scrap is a key lever to improve the material efficiency of the aluminium value chain. In 2019, pre-consumer scrap represented about 15,2% of the global production of aluminium semi-products [8]. As aluminium transformation processes are very diverse, it is not possible to define a common objective of scrap reduction in terms of percentage. Therefore, the maturity matrix assess the means implemented by the company in order to reduce its pre-consumer scrap

 

5.3.4.3 - AL 4.3 Recycled scrap traceability

Description & Requirements AL 4.3 Recycled scrap traceability
Short description of indicator The company demonstrates that its recycling activities do not contribute to industrial inefficiencies at their pre-consumer scrap suppliers, through traceability. Only companies present at the recycling and internal scrap remelting steps will be assessed for this indicator.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • What level of scrap traceability is implemented by the company?
  • Can the company demonstrate that it does not contribute to industrial inefficiencies?
How the assessment will be done

The analyst evaluates the description and evidence of the scrap traceability measures for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points is allocated for elements indicating a higher level of maturity.

Best-practice elements to be identified in the scrap traceability strategy include:

  • Management at a high level within the organisation
  • Monitoring, reporting and verification processes included to track progress
  • Continuous improvement/learning feedback mechanisms
  • Linking the scrap traceability strategy to the development of circular economy business models
  • Linking the scrap traceability strategy to the core business strategy
  • Linking the scrap traceability strategy to core business operations (procurement, product design)

The maturity matrix used for the assessment is the following:

 

Defining “good pre-consumer scrap reduction practises”

Companies that have a certified environmental management system (e.g. ISO 14001, EMAS…) are assumed to have “good pre-consumer scrap practises”.

Rationale AL 4.3 Recycled scrap traceability
Rationale of the indicator

Relevance of the indicator:

The share of recycled aluminium is expected to increase in the future. It is crucial that this increase does not occur at the expense of industrial efficiencies in aluminium transformation. This can be prevented by improving transparency and traceability of the pre-consumer scrap that is recycled.

 

5.3.5. Management

5.3.5.1 - AL 5.1 Oversight of climate change issues

Description & Requirements AL 5.1 Oversight of climate change issues
Short description of indicator The company discloses that responsibility for climate change within the company lies at the highest level of decision-making within the company structure.
Data requirements

The relevant data for this indicator are:

  • Environmental policy and details regarding governance
  • The reporter shall provide details on where is the highest level of direct responsibility for climate change within the organization

External sources of data may also be used for the analysis of this indicator.

How the assessment will be done

The benchmark case is that climate change is managed within the highest decision-making structure within the company. The company situation will be compared to the benchmark case, if it is similar then points will be awarded.

The position at which climate change is managed within the company structure will be determined from the company data submission and accompanying evidence.

The maturity matrix used for the assessment is the following:

 

Rationale AL 5.1 Oversight of climate change issues
Rationale of the indicator

Successful change within companies, such as the transition to a low-carbon economy, requires strategic oversight and buy-in from the highest levels of decision-making within the company. Evidence of how climate change is addressed within the top decision-making structures is a proxy for how seriously the company takes climate change, and how well integrated it is at a strategic level. High-level ownership also increases the likelihood of effective action to address low-carbon transition.

Changes in strategic direction are necessarily future-oriented, which fits with this principle of the ACT initiative.

Managing oversight of climate change is considered as a good practice.

 

5.3.5.2 - AL 5.2 Climate change oversight capability

Description & Requirements AL 5.2 Climate change oversight capability
Short description of indicator Company board or executive management has expertise on the science and economics of climate change, including an understanding of policy, technology and consumption drivers that can disrupt current business.
Data requirements

The relevant data for this indicator are:

  • Environmental policy and details regarding governance
  • The reporter shall identify the position of the individual or name of the committee with this responsibility and outline their expertise regarding climate change and the low-carbon transition

External sources of data may also be used for the analysis of this indicator.

How the assessment will be done

The presence of expertise on topics relevant to climate change and the low-carbon transition at the level of the individual or committee with overall responsibility for it within the company is assessed. The presence of expertise is the condition that must be fulfilled for points to be awarded in the scoring.

The analyst determines if the company has expertise as evidenced through a named expert biography outlining capabilities. A cross check is performed against 5.1 on the highest responsibility for climate change, the expertise should exist at the level identified or the relationship between the structures/experts identified should also be evident.

The maturity matrix used for the assessment is the following:

 

Elements of biography outlining expertise might be:

  • Achievement of a course with a focus on climate change
  • Training in climate change subjects by a certified organism
  • Previous experience in an organization specialized in climate change (consulting companies in transition, NGO, …)
  • Supervision of studies to assess climate change impact on business and business impact on climate change
Rationale AL 5.2 Climate change oversight capability
Rationale of the indicator

Effective management of the low-carbon transition requires specific expertise related to climate change and its impacts, and their likely direct and indirect effects on the business. Presence of this capability within or closely related to the decision-making bodies that will implement low-carbon transition both indicates company commitment to that transition and increases the chances of success.

Even if companies are managing climate change at the Board level or equivalent level, a lack of expertise could be a barrier to successful management of low-carbon transition.

 

5.3.5.3 - AL 5.3 Low-carbon transition plan

Description & Requirements AL 5.3 Low-carbon transition plan
Short description of indicator The company has a plan on how to transition the company to a business model compatible with a low-carbon economy.
Data requirements

The relevant data for this indicator are:

  • Environmental policy and details regarding governance
  • The reporter should provide the following description of the transition plan including the following details:
    • Whether the transition plan exists in a documented form and whether that document is public
    • How the results of scenario testing influenced the transition plan
    • Timescale for implementation of the transition plan
    • Who has responsibility for its implementation (at the strategic, not operational, level)
    • How successful implementation of the plan will be measured and monitored. (Should include details of any linked targets, emissions reduction or energy efficiency targets, or KPIs.)
How the assessment will be done

The analyst evaluates the description and evidence of the low-carbon transition plan for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

Among the best practice elements identified to date are:

  • The plan includes financial projections
  • The plan should include cost estimates or other assessments of financial viability as part of its preparation
  • The description of the major changes to the business is comprehensive, consistent, aligned with other indicators
  • Quantitative estimates of how the business will change in the future are included
  • Costs associated with the plan (e.g. write-downs, site remediation, contract penalties, regulatory costs) are included
  • Potential “shocks” or stressors (sudden adverse changes) have been taken into consideration
  • Relevant region-specific considerations are included
  • The plan’s measure of success is SMART - contains targets or commitments with timescales to implement them, is time-constrained or the actions anticipated are time-constrained
  • The plan’s measure of success is quantitative
  • The description of relevant testing/analysis that influenced the transition plan is included
  • The plan is consistent with reporting against other ACT indicators
  • The scope should cover entire business, and is specific to that business
  • The plan should cover the short, medium and long terms. From now or the near future <5 years, until at least 2035 and preferably beyond (2050)
  • The plan contains details of actions the company realistically expects to implement (and these actions are relevant and realistic)
  • The plan is approved at the strategic level within the organisation
  • Discussions about the potential impacts of a low-carbon transition on the current business have been included
  • The company has a publicly-acknowledged well-below 2°C (or beyond) science-based target (SBT)
  • The company has been carrying out a diagnosis of climate change impacts and identified related physical risks

The maximum score (100%) is assigned if all of these elements are demonstrated.

 

Rationale AL 5.3 Low-carbon transition plan
Rationale of the indicator All the sectors will require substantial changes to their business to align to a low-carbon economy, over the short, medium and long term, whether it is voluntarily following a strategy to do so or is forced to change by regulations and structural changes to the market. It is better for the success of its business and of its transition that these changes occur in a planned and controlled manner.

 

5.3.5.4 - AL 5. 4 Climate change management incentives

Description & Requirements AL 5.4 Climate change management incentives
Short description of indicator The Board’s compensation committee has included metrics for the reduction of GHG emissions in the annual and/or long-term compensation plans of senior executives; the company provides monetary incentives for the management of climate change issues as defined by a series of relevant indicators.
Data requirements

The relevant data for this indicator are:

  • Management incentives
  • The reporter shall report whether the company provides incentives for the management of climate change issues, including the attainment of targets
  • The reporter shall provide details on the incentives provided for the management of climate change issues
  • The reporter shall provide details on the activities that are usually rewarded by incentives in the company
How the assessment will be done

The analyst verifies if the company has compensation incentives set for senior executive compensation and/or bonuses, that directly and routinely reward specific, measurable reductions of metric tonnes of carbon emitted by the company in the preceding year and/or the future attainment of emissions reduction targets, or other metrics related to the company’s low-carbon transition plan.

 

Rationale AL 5.4 Climate change management incentives
Rationale of the indicator

Executive compensation should be aligned with overall business strategy and priorities. As well as commitments to action the company should ensure that incentives, especially at the executive level, are in place to reward progress towards low-carbon transition. This will improve the likelihood of successful low-carbon transition.

Monetary incentives at the executive level are an indication of commitment to successful implementation of a strategy for low-carbon transition.

 

5.3.5.5 - AL 5.5 Climate change scenario testing

Description & Requirements AL 5.5 Climate change scenario testing
Short description of indicator Testing or analysis relevant to determining the impact of transition to a low-carbon economy on the current and projected business model and/or business strategy has been completed, with the results reported to the board or c-suite, the business strategy revised where necessary, and the results publicly reported.
Data requirements

The relevant data for this indicator are:

  • The reporter shall provide the details and supporting documents on the organization’s climate change scenario testing
How the assessment will be done

The analyst evaluates the description and evidence of the low-carbon economy scenario testing for the presence of best-practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points is allocated for elements indicating a higher level of maturity.

Maximum points are awarded if all of these elements are demonstrated.

 

Rationale AL 5.5 Climate change scenario testing
Rationale of the indicator

There are a variety of ways of analysing the potential impacts of climate-related changes on the business, whether these are slow and gradual developments or one-off “shocks”. Investors are increasingly calling for techniques such as use of an internal price on carbon, scenario analysis and stress testing to be implemented to enable companies to calculate the value-at-risk that such changes could pose to the business. As this practice is emergent at this time there is currently no comprehensive survey or guidance on specific techniques or tools recommended for the sector. The ACT methodology thus provides a broad definition of types of testing and analysis which can be relevant to this information requirement, to identify both current and best practices and consider them in the analysis.

Scenario stress testing is an important management tool for preparing for low-carbon transition. For businesses likely to be strongly affected by climate change impacts (both direct and indirect), it has even greater importance.

 

5.3.6. Supplier engagement

 

5.3.6.1 - AL 6.1 Strategy to influence suppliers to reduce their ghg emissions

Description & Requirements AL 6.1 Strategy to influence suppliers to reduce their ghg emissions
Short description of indicator This indicator assesses the strategic policy and the process which are formalized and implemented into business decision making-process to influence, enable or otherwise shift suppliers’ choices and behaviours in order to reduce its GHG emissions.
Data requirements

The relevant data for this indicator are:

  • Methods of supplier engagement, strategy to prioritizing supplier engagements and measures of success
  • Number of suppliers engaged and proportion of total spend
  • Data on suppliers’ GHG emissions and climate change strategies
How the assessment will be done

The assessment will assign a maturity score based on the company’s formalized strategy with their suppliers, expressed in a maturity matrix.

This maturity matrix is indicative but does not show all possible options that can result in a particular score. Companies responses will be scrutinized by the analyst and then placed on the level in the matrix where the analyst deems it most appropriate.

Examples of action levers:

  • Awareness campaign,
  • Purchasing rules
  • Joint R&D
  • Supporting/leading industry environmental groups
  • Sanctions
  • Audits
  • Sharing patents
  • Sustainability manager involved in appointment/can veto new supplier appointments
Rationale AL 6.1 Strategy to influence suppliers to reduce their GHG emissions
Rationale of the indicator

Relevance of the indicator:

Supplier engagement is included in this ACT methodology for the following reasons:

  • It might have a significant impact in terms of GHG emission
  • Achieving decarbonization of the whole supply chain is also key to reach the ambitious goals in most of the companies of the value chain
  • Engaging suppliers through contract clauses and sales incentives is necessary to take them on board.

Scoring the indicator:

Because of data availability and complexity, a direct measure of the outcome of such engagement is not very feasible at this time. It is often challenging to quantify the emissions reduction potential and outcome of collaborative activities with the supply chain. Therefore, the approach of a maturity matrix allows the analyst to consider multiple dimensions of supplier engagement and assess them together towards a single score for Supplier Engagement.

 

5.3.6.2 - AL 6.2 Activities to influence suppliers to reduce their ghg emissions

Description & Requirements AL 6.2 Activities to influence suppliers to reduce their GHG emissions
Short description of indicator The company participates in activities that help, influence or otherwise enable suppliers to reduce their GHG emissions. The indicator aims to be a holistic measure of these activities to assess how active the company is in reducing the emissions of their products/services in the value chain across all products/services.
Data requirements

The relevant data for this indicator are:

  • List of initiatives implemented to influence suppliers to reduce their GHG emissions, green purchase policy or track record, supplier code of conduct
How the assessment will be done

The assessment will assign a maturity score based on the company’s formalized strategy with their suppliers, expressed in a maturity matrix.

This maturity matrix is indicative but does not show all possible options that can result in a particular score. Companies responses will be scrutinized by the analyst and then placed on the level in the matrix where the analyst deems it most appropriate.

 

Rationale AL 6. 2 Activities to influence suppliers to reduce their GHG emissions
Rationale of the indicator

Relevance of the indicator:

Activities to influence suppliers are included in this ACT methodology for the following reasons:

  • It might have a significant impact in terms of GHG emission
  • Achieving decarbonization of the whole supply chain is also key to reach the ambitious goals in most of the companies of the value chain
  • Engaging suppliers through contract clauses and sales incentives is necessary to take them on board.

Scoring the indicator:

Because of data availability and complexity, a direct measure of the outcome of such engagement is not very feasible at this time. It is often challenging to quantify the emission reduction potential and outcome of collaborative activities with the supply chain. Therefore, the approach of a maturity matrix allows the analyst to consider multiple dimensions of supplier engagement and assess them together towards a single score for all the activities related to Supplier Engagement.

 

5.3.7. Client engagement

 

5.3.7.1 - AL 7.1 Strategy to influence client behaviour to reduce their GHG emissions

Description & Requirements AL 7.1 Strategy to influence clients to reduce their GHG emission
Short description of indicator The company has a strategy, ideally governed by policy and integrated into business decision making, to influence, enable, or otherwise shift client choices and behaviour in order to reduce GHG emissions.
Data requirements

The relevant data for this indicator are:

  • Strategy to influence clients GHG emissions
  • % of products/services
  • Data on clients’ choices and preferences towards reducing GHG emissions
How the assessment will be done

The assessment will assign a maturity score based on the company’s formalized strategy to influence clients, expressed in a maturity matrix.

Rationale AL 7.1 Strategy to influence client behaviour to reduce their GHG emissions
Rationale of the indicator

Relevance of the indicator:

Strategies to influence clients are included in this ACT methodology for the following reasons:

  1. Companies usually have the ability to influence the strategy and performance of clients regarding climate thanks to their products or services.
  2. The downstream can represent a large source of emissions for some companies throughout the value chain and clients should be engaged through a proper ambitious strategy.

Scoring the indicator:

Because of data availability and complexity, a direct measure of the outcome of such engagement is not very feasible at this time. It is often challenging to quantify the emission reduction potential and outcome of collaborative activities with the supply chain. Therefore, the approach of a maturity matrix allows the analyst to consider multiple dimensions of supplier engagement and assess them together towards a single score for a strategy related to Client Engagement.

 

5.3.7.2 - AL 7.2 Activities to influence client behaviour to reduce their GHG emissions

Description & Requirements AL 7.2 Activities to influence clients to reduce their GHG emission
Short description of indicator The company participates in activities, to influence, enable, or otherwise shift client choices and behaviour in order to reduce GHG emissions.
Data requirements

The relevant data for this indicator are:

  • Activities to influence clients GHG emissions
  • % of products/services
  • Data on clients’ choices and preferences towards reducing GHG emissions
How the assessment will be done

The assessment will assign a maturity score based on the company’s activities to influence clients, expressed in a maturity matrix.

Rationale AL 7.2 Activities to influence clients to reduce their GHG emission
Rationale of the indicator

Relevance of the indicator:

Activities to influence clients are included in this ACT methodology for the following reasons:

  1. Companies usually have the ability to influence the strategy and performance of clients regarding climate thanks to their products or services.
  2. The downstream can represent a large source of emissions for some companies throughout the value chain and clients should be engaged through low-carbon solutions.

Scoring the indicator:

Because of data availability and complexity, a direct measure of the outcome of such engagement is not very feasible at this time. It is often challenging to quantify the emission reduction potential and outcome of collaborative activities with the supply chain. Therefore, the approach of a maturity matrix allows the analyst to consider multiple dimensions of supplier engagement and assess them together towards a single score for all the activities related to Client Engagement.

 

5.3.8. Policy engagement

 

5.3.8.1 - AL 8.1 Company policy on engagement with trade associations

Description & Requirements AL 8.1 Company policy on engagement with trade associations
Short description of indicator The company has a policy on what action to take when industry organisations to which it belongs are found to be opposing “climate-friendly” policies.
Data requirements

The relevant data for this indicator are:

  • Public climate change policy positions
  • Description of this policy (scope & boundaries, responsibilities, process to monitor and review)
  • Trade associations that are likely to take a position on climate change legislation
How the assessment will be done

The analyst will evaluate the description and evidence of the policy on trade associations and climate change for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence will be compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for elements indicating a higher level of maturity.

Maximum points are awarded if all these elements are demonstrated.

 

Rationale AL 8.1 Company policy on engagement with trade associations
Rationale of the indicator

Trade associations are a key instrument by which companies can indirectly influence policy on climate. Thus, when trade associations take positions, which are negative for climate, companies need to take action to ensure that this negative influence is countered or minimized.

This indicator is consistent with the ACT philosophy, ACT framework and ACT guidelines and common to the other sectoral methodologies.

 

5.3.8.2 - AL 8.2 Trade associations supported do not have climate-negative activities or positions

Description & Requirements AL 8.2 Trade associations supported do not have climate-negative activities or positions
Short description of indicator The company is not on the board or providing funding beyond membership of any trade associations that have climate-negative activities or positions.
Data requirements

The relevant data for this indicator are:

  • Company policy on engagement with trade associations
How the assessment will be done

The list of trade associations declared in the CDP data and other external source entries relating to the company (e.g. RepRisk database), is assessed against a list of associations that have climate-negative activities or positions. The results are compared to any policy described in 5.1.

 

 

Rationale AL 8.2 Trade associations supported do not have climate-negative activities or positions
Rationale of the indicator Trade associations are a key instrument by which companies can indirectly influence policy on climate. Thus, participating in trade associations which actively lobby against climate-positive legislation is a negative indicator and likely to obstruct low-carbon transition. However, membership in associations that support climate positive policies should also be considered in the analysis.

 

5.3.8.3 -AL 8.3 Position on significant climate policies

Description & Requirements AL 8.3 Position on significant climate policies
Short description of indicator The company is not opposed to any significant climate relevant policy and/or supports climate friendly policies.
Data requirements

The relevant data for this indicator are:

  • The company should attach supporting documentation, if this exists, giving evidence on the position of the company on significant climate policies (public statements, etc.).
  • The company shall disclose details of the issues on which it has been directly engaging with policy makers and its proposed legislative solution.

External sources of data shall also be used for the analysis of this indicator (e.g. RepRisk database, press news, actions in standard development)

How the assessment will be done

The analyst evaluates the description and evidence on company position on relevant climate policies for the presence of best practice elements, negative indicators and consistency with the other reported management indicators. The company description and evidence will be compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for elements indicating a higher level of maturity.

 

Rationale AL 8.3 Position on significant climate policies
Rationale of the indicator Many initiatives have been developed about sustainable practices that contribute to the transition to a low-carbon economy. Companies should not oppose effective and well-designed regulation in these areas, but should support it. Assessing the position of the company regarding the evolution of the context is thus key to understand the corporate vision in these matters

 

5.3.8.4 - AL 8.4 Collaboration with local public authorities

Description & Requirements AL 8.4 Collaboration with local public authorities
Short description of indicator The company is collaborating with local public authorities whether on aluminium scrap collection and sorting and/or on contribution to the low-carbon transition of the grid of the territory.
Data requirements

The relevant data for this indicator are:

  • Participation in meetings / collaborations with public authorities
  • Contracts with public authorities
How the assessment will be done

The analyst evaluates the description and evidence on the company’s collaboration and pilot tests with local authorities on scrap collection and sorting or/and on contribution to the low-carbon transition of the grid for the presence of best-practice elements, negative indicators and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

Examples of actions to contributes to the low-carbon transition of the grid:

  • Enhance the development of new low-carbon electricity assets, as defined in the EU Taxonomy [27]
  • Participate in demand-side management programs to reduce, flatten or shift power demand when needed by the grid.
  • Work with local authority to better collect post-consumer aluminium scrap

 

Rationale AL 8.4 Collaboration with local public authorities
Rationale of the indicator Collaboration with local authorities can be a key instrument by which companies can indirectly influence policy on scrap OR on low-carbon transition of the grid on their territory. Thus, participating actively in local dialogues shows leadership in such climate actions and can significantly help enhancing local policies on such topics.

 

5.3.9. Business model

 

Module Rationale

A company may transition its business model to other areas to remain profitable in a low-carbon economy. The company’s future business model should enable it to decouple financial results from GHG emissions, in order to meet the constraints of a low-carbon transition while continuing to generate value. This can be done by developing activities outside the core business of the company.

This module aims to identify both relevant current business activities and those still at a burgeoning stage. It is recognised that transition to a low-carbon economy, with the associated change in business models, will take place over a number of years. The analysis will thus seek to identify and reward projects at an early stage as well as more mature business activities, although the latter (i.e. substantially sized, profitable, and/or expanding) business activities will be better rewarded.

  • Focus will be on new business models
  • High emissive / involved in high emissive activity companies should be benchmarked by quantitative modules (not in business model module)
  • Score will be based on long-term viability of the company’s business model in the low-carbon economy
  • Is the company developing levers, and activating them, to transition to low-carbon economy?
  • Is there a need to change the fundamental business model? e.g. ticket agencies can just do train not air travel, engineering services no longer provided to fossil fuel companies.
  • How linked to emissive activities is the business model?
  • New business models vs. transitioning existing business model
  • We shouldn’t penalise companies who can’t shift a business model because they are already low-carbon

A variety of sources have been consulted to develop a comprehensive review of the challenges facing the Aluminium sector in relation to the low-carbon transition. The ACT initiative chose to use the recent work from IAI to define 3 potential business models for the aluminium sector [19].

Climate scenarios can identify shifts in the use of aluminium (transport, solar panels…) that will foster the transition to a low-carbon economy. Companies committed to adapting their business to these predicted changes will be better positioned to take advantage of associated opportunities and successfully transition to a low-carbon economy.

Scoring

The maturity matrix used to assed all the indicators of the module is the following:

 

5.3.9.1 - AL 9.1 Low carbon business models that aim at increasing low carbon power production and/or more flexible grid

Description & Requirements   AL 9.1 Low carbon business models that aim at increasing low-carbon power production and/or more flexible grid
Short description of indicator   The company is actively developing a business models that aim at increasing low-carbon power production and/or more flexible grid.
Data requirement  

The questions comprising the information request that are relevant to this indicator are:

  • Details on business model(s)
How the assessment will be done  

Best practice elements to be identified in the analysis include:

  • the business activity is profitable;
  • the business activity is of a substantial size;
  • the company is planning to expand the business activity;
  • expansion will occur on a defined timescale

If several business models are developed by the company, the final score will be the one given to the most mature business model (usually the one that is best scored too). The company should not be penalized if it has built a mature business model and explores besides other tracks (which would be scored with a lower score) compared to another company having only one mature business model.

The following lists give high-level categories of business activities. The categories are intentionally broad to allow the inclusion and the assessment of a diversity of business activities. Examples of business activities:

  • Low-carbon electricity self-generation (according to the EU Taxonomy, low carbon electricity generation corresponds to renewable energies. Discussions on whether gas and nuclear energy are considered low-carbon are still undergoing)
  • Adapt the processes of the company to be able to undergo the growing volatility of electricity supply (e.g. through EnPot technologies)
  • Integration of heat exchangers to vary energy consumption and production levels
  • Actively engage with electricity authorities
  • Other
Rationale   AL 9.1 Low carbon business models that aim at increasing low carbon power production and/or more flexible grid
Rationale of the indicator   See module rationale

 

5.3.9.2 - AL 9.2 Low carbon business models that aim at switching to low carbon-processes

Description & Requirements AL 9.2 Low carbon business models that aim at switching to low carbon-processes
Data requirement

The questions comprising the information request that are relevant to this indicator are:

  • Details on business model(s)
Short description of indicator The company is actively developing business models that aim at switching to low-carbon-processes.
How the assessment will be done

Best practice elements to be identified in the test/analysis include:

  • the business activity is profitable;
  • the business activity is of a substantial size;
  • the company is planning to expand the business activity;
  • expansion will occur on a defined timescale

If several business models are developed by the company, the final score will be the one given to the most mature business model (usually the one that is best scored too). The company should not be penalized if it has built a mature business model and explores besides other tracks (which would be scored with a lower score) compared to another company having only one mature business model.

Examples of business activities:

  • Inert anode
  • CCS/CCUS
  • Substitute to thermal energy (green hydrogen / electrification / biomass)
  • Energy storage
  • Retrofitting/upgrading technologies to innovative ones for energy efficiency gains
  • Other
Rationale AL 9.2 Low carbon business models that aim at switching to low carbon-processes
Rationale of the indicator See module rationale

 

5.3.9.3 - AL 9.3 Low carbon business models that aim at taking part in aluminium circular economy

Description & Requirements AL 9.3 Low carbon business models that aim at taking part in aluminium circular economy
Data requirement

The questions comprising the information request that are relevant to this indicator are:

  • Details on business model(s)
Short description of indicator The company is actively developing business models that aim at taking part in aluminium circular economy.
How the assessment will be done

Best practice elements to be identified in the test/analysis include:

  • the business activity is profitable;
  • the business activity is of a substantial size;
  • the company is planning to expand the business activity;
  • expansion will occur on a defined timescale

If several business models are developed by the company, the final score will be the one given to the most mature business model (usually the one that is best scored too). The company should not be penalized if it has built a mature business model and explores besides other tracks (which would be scored with a lower score) compared to another company having only one mature business model.

Examples of business activities:

  • Elimination of pre-consumer scrap generated during the processes
  • Elimination of all metal losses during casting and recycling
  • Ecodesign to facilitate the post-consumer scrap collection
  • End-of-life scrap collection technologies
  • Technologies to improve the quality of the scrap
  • Circular waste good practices to support other industry decarbonization efforts (e.g. aluminium dross replacing clinker in the cement industry)
  • Other
Rationale AL 9.3 Low carbon business models that aim at taking part in aluminium circular economy
Rationale of the indicator See module rationale

 

6. Assessment

 

6.1. Sector Benchmark

A literature review has been performed in order to identify low carbon pathways for the aluminium sector. A low carbon pathway is a projection of a sectoral carbon metric over time matching with an ambitious scenario (1.5°; well-below two degrees, 2°). The carbon metrics that will be used in ACT Aluminium are Scope 1+2 and Scope 1+2+3 (see section 4.1 for more details on boundaries). A company’s low carbon pathway will then be computed from the sectoral low carbon pathway to be company specific. The following figure provides more details on the ACT methodology to build low carbon pathways.

 

Figure 25: The climate performance of a company

 

For the quantitative modules, the convergence method will be used and ACT mimicked the Sectoral Decarbonization Approach from Science-Based Targets method.

The mechanism allocation is taken partially from the sectoral decarbonization approach to science-based targets, based on IAI data and hypotheses [add reference when available]. It relies mainly on IEA ETP 2017 B2DS scenario.

The Aluminium company emissions benchmark is the company’s allocated decarbonization pathway, it is calculated from the sectoral decarbonisation pathway.

To compute this low carbon pathway inspired by the SDA methodology, the sector benchmark is used an input to compute the company’s benchmark that will adapt to the company’s carbon intensity of the reporting year. The rate of convergence is determined by a market share parameter that will require the company to reduce faster its carbon intensity if its market share increases (based on the total amount of Aluminium of IEA ETP 2017 B2DS projected), and a convergence index based on the emissions intensity reduction pathway of the sector benchmark (the rate of decrease of the emissions intensity from base year to 2050 according to IAI data and hypotheses).

For the quantitative part of indicator 2.4, the SDA calculation will be used to assess the carbon intensity of the self-generated electricity of the company. The source of the sectoral low carbon pathway is IEA ETP 2017 B2DS scenario. This data source has been used to be consistent with the other low carbon pathways. The self-generated carbon electricity will be compared to this sectoral benchmark.

 

6.1.1. Description of the benchmark

The fundamental target to achieve for all organizations is to contribute to not exceeding a threshold of 2⁰C global warming compared to pre-industrial temperatures. This target has long been widely accepted as a credible threshold for achieving a reasonable likelihood of avoiding climate instability, while a 1.5⁰C rise has been agreed upon as an aspirational target.

Consequently, low carbon scenarios used for the benchmark are B2DS (Below Two Degree Scenario) scenarios.

Every company shall be benchmarked according to an acceptable and credible benchmark that aligns with spatial boundary of the methodology. All aluminium companies shall be benchmarked to the steps of the value chain where they operate, and also through cradle-to-gate assessment (until the last step of the value chain where the company operates.

 

6.1.1.1. IAI low carbon pathways

IAI low carbon pathways consist of the CO2e emissions of each step of the value chain, as well as the corresponding aluminium volume, from 2014 to 2050. This enables to compute a low carbon intensity trajectory for each step of the value chain, on which company’s specific low carbon pathways can be built. As a consequence, these low carbon pathways are more granular and more precise.

To build these low carbon pathways, the SDA methodology will be partially used:

The company’s low carbon pathway will have the same starting point as the company’s carbon intensity

The company’s low carbon pathway must converge to the sectoral low carbon intensity in 2050 thanks to the market share parameter and the convergence index

Two index parameters will be computed to indicate the rate of decrease the company should follow:

CO2e emissions decrease of the sectoral emissions intensity

Market share: if the market share of the company increases over time, its carbon intensity should decrease even more

Moreover, the higher the carbon intensity of the company at the reporting year, the faster the SDA calculation requires companies to decrease their carbon intensity. This enables to reward the past efforts the company has made to reduce its carbon intensity.

The CO2e emissions posts to be taken into account will depend on the module. For example, module 2 will not take into account ancillary materials and transport CO2e emissions as this will be part of the Scope 3 of the aluminium companies; however, these CO2e emissions will be taken into account in module 4 that assess the global carbon footprint of the aluminium products sold by the company.

Later in the chapter, the reference pathway definition and classification are presented.

 

6.1.1.2. Distinctions between the modules

For module 1 Targets, several steps of the value chain will be taken into account when accounting the CO2e. The company is asked to indicate where it operates, and then the corresponding CO2e emissions will be taken into account by the company’s low carbon pathway. The activity volume data will correspond to the last of the value chain where the company operates.

For module 2 Material investments, one company’s low carbon pathway will be built per step of the value chain. Therefore, the numerator (CO2e) and denominator (metric tonnes of aluminium products, depending on which step of the value chain is considered) are fixed and concern only one step of the aluminium value chain.

For module 4 Sold product performance, the company is to indicate which upstream steps of the value chain are relevant to be taken into account, and then the company’s low carbon pathway will include the corresponding CO2e emissions. Indeed, a company doing only recycling should not consider the electrolysis CO2e emissions for example, as we consider that pre-consumer scrap is allocated to 0 tCO2e for Scope 3 upstream. The denominator will be the last step of the value chain where the company operates.

 

6.1.2. Mechanisms to compute the company benchmark

The convergence mechanism has been chosen. This allocation takes the company’s emissions intensity in the initial year and converges it to the sector’s emissions intensity in 2050 at a rate that ensures that the corresponding sectoral carbon budget is not exceeded, based on IAI data and hypotheses.

The next figure illustrates the mechanism.

 

Figure 26: Convergence mechanism illustration

 

Thus, companies starting from a lower intensity will have a shallower decarbonization pathway than companies starting from a higher intensity. In this way, past action or inaction to reduce intensity is taken into consideration.

The next figure highlights the carbon intensity to generate electricity. This will be the sectoral low carbon pathway used for the quantitative part of indicator 2.4 Contribution to low carbon electricity generation (IEA ETP 2017 B2DS scenario).

Figure 27: Power intensity tCO2e/MWh - IEA ETP 2020 (SDS scenario)

 

 

6.1.3. Reference pathway classification

A reference pathway defines the carbon intensity (tCO2e/metric tonnes of aluminium products) pathway for a given company type.

For the Aluminium sector we consider the following types of pathways:

  • Bauxite mining
  • Alumina refining
  • Anode production
  • Electrolysis
  • Casting
  • Recycling
  • Semis production
  • Internal scrap remelting

 

6.1.4. Available reference pathways

The low carbon pathways selected will use IAI data and IAI hypotheses to get the carbon intensity from 2014 to 2050.

Figures highlighting the activity volume and emissions intensities for each step of the value chain, based on IAI data and hypotheses, will be presented in the final version of the methodology when IAI data is launched publicly.

 

6.2. Weightings

The weightings of a great number of modules, and indicators, will depend on where the company operates along the aluminium value chain by indicating the Scope 1+2 CO2e emissions of the company for the eight steps of the aluminium value chain.

 

6.2.1. Rationale for weightings

The selection of weights for both the modules and the individual indicators was guided by a set of principles (see the ACT framework document [1] for more information). These principles helped define the weighting scheme of the modules and indicators.

Principle Explanation
Value of information The value of the information that an indicator gives about a company’s outlook for the low-carbon transition is the primary principle for the selection of the weights.
Impact of variation A high impact of variation in an indicator means that not performing in such an indicator has a large impact on the success of a low-carbon transition, and this makes it more relevant for the assessment.
Future orientation Indicators that measure the future, or a proxy for the future, are more relevant for the ACT assessment than past & present indicators, which serve only to inform about the likelihood and credibility of the transition.
Data quality sensitivity Indicators that are highly sensitive to expected data quality variations are not recommended for a high weight compared to other indicators, unless there is no other way to measure a particular dimension of the transition.

The weightings below indicate the range for each module. Indeed, depending on where the company operates alongside the aluminium value chain, these weightings will vary. To compute the weighting for these modules, two different calculations are done:

  • For modules 2 and 4, a weighted average based on the percentages of Scope 1+2 CO2e emissions of the company corresponding to each step of the value chain and the default weightings for each step of the value chain will be computed to get the specific weighting of the company
  • For module 6 and 7, the company is asked to indicate the aluminium product that generates the highest amount of revenue, and depending on if this product is present at the upstream or downstream of the value chain, the weightings of the suppliers and clients modules will be updated (e.g. if the highest revenue comes from semis production, then the suppliers module will have higher weightings as the company can have more levers there)

More explanations are provided below, as well as fictive examples to illustrate this.

6.2.1.1 Targets 15%

The targets Module has a relatively large weight of 15%. Most of it is placed on the ‘alignment of Scope 1+2 / scope 1+2+3 emissions reduction targets’ with 10%. The ‘time horizon of targets’ have a medium weight of 3%. The ‘time horizon of targets’ is a proxy of how forward-looking the company is, which is very long-term oriented. Finally, the ‘achievement of previous targets’ indicator measures the company’s past credentials on target setting and achievement, which provides more contextual information on the company’s ability to meet ambitious future targets. 2% score is attributed to this indicator.

 

6.2.1.2. Material Investment 12-35%

Step of the value chain Default module weighting
Bauxite mining 35%
Alumina refining 35%
Anode production 30%
Electrolysis 30%
Casting 25%
Recycling 30%
Semis production 12%
Internal scrap remelting 30%

Aluminium producers requires high and long-term investment with best available technologies. Roadmaps specific to the aluminium sector show that resources and energy efficiency and low-carbon electricity are key for low-carbon transition.

This is the primary module that assesses the development of the company’s assets, and how these existing assets influence the likelihood of a low-carbon transition.

Material investment is a key module for alumina producers and smelters.

 

6.2.1.3. Intangible Investment 10%

For companies operating in value chains with high stakes regarding low-carbon transition, such as the aluminium sector, R&D spending in low-carbon technologies are crucial. This module has thus a weight of 10%.

 

6.2.1.4 Sold product performance 7-30%

Step of the value chain Default module weighting
Bauxite mining 7%
Alumina refining 7%
Anode production 12%
Electrolysis 12%
Casting 17%
Recycling 12%
Semis production 30%
Internal scrap remelting 12%

This module is key for downstream companies.

“Cradle-to-gate aluminium carbon footprint” has a large part of the module weighting for any company except recycling companies (the scrap is considered as carbon-free) ; “pre-consumer scrap reduction” and “recycled scrap traceability” are not triggered for all companies, but are key to measure the transition to an efficient circular economy.

 

6.2.1.5. Management 10%

Management is a multi-faceted Module. It incorporates many different smaller indicators that together draw a picture of the company’s management and strategic approach to the low-carbon transition.

Going by the principle of future orientation, the main part of this weight is placed on the “low-carbon transition plan” and on “climate change scenario testing” weighted each at 3%. The transition plan provides more information on how this company will specifically deal with the transition, given its unique constraints and opportunities, and therefore provides valuable insights into the company’s planning and narrative towards the final goal.

The indicators “climate change oversight capability (2%), ,“oversight of climate change issues” (1%) and “Climate change management incentives”(1%) are low weighted. These indicators provide more information on how this company is managed, if decisions are coming from the top management and if the person in charge knows the topics. They are contextual indicators the outcome of which can strengthen or undermine the company’s ability to carry out the transition plan and meet ambitious science-based targets.

 

6.2.1.6. Supplier engagement 2-6%

In order to decarbonize the whole economy, it is essential that all stakeholders get involved.

The supplier engagement Module is focused on the company’s efforts to purchase low-carbon products and to encourage suppliers reduce their emissions. Nevertheless, this indicator alone is a narrow aspect of the transition and therefore its total weight is low to medium (2-6%) depending on where the company is in the value chain.

Step of the value chain Module weighting
Bauxite mining 2%
Alumina refining 2%
Anode production 2%
Electrolysis 4%
Casting 4%
Recycling 6%
Semis production 6%
Internal scrap remelting 6%

 

6.2.1.7. Client engagement 2-6%

In order to decarbonize the whole economy, it is essential that all stakeholders get involved.

The client engagement Module is focused on the company’s efforts to promote low-carbon products, more efficient use of aluminium and recycling of products to their customers. Nevertheless, this indicator alone is a narrow aspect of the transition and therefore its total weight is low to medium (2-6%) depending on where the company is in the value chain.

Step of the value chain Module weighting
Bauxite mining 6%
Alumina refining 6%
Anode production 6%
Electrolysis 4%
Casting 4%
Recycling 2%
Semis production 2%
Internal scrap remelting 2%

 

6.2.1.8. Policy engagement 5%

In line with the rationale for the management indicators of low weight, the policy engagement indicators are also contextual aspects which tell a narrative about the company’s stance on climate change and how the company expresses it in their engagement with policy makers and trade associations. The total weight for this Module is therefore medium at 5%. As the ‘’Trade associations supported do not have climate-negative actions or positions’ is less robust than other indicators, it is less weighted.

 

6.2.1.9. Business model 10%

The module captures many elements and aspects that cannot otherwise be captured in any of the other modules. It includes those aspects that are relevant to the transition but are not directly a part of the primary activities. It is future oriented by asking the companies on its narrative on certain future directions it can/has to take is standard to enable the transition.

In addition to the weightings of the modules, the weightings of many indicators will also depend on where the company operates – based on its CO2e emissions – alongside the aluminium value chain. A weighted average based the percentages of Scope 1+2 CO2e emissions of the company corresponding for each step and default weightings for each step of the value chain will be computed to get the weighting for the company specifically. By doing so, ACT enables to adapt to the specificities of each aluminium company. The figure below indicates the default weighting for each indicator and for each step of the value chain. The percentages correspond to the weighting of each indicator to the weighting of the module, hence the fact that summing all percentages of one module makes 100%

 

Figure 28: Default weightings per indicator and per step of the value chain

 

The following fictive examples will help better understand how the weighting tool works.

Example 1
  • Bauxite mining accounts for 2% of Scope 1+2 CO2e emissions
  • Alumina refining accounts for 98% of Scope 1+2 CO2e emissions

 

Figure 29: Weightings for fictive company example 1

 

Example 2
  • Anode production accounts for 4% of Scope 1+2 CO2e emissions
  • Electrolysis accounts for 95% of Scope 1+2 CO2e emissions
  • Casting accounts for 1% of Scope 1+2 CO2e emissions
Figure 30: Weightings for fictive company example 2

 

Example 3
  • Recycling accounts for 100% of Scope 1+2 CO2e emissions
Figure 31: Weightings for fictive company example 3

 

Example 4
  • Semis production accounts for 100% of Scope 1+2 CO2e emissions
Figure 32: Weightings for fictive company example 4

 

 

6.3. Data request

Table 5 introduces the list of information that will be requested to companies through a questionnaire, as well as the corresponding indicators.

Table 5: Data request per indicator

 

7. Integration of Physical risks and Adaptation in ACT

 

7.1 Introduction and context

This is a first version of a maturity matrix that aims to integrate climate physical risks and adaptation in ACT.

A specific method will be developed with a separate score, modules specific to climate risks and adaptation, and a possible joint assessment with the mitigation part of ACT. This is a first draft of its integration in current ACT methodological development.

To be noted :

Each line (row) of the matrix corresponds to a category that is independent from others. Categories are just grouped by module. The matrix is composed of two dimensions, the physical climate risks and adaption. Each of these dimensions contains several modules.

Scores and weightings are detailed in this document.

The lists of impacts and vulnerabilities for the different activities of a company along its value chain are not exhaustive. Any other impact or vulnerability that is relevant for the company can be considered and analysed.

Any comment or feedback is welcome.

Two questions are for consultation.

A glossary of climate physical risks and adaptation terms is available at the end of this document.

7.2. Maturity Matrix

The two dimensions of the maturity matrix are climate physical risks and adaptation.

Physical climate risks correspond to the potential for negative consequences from physical climate events or trends. Risks from climate change impacts arise from the interaction between hazard (triggered by an event or trend related to climate change), vulnerability (susceptibility to harm) and exposure (people, assets or ecosystems at risk) (from IPCC, 2014).

Hazards refer to the potential occurrence of a natural or human-induced physical event or trend or physical impact that may cause loss of life, injury, or other health impacts, as well as damage and loss to property, infrastructure, livelihoods, service provision, ecosystems and environmental resources. In this note, the term hazard usually refers to climate-related physical events or trends or their physical impacts. Thus, it includes processes that range from brief events, such as severe storms, to slow trends, such as multi-decade droughts or multi-century sea level rise (from IPCC, 2014).

Exposition is the degree to which a company’s value chain (e.g., assets, operations, supply chain, customers) has the potential to be impacted by physical climate hazards due to its geographic location. These metrics should link part of a company’s value chain (e.g., physical assets) with specific physical climate hazards (e.g., tropical cyclones) (from IPCC, 2014).

Vulnerability is the propensity of different parts of a company’s value chain to suffer negative impacts when exposed to and then impacted by physical climate hazards. These metrics should assess specific characteristics of a company’s value chain (e.g., water intensity) that may make that part of the value chain more or less likely to suffer negative impacts from physical climate hazards (WRI, 2021).

The second dimension of the matrix is adaptation. It is the process of adjustment to actual or expected climate and its effects. In human systems, adaptation seeks to moderate or avoid harm or exploit beneficial opportunities. In some natural systems, human intervention may facilitate adjustment to expected climate and its effects.

Adaptation options exist in all sectors, but their context for implementation and potential to reduce climate-related risks differs across sectors and regions. Some adaptation responses involve significant co-benefits, synergies and trade-offs (from IPCC, 2014).

Here is presented the complete physical risks and adaptation maturity matrix.

7.2.1 CLIMATE PHYSICAL RISKS DIMENSION

 

7.2.2. ADAPTATION DIMENSION

 

7.3. Weightings

The weightings on 100% are distributed equally among Physical risks and Adaptation dimensions. Analysis and Organizational capacity modules are both fixed to 25%. If a company is not concerned by one or several modules between Supply chain, Production, Logistics or Demand, the analyst can decide

  • To attribute a weighting of 0% for it and to redistribute the corresponding weightings
  • To change marginally the weightings between these four modules for another distribution that could be more appropriate for the company

The final score of the complete matrix will be computed on 20 thanks to a weighted average. Two other scores will be computed, the physical risks score on 100% and the adaptation score on 100%.

 

Do you think this scoring is appropriate? What about the weightings?

 

7.4. Questions for consultation

 

How do we want to assess the “Demand and sales” (5) aspect for the company?

OPTION 1: keep the module as it is now

OPTION 2: Modify the « Demand & sales » module (5) to make it more business related and integrate more in it the notion of climate-related opportunities, as well as keeping the risks analysis dimension

 

 

How do we want to address the notion of climate-related opportunities in the matrix?

 

Climate-related opportunities in the ACT framework are defined as follow:

It is the potential positive impacts related to climate change on an organisation. It will vary depending on the region, market and industry in which an organisation operates. In the ACT framework, climate-related opportunity focuses on opportunities to adapt to market shifts driven by physical climate impacts and cater to any resulting new market needs, that is to say, the fundamental shifts in climate over the longer term may affect value chains and drive new consumer needs. For example, technology to keep buildings cool, along with water- and energy-efficient technologies, or crops that are better suited to chronic changes in precipitation and temperature. (EBRD)

OPTION 1: Add « Identification climate-related opportunities related to climate change » at the low-carbon aligned level in the matrix for

Analysis module (1)

Production module (3)

OPTION 2: Modify the « Demand & sales » module (5) to make it more business related and integrate more in it the notion of climate-related opportunities, as well as keeping the risks analysis dimension.

 

7.5. Glossary

Actions that do not (significantly) harm mitigation, biodiveristy, health and pollution

According to the European Taxonomy proposed by the Technical Expert Group, economic activities making a substantial contribution to climate change mitigation or adaptation must be assessed to ensure they do not cause significant harm to all remaining environmental objectives. An activity contributing to climate change adaptation must avoid significant harm to climate change mitigation and the other four environmental objectives (and vice versa):

- Sustainable use and protection of water and marine resources

- Transition to a circular economy, waste prevention and recycling

- Pollution prevention and control

- Protection of healthy ecosystems

This assessment ensures that progress against some objectives are not made at the expense of others and recognises the reinforcing relationships between different environmental objectives. (TEG, 2020)

adaptation

The process of adjustment to actual or expected climate and its effects. In human systems, adaptation seeks to moderate or avoid harm or exploit beneficial opportunities. In some natural systems, human intervention may facilitate adjustment to expected climate and its effects.

Adaptation options exist in all sectors, but their context for implementation and potential to reduce climate-related risks differs across sectors and regions. Some adaptation responses involve significant co-benefits, synergies and trade-offs. Increasing climate change will increase challenges for many adaptation options.

Adaptation and mitigation responses are underpinned by common enabling factors. These include effective institutions and governance, innovation and investments in environmentally sound technologies and infrastructure, sustainable livelihoods and behavioural and lifestyle choices. (IPCC, 2014)

adaptive capacity The ability of systems, institutions, humans and other organisms to adjust to potential damage, to take advantage of opportunities, or to respond to consequences. (IPCC, 2014)
CLIMATE PROJECTION A climate projection is the simulated response of the climate system to a scenario of future emission or concentration of greenhouse gases (GHGs) and aerosols, generally derived using climate models. Climate projections are distinguished from climate predictions by their dependence on the emission/concentration/radiative forcing scenario used, which is in turn based on assumptions concerning, for example, future socio-economic and technological developments that may or may not be realized. (IPCC, 2014)
climate-related Opportunity

It is the potential positive impacts related to climate change on an organisation. It will vary depending on the region, market and industry in which an organisation operates.

In the ACT framework, climate-related opportunity focuses on opportunities to adapt to market shifts driven by physical climate impacts and cater to any resulting new market needs, that is to say, the fundamental shifts in climate over the longer term may affect value chains and drive new consumer needs. For example, technology to keep buildings cool, along with water- and energy-efficient technologies, or crops that are better suited to chronic changes in precipitation and temperature. (EBRD)

Emission SCENARIO A plausible representation of the future development of emissions of substances that are potentially radiatively active (e.g., greenhouse gases (GHGs), aerosols) based on a coherent and internally consistent set of assumptions about driving forces (such as demographic and socio-economic development, technological change, energy and land use) and their key relationships. Concentration scenarios, derived from emission scenarios, are used as input to a climate model to compute climate projections. (IPCC, 2014)
exposition / Exposure The presence of people; livelihoods; species or ecosystems; environmental functions, services, and resources; infrastructure; or economic, social, or cultural assets in places and settings that could be adversely affected. (IPCC, 2014)
exposure metrics Metrics designed to assess the degree to which a company’s value chain (e.g., assets, operations, supply chain, customers) has the potential to be impacted by physical climate hazards due to its geographic location. These metrics should link part of a company’s value chain (e.g., physical assets) with specific physical climate hazards (e.g., tropical cyclones). (IPCC, 2014)
financial ressources It is the funds available to implement its adaptive capacity. (ADEME, 2019)
HAZARDs

The potential occurrence of a natural or human-induced physical event or trend or physical impact that may cause loss of life, injury, or other health impacts, as well as damage and loss to property, infrastructure, livelihoods, service provision, ecosystems and environmental resources. In this report, the term hazard usually refers to climate-related physical events or trends or their physical impacts.

Thus, it includes processes that range from brief events, such as severe storms, to slow trends, such as multi-decade droughts or multi-century sea level rise.

(IPCC, 2014)

A climate hazard should be appreciated in function of its likelihood, magnitude and duration.

human ressources It is the internal skills and working time that the company uses to improve its adaptive capacity. (ADEME, 2019)
organizational capacity It is the governance bodies, exchanges, decision-making processes and the management mode that contribute to its adaptive capacity. (ADEME, 2019)
Physical climate risks

The potential for negative consequences from physical climate events or trends.

Acute physical risks refer to those that are event-driven, including increased severity of extreme weather events, such as tropical cyclones or floods.

Chronic physical risks are longer-term shifts in climate patterns (e.g., sustained higher temperatures) that may cause sea level change or chronic heat waves.

Risks from climate change impacts arise from the interaction between hazard (triggered by an event or trend related to climate change), vulnerability (susceptibility to harm) and exposure (people, assets or ecosystems at risk). (IPCC, 2014)

The classification of physical hazards is the following :

Note: The definitions of these hazards from the WRI and the IPCC are examples, any other relevant definition and corresponding indicator will be appropriate. 

Sources : WRI based on a review of reports from the IPCC (2014a, 2021, 2018, 2019a, 2019b), Géorisques, and adapted from I4CE

Representative concentration pathways (rcp)

Scenarios that include time series of emissions and concentrations of the full suite of greenhouse gases (GHGs) and aerosols and chemically active gases, as well as land use/land cover (Moss et al., 2008). The word representative signifies that each RCP provides only one of many possible scenarios that would lead to the specific radiative forcing characteristics. The term pathway emphasizes that not only the long-term concentration levels are of interest, but also the trajectory taken over time to reach that outcome (Moss et al., 2010).

 

RCPs usually refer to the portion of the concentration pathway extending up to 2100, for which Integrated Assessment Models produced corresponding emission scenarios. Extended Concentration Pathways (ECPs) describe extensions of the RCPs from 2100 to 2500 that were calculated using simple rules generated by stakeholder consultations and do not represent fully consistent scenarios.

Four RCPs produced from Integrated Assessment Models were selected from the published literature and are used in the present IPCC Assessment as a basis for the climate predictions and projections presented   in WGI AR5 Chapters 11 to 14 (IPCC, 2013b):

RCP2.6

One pathway where radiative forcing peaks at approximately 3 W/m2 before 2100 and then declines (the corresponding ECP assuming constant emissions after 2100). RCP2.6 is representative of a scenario that aims to keep global warming likely below 2°C above pre-industrial temperatures. The increase of global mean surface temperature by the end of the 21st century (2081–2100) relative to 1986–2005 is likely to be 0.3°C to 1.7°C under RCP2.6.

RCP4.5 and RCP6.0

Two intermediate stabilization pathways and scenarios in which radiative forcing is stabilized at approximately 4.5 W/m2 and 6.0 W/m2 after 2100 (the corresponding ECPs assuming constant concentrations after 2150). The increase of global mean surface temperature by the end of the 21st century (2081–2100) relative to 1986–2005 is likely to be 1.1°C to 2.6°C under RCP4.5, 1.4°C to 3.1°C under RCP6.0.

RCP8.5

It is the scenario with very high GHG emissions. One high pathway for which radiative forcing reaches >8.5 W/m2 by 2100 and continues to rise for some amount of time (the corresponding ECP assuming constant emissions after 2100 and constant concentrations after 2250). Scenarios without additional efforts to constrain emissions (’baseline scenarios’) lead to pathways ranging between RCP6.0 and RCP8.5. The increase of global mean surface temperature by the end of the 21st century (2081–2100) relative to 1986–2005 is likely to be 2.6°C to 4.8°C under RCP8.5.

Relative to 1850–1900, global surface temperature change for the end of the 21st century (2081–2100) is projected to likely exceed 1.5°C for RCP4.5, RCP6.0 and RCP8.5 (high confidence). Warming is likely to exceed 2°C for RCP6.0 and RCP8.5 (high confidence), more likely than not to exceed 2°C for RCP4.5 (medium confidence), but unlikely to exceed 2°C for RCP2.6 (medium confidence).

(21)

resilience

The capacity of social, economic and environmental systems to cope with a hazardous event or trend or disturbance, responding or reorganizing in ways that maintain their essential function, identity and structure, while also maintaining the capacity for adaptation, learning and transformation. (21)

technical ressources

The technologies, techniques and new solutions that contribute to improving its adaptive capacity. (ADEME, 2019)

threshold

Identifying the stages beyond which the operation of a system is significantly or irreversibly compromised, and understanding how climate change interacts with these functional thresholds, threshold analysis enables to identify different levels of risk.

The identification of these different risks thresholds in space and time then allows to prioritize and sequence incremental adaptation solutions. (ADEME, 2020)

transformation

A change in the fundamental attributes of natural and human systems. (21) 

vulnerability / sensitivity

The propensity or predisposition to be adversely affected. Vulnerability encompasses a variety of concepts and elements, including sensitivity or susceptibility to harm and lack of capacity to cope and adapt. (22)

vulnerability metrics

Metrics designed to assess the propensity of different parts of a company’s value chain to suffer negative impacts when exposed to and then impacted by physical climate hazards. These metrics should assess specific characteristics of a company’s value chain (e.g., water intensity) that may make that part of the value chain more or less likely to suffer negative impacts from physical climate hazards. (22) 

 

7.6. Bibliography

ADEME. (2019). Capacité d'adaptation au changement climatique des entreprises : recueil d'experiences 2019. Angers, France.

ADEME. (2020), Diagnostic des impacts du changement climatique sur une entreprise : recueil international d'expériences, adaptation au changement climatique 2020. Angers, France.

Carbone 4. (2017), CRIS Climate Risk Impact Screening, The methodology guidebook.

EBRD & GCECA, Advancing TCFD Guidance on physical climate risks and opportunities.

IPCC. (2014), Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. Geneva, Switzerland.

ISO 14090. (2019), Adaptation au changement climatique - Principes, exigences et lignes directrices.

TEG. (2020), Taxonomy Report, Technical Annex: Updated methodology & Updated Technical Screening Criteria.

WRI. (2021), Assessing physical risks from climate change: Do companies and financial organization have sufficient guidance ? - Working Paper

 

8. Rating

The ACT rating shall comprise:

  • A performance score
  • A narrative score
  • A trend score

A Climate Physical Risks and Adaptation Score (experimental)

These pieces of information shall be represented within the ACT rating as follows:

  1. Performance score as a number from 1 (lowest) to 20 (highest)
  2. Narrative score as a letter from E (lowest) to A (highest)
  3. Trend score as either “+” for improving, “-” for worsening, or “=” for stable. In some situations, trend scoring may reveal itself to be unfeasible depending on data availability. In this case, it should be replaced with a “?”.
  4. Climate Physical Risks and Adaptation score as a number from 1 (lowest) to 20 (highest

The highest rating is thus represented as “20A+”, the lowest as “1E-” and the midpoint as “10C=”.

Table 6: Highest score for each ACT score type

Each company assessed using an ACT methodology received not only an ACT rating but a commentary on their performance across the three aspects of the rating. This gave a nuanced picture of the company’s strengths and weaknesses. Detailed information on the ACT rating is available in the ACT Framework document.

 

8.1. Performance scoring

Performance scoring shall be performed in compliance with the ACT Framework.

 

8.2. Narrative scoring

Narrative scoring shall be performed in compliance with the ACT Framework, assessing the company on the 4 following criteria:

  • Business model and strategy
  • Consistency and credibility
  • Reputation
  • Risk

The organisation of the company – steps of the value chain where the company operates – shall be considered in the narrative assessment and narrative scoring for the Aluminium sector.

The information reported in Module 4 shall be considered with peculiar attention for the narrative analysis and narrative scoring for the Aluminium sector because they assess most parts of CO2e emissions due to Aluminium production (the upstream steps of the value chain, and ancillary materials & transport CO2e emissions).

Indicator 2.4 Contribution to low carbon electricity generation could be used to assess the consistency and business model strategy of the company, as well as indicators 4.2 and 4.3 on scrap management.

With this information, the analyst can take a holistic view on the company’s actions to perform deep decarbonization of its process and assess the consistency of actions taken with respect to targets, business model and engagement with other stakeholders.

No other sector-specific issue impacting the narrative scoring for this sector has been identified to date.

Table 6: RELEVANT PERFORMANCE INDICATORS FOR NARRATIVE SCORING

 

8.3. Trend scoring

Scoring shall be performed in compliance with the ACT Framework.

To apply the trend scoring methodology presented in the ACT Framework, the analyst should identify the trends from the existing data infrastructure based on the data points and/or indicators that can indicate the future direction of change within the company.

The table below includes an overview of which indicators/data points could possibly have valuable information about future directions.

Table 7: RELEVANT PERFORMANCE INDICATORS FOR TRENDS IDENTIFICATION

 

9. Aligned state

The table below presents the response of a low-carbon aligned company of the sector to the 5 questions of ACT:

  • What is the company planning to do? [Commitment]
  • How is the company planning to get there? [Transition Plan]
  • What is the company doing at present? [Present]
  • What has the company done in the recent past? [Legacy]
  • How do all of these plans and actions fit together? [Consistency]

 

Figure 33: Aligned state for companies

 

 

10. Glossary

2 degrees (2°C) A political agreement was reached at COP21 on limiting global warming to 2°C above the pre-industrial level (COP21: Why 2°C?). A 2°C scenario (or 2°C pathway) is a scenario (or pathway) compatible with limiting global warming to 2°C above the pre-industrial level.
ACT The Assessing low-Carbon Transition (ACT) initiative was jointly developed by ADEME and CDP. ACT assesses how ready an organization is to transition to a low-carbon world using a future-oriented, sector-specific methodology (ACT website).
Action gap In relation to emissions performance and reduction, the action gap is the difference between what a given company has done in the past plus what it is doing now, and what has to be done. For example, companies with large action gaps have done relatively little in the past, and their current actions point to continuation of past practices.
Activity data Activity data are defined as data on the magnitude of human activity resulting in emissions or removals taking place during a given period of time (UNFCCC definitions).
ADEME Agence de la Transition Ecologique; The French Agency for Ecological Transition (ADEME webpage).
Alignment The ACT project seeks to gather information that will be consolidated into a rating that is intended to provide a general metric of the 2-degree alignment of a given company. The wider goal is to provide companies specific feedback on their general alignment with 2-degrees in the short and long term.
Analyst Person in charge of the ACT assessment.
Assess Under the ACT project, to evaluate and determine the low-carbon alignment of a given company. The ACT assessment and rating will be based on consideration of a range of indicators. Indicators may be reported directly from companies. Indicators may also be calculated, modelled or otherwise derived from different data sources supplied by the company. The ACT project will measure 3 gaps (Commitment, Horizon and Action gaps – defined in this glossary) in the GHG emissions performance of companies. This model closely follows the assessment framework presented above. It starts with the future, with the goals companies want to achieve, followed by their plans, current actions and past actions.
Asset An item of property owned by a company, regarded as having value and available to meet debts, commitments, or legacies. Tangible assets include 1) fixed assets, such as machinery and buildings, and 2) current assets, such as inventory. Intangible assets are nonphysical such as patents, trademarks, copyrights, goodwill and brand value.
AL Abbreviation of the ‘Aluminium’ sector
Base year According to the GHG Protocol and ISO14064-1, a base year is “a historic datum (a specific year or an average over multiple years) against which a company’s emissions are tracked over time”. Setting a base year is an essential GHG accounting step that a company must take to be able to observe trends in its emissions information (GHG Protocol Corporate Standard).
Benchmark A standard, pathway or point of reference against which things may be compared. In the case of pathways for sector methodologies, a sector benchmark is a low-carbon pathway for the sector average value of the emissions intensity indicator(s) driving the sector performance. A company’s benchmark is a pathway for the company value of the same indicator(s) that starts at the company performance for the reporting year and converges towards the sector benchmark in 2050, based on a principle of convergence or contraction of emissions intensity.
Board Also the “Board of Directors” or “Executive Board”; the group of persons appointed with joint responsibility for directing and overseeing the affairs of a company.
Business model A plan for the successful operation of a business, identifying sources of revenue, the intended client base, products, and details of financing. Under ACT, evidence of the business model shall be taken from a range of specific financial metrics relevant to the sector and a conclusion made on its alignment with low-carbon transition and consistency with the other performance indicators reported.
Business-as-usual No proactive action taken for change. In the context of the ACT methodology, the business-as-usual pathway is constant from the initial year onwards. In general, the initial year – which is the first year of the pathway/series – is the reporting year (targets indicators) or the reporting year minus 5 years (performance indicators).
Capital expenditure Money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.
Carbon Capture and Storage (CCS) The process of trapping carbon dioxide produced by burning fossil fuels or other chemical or biological process and storing it in such a way that it is unable to affect the atmosphere.
Carbon offsets Carbon offsets are avoidance of GHG emissions or GHG suppressions made by a company, sector or economy to compensate for emissions made elsewhere in the economy, where the marginal cost of decarbonization proves to be lower.
CDP Formerly the "Carbon Disclosure Project", CDP is an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. CDP works with market forces, including 827 institutional investors with assets of over US$100 trillion, to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them. More than 5,500 companies worldwide disclosed environmental information through CDP in 2015. CDP now holds the largest collection globally of primary climate change, water and forest risk commodities information and puts these insights at the heart of strategic business, investment and policy decisions (CDP website).
Climate change A change in climate, attributed directly or indirectly to human activity, that alters the composition of the global atmosphere and that is, in addition to natural climate variability, observed over comparable time periods (UNFCCC).
Commitment gap In relation to emissions performance, the difference between what a company needs to do and what it says it will do.
Company A commercial business.
Company pathway A company’s past emissions intensity performance pathway up until the present.
Company target pathway The emissions intensity performance pathway that the company has committed to follow from the initial year on until a future year, for which it has set a performance target.
Confidential information Any non-public information pertaining to a company's business.
Conservativeness A principle of the ACT project; whenever the use of assumptions is required, the assumption shall err on the side of achieving 2-degrees maximum.
Consistency A principle of the ACT project; whenever time series data is used, it should be comparable over time. In addition to internal consistency of the indicators reported by the company, data reported against indicators shall be consistent with other information about the company and its business model and strategy found elsewhere. The analyst shall consider specific, pre-determined pairs of data points and check that these give a consistent measure of performance when measured together.
Conventional (technology) In relation to automobiles and emissions, conventional internal combustion engines (ICE) are those that generate motive power by burning fossil fuels, as opposed to advanced (low-carbon) vehicle engines such as battery electric vehicles or hydrogen fuel cells.
COP21 The 2015 United Nations Climate Change Conference, held in Paris, France from 30 November to 12 December 2015 (COP21 webpage).
Data Facts and statistics collected together for reference and analysis (e.g. the data points requested from companies for assessment under the ACT project indicators).
Decarbonization A complete or near-complete reduction of greenhouse gas emissions over time (e.g. decarbonization in the electric utilities sector by an increased share of low-carbon power generation sources, as well as emissions mitigating technologies like Carbon Capture and Storage (CCS)).
Emissions The GHG Protocol defines direct GHG emissions as emissions from sources that are owned or controlled by the reporting entity, and indirect GHG emissions as emissions that are a consequence of the activities of the reporting entity, but occur at sources owned or controlled by another entity (GHG Protocol).
Energy Power derived from the utilization of physical or chemical resources, especially to provide light and heat or to work machines.
Fossil fuel A natural fuel such as coal, oil or gas, formed in the geological past from the remains of living organisms.
Future A period of time following the current moment; time regarded as still to come.
Greenhouse gas (GHG) Greenhouse gas (e.g. carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and three groups of fluorinated gases (sulfur hexafluoride (SF6), hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs)) which are the major anthropogenic GHGs and are regulated under the Kyoto Protocol. Nitrogen trifluoride (NF3) is now considered a potent contributor to climate change and is therefore mandated to be included in national inventories under the United Nations Framework Convention on Climate Change (UNFCCC).
Guidance Documentation defining standards or expectations that are part of a rule or requirement (e.g. CDP reporting guidance for companies).
Horizon Gap In relation to emissions performance, the difference between the average lifetime of a company’s production assets (particularly carbon intensive) and the time-horizon of its commitments. Companies with large asset-lives and small-time horizons do not look far enough into the future to properly consider a transition plan.
IAI International Aluminium Institute
Incentive A thing, for example money, that motivates or encourages someone to do something (e.g. a monetary incentive for company board members to set emissions reduction targets).
Indicator

An indicator is a quantitative or qualitative piece of information that, in the context of the ACT project, can provide insight on a company’s current and future ability to reduce its carbon intensity. In the ACT project, 3 fundamental types of indicators can be considered:

Key performance indicators (KPIs);

Key narrative indicators (KNIs); and

Key asset indicators (KAIs).

Intensity (emissions) The average emissions rate of a given pollutant from a given source relative to the intensity of a specific activity; for example, grams of carbon dioxide released per MWh of energy produced by a power plant.
Intervention Methods available to companies to influence and manage emissions in their value chain, both upstream and downstream, which are out of their direct control (e.g. a retail company may use consumer education as an intervention to influence consumer product choices in a way that reduces emissions from the use of sold products).
Lifetime The duration of a thing's existence or usefulness (e.g. a physical asset such as a power plant).
Long-term Occurring over or relating to a long period of time; under ACT this is taken to mean until the year 2050. The ACT project seeks to enable the evaluation of the long-term performance of a given company while simultaneously providing insights into short- and medium-term outcomes in alignment with the long-term.
Low-carbon benchmark pathway Benchmark pathway (See ‘Benchmark’)
Low-carbon scenario (or pathway) A low-carbon scenario (or pathway) is a 2°C scenario, a well-below 2°C scenario or a scenario with higher decarbonization ambition.
Low-carbon solution A low-carbon solution (e.g. energy, technology, process, product, service, etc.) is a solution whose development will contribute to the low-carbon transition.
Low-carbon transition The low-carbon transition is the transition of the economy according to a low-carbon scenario.
Manufacture Making objects on a large-scale using machinery.
Maturity matrix A maturity matrix is essentially a “checklist”, the purpose of which is to evaluate how well advanced a particular process, program or technology is according to specific definitions.
Maturity progression An analysis tool used in the ACT project that allows both the maturity and development over time to be considered with regards to how effective or advanced a particular intervention is.
Mitigation (emissions) The action of reducing the severity of something (e.g. climate change mitigation through absolute GHG emissions reductions)
Model A program designed to simulate what might or what did happen in a situation (e.g. climate models are systems of differential equations based on the basic laws of physics, fluid motion, and chemistry that are applied through a 3-dimensional grid simulation of the planet Earth).
Pathway (emissions) A way of achieving a specified result; a course of action (e.g. an emissions reduction pathway).
Performance Measurement of outcomes and results.
Plan A detailed proposal for doing or achieving something.
Point A mark or unit of scoring awarded for success or performance.
Power Energy that is produced by mechanical, electrical, or other means and used to operate a device (e.g. electrical energy supplied to an area, building, etc.).
Power generation The process of generating electric power from other sources of primary energy.
Primary energy Primary energy is an energy form found in nature that has not been subjected to any conversion or transformation process. It is energy contained in raw fuels, and other forms of energy received as input to a system. Primary energy can be non-renewable or renewable.
Progress ratio An indicator of target progress, calculated by normalizing the target time percentage completeness by the target emissions or renewable energy percentage completeness.
Relevant / Relevance In relation to information, the most relevant information (core business and stakeholders) to assess low-carbon transition.
Renewable energy Energy from a source that is not depleted when used, such as wind or solar power.
Reporting year Year under consideration.
Research and Development (R&D) A general term for activities in connection with innovation; in industry; for example, this could be considered work directed towards the innovation, introduction, and improvement of products and processes.
Scenario The Fifth Assessment Report (AR5) of the Intergovernmental Panel on Climate Change (IPCC) presents the results of an extensive climate modelling effort to make predictions of changes in the global climate based on a range of development/emissions scenarios. Regulation on climate change-related issues may present opportunities for your organization if it is better suited than its competitors to meet those regulations, or more able to help others to do so. Possible scenarios would include a company whose products already meet anticipated standards designed to curb emissions, those whose products will enable its clients to meet mandatory requirements or those companies that provide services assisting others in meeting regulatory requirements.
Scenario analysis A process of analysing possible future events by considering alternative possible outcomes.
Science-Based Target To meet the challenges that climate change presents, the world’s leading climate scientists and governments agree that it is essential to limit the increase in the global average temperature at below 2°C. Companies making this commitment will be working toward this goal by agreeing to set an emissions reduction target that is aligned with climate science and meets the requirements of the Science-Based Targets Initiative.
Sectoral Decarbonization Approach (SDA)

The Sectoral Decarbonization Approach (SDA) is a scientifi cally-informed method for companies to set GHG reduction targets necessary to stay within a 2°C temperature rise above preindustrial levels.

The method is based on the 2°C scenario, one of the International Energy Agency’s detailed CO2 sector scenarios modeled in their 2014 Energy Technology Perspectives report. The Energy Technology Perspectives report’s budget is consistent with the representative concentration pathway 2.6 (RCP2.6) scenario from the IPCC’s Fifth Assessment Report, which gives the highest likelihood of staying within the global target temperature of less than 2°C in the year 2100. The probability is estimated by the IPCC at a minimum of 66 percent. The IEA 2°C scenario estimates an overall carbon budget of 1,055 GtCO2 up to 2050.

The SDA is differentiated from other existing methods by virtue of its subsector-level approach and global least cost mitigation perspective. SDA results and assumptions are based on mitigation potential and cost data from the IEA’s TIMES model 2ºC scenario, which identifies the least-cost technology mix available to meet final demand for industry, transport, and buildings services. The SDA is intended to help companies in homogenous, energy intensive sectors align their emissions reduction targets with a global 2ºC pathway. The SDA is best suited for companies in the following subsectors with well-defi ned activity and physical intensity data: electricity generation; iron and steel; chemicals; aluminium; cement; pulp and paper; road, rail, and air transport; and commercial buildings.

Scope 1 emissions

Direct GHG emissions and removals

All direct GHG emissions (GHG Protocol Corporate Standard).

Category 1 from ISO 14064-1:2018: Direct GHG emissions and removals occur from GHG sources or sinks inside organizational boundaries and that are owned or controlled by the [reporting] organization. Those sources can be stationary (e.g. heaters,electricity generators, industrial process) or mobile (e.g. vehicles).

Scope 2 emissions

Indirect GHG emissions from imported energy

Indirect GHG emissions from consumption of purchased electricity, heat or steam (GHG Protocol Corporate Standard).

Category 2 from ISO 14064-1:2018: GHG emissions due to the fuel combustion associated with the production of final energy and utilities, such as electricity, heat, steam, cooling and compressed air [imported by the reported company]. It excludes all upstream emissions (from cradle to power plant gate) associated with fuel, emissions due to the construction of the power plant, and emissions allocated to transport and distribution losses.

Scope 3 emissions

Indirect GHG emissions

Other indirect emissions, such as the extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the reporting entity, electricity-related activities (e.g. T&D losses) not covered in Scope 2, outsourced activities, waste disposal, etc. (GHG Protocol Corporate Standard). Scope 3 also encompass the emissions related to the use of sold-products.

ISO 14064-1:2018: GHG emission that is a consequence of an organization’s operations and activities, but that arises from GHG sources that are not owned or controlled by the [reporting] organization. These emissions occur generally in the upstream and/or downstream chain.

Category 3 : indirect GHG emissions from transportation

Category 4: Indirect GHG emissions from products used by an organization

Category 5: Indirect GHG emissions associated with the use of products from

the organization

Category 6: Indirect GHG emissions from other sources

Sector A classification of companies with similar business activities, e.g. automotive manufacturers, power producers, retailers, etc.
Sectoral Decarbonization Approach (SDA) To help businesses set targets compatible with 2-degree climate change scenarios, the Sectoral Decarbonization Approach (SDA) was developed. The SDA takes a sector-level approach and employs scientific insight to determine the least-cost pathways of mitigation, and converges all companies in a sector towards a shared emissions target in 2050.
Short-term Occurring in or relating to a relatively short period of time in the future.
Strategy A plan of action designed to achieve a long-term or overall aim. In business, this is the means by which a company sets out to achieve its desired objectives; long-term business planning.
Stress test A test designed to assess how well a system functions when subjected to greater than normal amounts of stress or pressure (e.g. a financial stress test to see if an oil & gas company can withstand a low oil price).
Supplier A person or entity that is the source for goods or services (e.g. a company that provides engine components to an automotive manufacturing company).
Target

A quantifiable goal (e.g. to reduce GHG emissions).

The following are examples of absolute targets:

metric tonnes CO2e or % reduction from base year

metric tonnes CO2e or % reduction in product use phase relative to base year

metric tonnes CO2e or % reduction in supply chain relative to base year

The following are examples of intensity targets:

metric tonnes CO2e or % reduction per passenger. Kilometre (also per km; per nautical mile) relative to base year

metric tonnes CO2e or % reduction per square foot relative to base

metric tonnes CO2e or % reduction per MWh

Technology The application of scientific knowledge for practical purposes, especially in industry (e.g. low-carbon power generation technologies such as wind and solar power, in the electric power generation sector).
Trade association Trade associations (sometimes also referred to as industry associations) are an association of people or companies in a particular business or trade, organized to promote their common interests. Their relevance in this context is that they present an “industry voice” to governments to influence their policy development. The majority of organizations are members of multiple trade associations, many of which take a position on climate change and actively engage with policymakers on the development of policy and legislation on behalf of their members. It is acknowledged that in many cases companies are passive members of trade associations and therefore do not actively take part in their work on climate change (CDP climate change guidance).
Transition The process or a period of changing from one state or condition to another (e.g. from an economic system and society largely dependent on fossil fuel-based energy, to one that depends only on low-carbon energy).
Transport To take or carry (people or goods) from one place to another by means of a vehicle, aircraft, or ship.
Trend A general direction in which something (e.g., GHG emissions) is developing or changing.
Verifiable / Verifiability To prove the truth of, as by evidence or testimony; confirm; substantiate. Under the ACT project, the data required for the assessment shall be verified or verifiable.
Weighting The allowance or adjustment made in order to take account of special circumstances or compensate for a distorting factor.

 

11. Bibliography

 

[1] ACT Initiative, «ACT Framework, version 1.1,» 2019.

[2] Maan_aluminium, «Aluminium: the green metal,» [En ligne]. Available: http://www.maanaluminium.com/#:~:text=Aluminium%20is%20the%20second%20most%20widely%20used%20metal,conductivity.%20Aluminium%20is%20also%20very%20easy%20to%20recycle.

[3] International_Aluminium_Institute, ghg_emissions_aluminium_sector_21_july_2020_read_only_25_september_2020, 2020. 

[4] IEA, «IEA Report: Aluminium,» 2020.

[5] I. A. Institute, «Global metal flow,» [En ligne]. Available: https://recycling.world-aluminium.org/review/global-metal-flow/.

[6] WEF_Aluminium_for_Climate_2020, «World Economic Forum,» 2020.

[7] T. JRC_Institute_for_Energy_and_Transport, «Energy Efficiency and GHG Emissions: Prospective Scenarios for the Aluminium Industry,» 2015.

[8] International_Aluminium_Institute, «https://alucycle.world-aluminium.org/public-access/,» 2020. [En ligne].

[9] I. A. Institute, «Perfluorocarbon_pfc_emissions,» 2019. [En ligne]. Available: https://www.world-aluminium.org/statistics/perfluorocarbon-pfc-emissions/#bubble.

[10] European_aluminium, «European aluminium's contribution to the EU's mid-century low-carbon roadmap,» 2019.

[11] European_Aluminium, «Recycling aluminium: a pathway to a sustainable economy,» 2015.

[12] Science-Based-Target, «Understanding and Addressing the Barriers for Aluminium Companies to Set Science-Based Targets,» 2020

[13] IEA, «ETP (Energy Technology Perspectives),» 2020.[14] Bristish_Geological_Survey, «World bauxite output in 2005,» 2005.

[15] World_aluminium, 2020. [En ligne]. Available: https://www.world-aluminium.org/statistics/.

[16] Statista, 2020. [En ligne]. Available: https://www.statista.com/statistics/280920/largest-aluminum-companies-worldwide/.

[17] Eurostat, «Statistical Classification of Products by Activity in the European Community, 2008 version,» 2008. [En ligne]. Available: https://ec.europa.eu/eurostat/ramon/nomenclatures/index.cfm?TargetUrl=LST_NOM_DTL_LINEAR&StrNom=CPA_2008&StrLanguageCode=EN&IntCurrentPage=50.

[18] Thomasnet, «Types of aluminium,» [En ligne]. Available: https://www.thomasnet.com/articles/metals-metal-products/types-of-aluminum/.

[19] International_Aluminium_Institute, «Aluminium sector greenhouse gas pathways to 2050,» 2021.

[20] Joakim_Haraldsson&Maria_Therese_Johansson, «Impact analysis of energy efficiency measures in the electrolysis process in primary aluminium production,» 2018.

[21] International_Aluminium_Institute, «https://www.world-aluminium.org/media/filer_public/2018/11/22/carbon_footprint_technical_support_document_v1_published.pdf,» 2018.

[22] European_Commission, «Sector specific guidance,» 2011. [En ligne]. Available: https://ec.europa.eu/clima/sites/clima/files/ets/allowances/docs/gd9_sector_specific_guidance_en.pdf.

[23] European_Commission, «http://ec.europa.eu/finance/docs/level-2-measures/taxonomy-regulation-delegated-act-2021-2800-annex-1_en.pdf

[24] IAI&GHG_Protocol, «The aluminium sector greenhouse gas protocol,» 2006.

[25] IEA, «Material efficiency in clean energy transitions,» 2019.

[26] Jülich_German_Federal_Ministry_for_Economic_Affairs_and_Energy_(BMWi), «Increasing the efficiency of an aluminium melting furnace (ALSO 4.0),» 2019.

[27] European_Commission, «http://ec.europa.eu/finance/docs/level-2-measures/taxonomy-regulation-delegated-act-2021-2800-annex-1_en.pdf».

[28] E. TEG, "Taxonomy Report, Technical Annex: Updated methodology & Updated Technical Screening Criteria," 2020.

[29] IPCC, "Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change," Geneva, Switzerland, 2014.

[30] WRI, "Assessing physical risks from climate change: Do companies and financial organization have sufficient guidance ? - Working Paper," 2021.

[31] European Commission, DG Climate Action, «Guidance document n°9 on the harmonized free allocation methodology for the EU-ETS post 2012,» 2011.

[32] IAI, «Global aluminium cycle,» 2010.

[33] Cullen&Allwood, «Global aluminium flows,» 2011.

[34] European_aluminium, «An aluminium 2050 roadmap,» 2012.

[35] European_Commission, «Updated methodology & Updated Technical Screening Criteria, EU Technical expert group on sustainable finance, March 2020,» 2020.

[36] ACT Initiative, Guidance for ACT sectoral methodologies development, version 1.0, 2019. 

[37] 

[38] Science Based Targets Initiative, «Sectoral Decarbonization Approach (SDA): A method for setting corporate emissions reduction targets in line with climate science.,» 2015.

[39] IEA, «Energy Technology Pespectives 2020,» 2020.

 

11. Appendix

 

11.1 TWG members

This ACT methodology has been developed with inputs and feedbacks of the Technical Working Group, which met five times over the course of the development phase.

Table 8: List of TWG members

Organisation Name
ADEME Elliot MARI
Aluminium Dunkerque Amandine Chaillous
Aluminium Dunkerque Adrien Berthier
Aluminium Dunkerque Emilie Bridier-jacob
Aluminium France Extrusion Gilles Le Bouquin
Aluminium Stewardship Institute Chris Bayliss
Aughinish Alumina Stephan Beaulieu
AUREA - Affimet François China
BMO Global Asset Management Derek Ib
CANDRIAM Alix Chosson
Companhia Brasileira de Alumínio (CBA) Marina Westrupp Alacon Rayis
Constellium France Mickaël Faliu
Emirates Global Aluminium (EGA) Steven Bater
Emirates Global Aluminium (EGA) Mohammad Hassan Al Jaw
Hydro Extruded Solutions Jean-Marc Moulin
IEA Tiffany Vass
International Aluminium Institute Pernelle Nunez
International Aluminium Institute Marlen Bertram
Rocky Mountain Institute Marc Johnson
SNFA Simon Algis
Vedanta Resources Rohit Mukund Nanoty
WBA Charlotte Hugman
WBA Kaibin Tang

 

11.2 Companies involved in the roadtest

Table 9: List of companies involved in the roadtest

Companies
 
 
 

 

11.3 Low-carbon Technology landscape

GHG emissions in the aluminium sector are mainly occurring at two main steps:

  • Aluminium smelting during the electrolysis
    • Indirect emissions coming from the electricity consumption (main source of CO2e emissions of the whole aluminium value chain)
    • Direct emissions
  • Alumina extraction
    • Thermal energy (main source of CO2e emissions of the alumina extraction step of the value chain)
    • Calcination of calcium carbonate

Moreover, aluminium recycling is a main CO2e emissions reduction lever, especially as it requires around 5% of the energy consumption compared to the primary route [6].

Therefore, the main approaches for reducing GHG emissions in the aluminium sector are therefore:

  • Electricity decarbonization
  • Direct CO2e emissions reduction
  • Recycling & resource efficiency

Improving the energy efficiency of the processes could also be a CO2e emissions reduction lever, but its potential is more limited compared to the three CO2e emissions reduction levers indicated above.

 

11.3.1. Electricity decarbonization

There are two ways to address the decarbonization of the power supply:

  • Transition to renewable energy
  • Through self-generated electricity

By delocalizing to countries which electricity carbon intensity is low)

CCUS

Energy efficiency

The next figure from IAI highlights these levers [19].

 

Figure 34: Electricity decarbonization levers

 

The electrolysis process requires a great amount of electricity, and about 60% of the power consumed by the aluminium industry is self-generated and not purchased from the grid [4]. In the following figure, the power mix of the industry is highlighted. The coal power plants proportion is important in China (coal supplies 90% of the electricity production) while China is producing more and more aluminium [4].

 

Figure 35: Global aluminium industry power mix compared with the global total power mix, 2010 and 2018

 

CCUS can therefore plays a big role in terms of CO2e emissions reduction.

Moreover, for the 40% of power remaining that is not self-generated, the decarbonization of the power grid is an important emissions reductions lever. To that end, a lever could be to delocalize its smelting facilities where the national electricity carbon intensity is lower.

Moreover, the aluminium can play a role in providing flexibility to the power grid as aluminium smelters consume a great amount of electricity. This might be a key topic especially in a context of an increasing share of intermittent electricity production means (photovoltaic and wind turbines). A project in Essen, Germany, is based on virtual battery, which is a concept relying on installing adjustable heat exchangers to maintain the energy balance in each electrolytic cell irrespective of shifting power inputs [4]. The aluminium industry is not the only one that can provide flexibility to the power grid, and all industrial processes consuming electricity can play this role as well.

 

11.3.2. Direct CO2e emissions reduction

The two main sources of direct emissions are:

  • Fuel combustion to generate heat and/or steam to refine alumina. At the alumina extraction step of the value chain, thermal energy is used to heat furnaces to extract the alumina, or aluminium oxide, from the bauxite ore.
  • Direct emissions from the electrolysis of alumina that use a carbon anode when smelting. In 2018, anode consumption accounted for around 10% of sectoral emissions and fuel combustion accounted for 15–20% of sectoral emissions [6]. Although direct emissions are a proportionally smaller decarbonization opportunity area than power consumption, they are easier to address collectively as aluminium refining and smelting techniques are shared across the industry (e.g. Bayer process, Hall-Héroult process).

Several options exist to reduce the CO2e emissions of these two sources.

Concerning the thermal energy at the alumina extraction step, switching to technologies providing heat and steam without resorting to fossil fuels is the main option. Alternatives might be solar water heaters, biomass, geothermal, green hydrogen or concentrated solar power [6]. Some experiments are being held such as in Australia where the use of 30% of biomass has been successfully tested. Another project, also in Australia, is trying to obtain 50% of energy from concentrating solar power instead of from thermal energy [4]. Electrification could also be an interesting CO2e emissions reduction lever.

And concerning the direct emissions from anodes, inert anodes are a promising technological solution. Rio Tinto and Alcoa have created the joint-venture Elysis that aims at replacing the carbon-based anode by inert anode releasing only oxygen during the electrolysis [6]. It is important to notice that PFC emissions might have an important impact in the whole carbon footprint of aluminium production. UC Rusal is also developing inert anode technologies.

The figure below from IAI highlights these levers [19].

 

Figure 36: Direct CO2e emissions reduction levers

 

 

11.3.3. Recycling & resource efficiency

Processing scrap to produce aluminium is a major CO2e emissions reduction lever compared to producing aluminium from the primary production route. However, the scrap availability is limited. Hence, the main levers for recycling are the following:

  • Elimination of pre-consumer scrap generated during the processes
  • Elimination of all metal losses during casting and recycling
  • Ecodesign to facilitate the post-consumer scrap collection
  • End-of-life scrap collection technologies
  • Technologies to improve the quality of the scrap

The next figure from IAI highlights these levers [19].

 

Figure 37: Recycling and resource efficiency levers

 

Moreover, improving the material efficiency is one of the main leads to reduce the GHG emissions in the sector. This would mainly result in the decrease of global demand for aluminium all else being equal (but global demand is expected to grow at the same time), through 4 main levers, as presented in the next figure. This lever would require commitment of all the actors along the value chain, aluminium producers have only a limited action and should develop an alternative business model which does not rely on selling bigger and bigger amounts of products [25].

 

Figure 38: Material efficiency strategies across the value chain

 

Recycling and scrap recovery are a very effective lever to reduce the carbon footprint of the aluminium production. Indeed, the aluminium production from scrap requires just 5% of the total energy needed compared to the primary production route [6], hence an important reduction in terms of CO2e reduction. Aluminium has the particularity to be almost infinitively recyclable. The collection of scrap is already high (around 80% of scrap aluminium was collected in 2018), but there is a limited amount of scrap available, notably because aluminium products have a long lifetime (e.g. construction). This long lifetime of aluminium products implies the need for primary aluminium to meet the growing demand. Several challenges still remain to maximize the collection of aluminium scrap, such as improving separation techniques to decrease the mixing of alloys, developing circular business models with the whole aluminium ecosystem etc.

At last, the notion of “good scrap donor” which can be recycled into various alloy families or “good scrap acceptor" which can absorb various alloy families is interesting.

 

11.3.4. Energy efficiency

At each step of the aluminium value chain, energy is consumed, which leads to CO2e emissions. As a consequence, a non-negligible CO2e emissions reduction levers consists therefore in reducing the amount of energy consumed. However, incremental savings in energy efficiency will not have a big impact if electricity comes from fossil fuels. A great number of research papers and R&D projects carried out in order to develop new technologies or improve the current ones to reduce the energy consumption, and therefore reduce the carbon footprint when producing aluminium. These energy efficiency measures can take place at each step of the value chain.

Concerning the electrolysis step, several energy efficiency levers are available with different TRL. The electrolysis process is indeed the most energy-intensive process within the aluminium industry. The figure below shows the results of a research paper on different energy efficiency technologies to reduce the amount of electricity consumed during the electrolysis [20].

 

Figure 39: Potential savings in primary energy demand

 

Another research paper is working on a method to automatically determine the state of an aluminium melting furnace thanks to a 3D camera system. At present, the amount of molten aluminium is determined manually: at regular intervals, a worker opens the oven door and checks the state of the aluminium and a lot of heat is lost. The aim of the research project is to determine the state of the aluminium without opening the oven's door, which would significantly reduce the energy loss and contributes to increasing the energy efficiency of the cast aluminium industry [26].

 

11.4 Pedagogical graphs for indicators using trend ratio

 

Illustration of the different cases

Case 1

Figure 40: Trend ratio - case 1

 

 

Case 2

Figure 41: Trend Ratio - case 2

 

 

Case 3

Figure 42: Trend Ratio - case 3

 

 

Case 4

 

Figure 43: Trend Ratio - case 4