Decarbonising the aluminium sector in India: implications of the Carbon Credit Trading Scheme

Few industrial materials are as crucial to the low-carbon transition in India as aluminium, which is essential in the manufacture of solar panels, and electric vehicle battery housings and transmission cables. But producing primary aluminium creates emissions of around 18–24 tonnes of carbon dioxide-equivalent (tCO₂e) in India, making it one of the most emission-intensive industrial processes in the world.

The Indian Carbon Credit Trading Scheme (CCTS) aims to support the country’s climate commitments with a focus on decarbonising hard-to-abate sectors, including aluminium. This policy brief explores the reasons for the high emissions intensity of Indian aluminium, and the role of the CCTS in decarbonising the sector. It makes recommendations for ensuring that the CCTS delivers meaningful decarbonisation.

Main messages

• The Indian Carbon Credit Trading Scheme (CCTS) is a welcome first step towards decarbonising India’s aluminium sector, but it currently functions more as a baseline-setting exercise than a transformative decarbonisation instrument. While it establishes a vital regulatory framework for greenhouse gas intensity targets, the initial targets for aluminium smelters are modest and reflect incremental operational gains, rather than structural shifts.
• Delays in notifying aluminium smelters with their targets and subsequent pro-rata reductions have led to missed opportunities to cut emissions. In the first four sectors notified of their targets under the CCTS, which include primary aluminium, the delays resulted in a lost opportunity.
• A challenge for the CCTS is that it must address two distinct decarbonisation challenges in the aluminium sector within a single framework. Smelting emissions are structurally tied to power supply, while emissions from alumina refineries and secondary/downstream producers are largely thermal-based and could be reduced by adopting established technologies.
• Meaningful decarbonisation requires future CCTS targets, which are set to be more ambitious. Future targets need to signal structural transformation that moves beyond incremental efficiency towards deeper decarbonisation, especially of the power supply for smelters and the adoption of other key technologies.
• India must implement complementary policies which facilitate increased access to renewable energy and support breakthrough technologies. Critical needs include reforms to improve access to reliable and cost-competitive renewable power, incentives for fuel switching in refineries and support for the adoption of inert anodes.
• Strengthening the domestic scrap ecosystem is vital for expanding low-carbon secondary aluminium production. Recycled aluminium requires around 95% less energy than primary aluminium production. India needs stronger domestic scrap collection, segregation and quality standards to reduce its reliance on imported scrap, increase recycled aluminium production and lower sectoral emissions.

DOI: 10.21953/researchonline.lse.ac.uk.00140335