The policies of the European Union are central to Hydro’s mission to deliver low-carbon aluminium and support a strong, competitive industrial base in Europe.
Hydro is committed to collaborating with the EU institutions, the Member States, and stakeholders across the European Economic Area to shape smart, effective policies that advance Europe’s green transition and strategic autonomy on raw materials.
With a permanent office in Brussels, Hydro maintains a continuous presence at the heart of the European Union’s decision-making. From here, the company is an active and constructive voice in the EU on a wide range of policy issues such as climate, energy, international trade, the circular economy, and industrial competitiveness.
Hydro engages directly with the relevant European institutions and through association platforms such as European Aluminium, Eurometaux, CCS Europe, the European Round Table for Industry, and the European Round Table on Climate Change and Sustainable Transition.
Climate Action for a strong European aluminium industry
Hydro aims to reach net-zero carbon emissions by 2050 or earlier. Hydro supports the European Green Deal as the foundation for Europe’s green and industrial transformation. The company is cutting emissions with technologies that work in real-world production, and today, around 95% of our European operations are already powered by renewable energy.
Aluminium is essential for Europe’s green transition. From solar panels to electric vehicles, it enables the shift to a low-carbon economy. European producers already deliver aluminium with a significantly lower CO₂ footprint than many international competitors. Yet, more than 54% of Europe’s aluminium demand is met by imports.
At the same time, high energy and carbon costs have forced the shutdown of half of the EU’s primary aluminium capacity. This trend increases Europe’s vulnerability to supply disruptions and undermines its strategic autonomy.
To achieve the ambitions of the Clean Industrial Deal, policy must strike the right balance between climate ambition and fairness, taking into account the ability of each sector to decarbonize by 2050. This is particularly critical for energy-intensive industries like aluminium, where the risk of carbon leakage is among the highest.
Our priorities
The Carbon Border Adjustment Mechanism (CBAM) was designed to protect industry against carbon leakage while the EU increases its ambitions on climate policies.
Hydro supports CBAM if it can deliver on that promise and drive real decarbonization. But in its current form, CBAM risks harming Europe’s aluminium industry instead of supporting it and realizing its decarbonization objective.
Two fixes are critical to make it work for aluminium:
1. Close the scrap loophole
Right now, imported aluminium made from re-melted scrap is counted as having zero emissions, no matter how it was produced. This means up to half of all aluminium imports could avoid CBAM.
On the other hand, European aluminium recyclers would still face the full CO2 costs of the EU ETS through the price of both primary aluminium and aluminium scrap.
By 2035, this dynamic could create a cost disadvantage for European recyclers of more than 10% compared to imported, recycled products. It could lead to the closure of more than one third of all aluminium recyclers in Europe.
2. Exclude indirect (scope 2) emissions
Counting electricity-related CO2 emissions under CBAM would create an unlevelled playing field for European producers. It should be introduced only when the EU electricity grid is close to complete decarbonization. The reason is that the price of all electricity in the EU/EEA remains tied to the cost of fossil fuels, even renewables-based electricity.
With CBAM, imported aluminium could, on the other hand, completely avoid this cost by claiming to have consumed renewable electricity. CBAM would therefore offer foreign producers an advantage that European producers would not have.
Policy should instead focus on reducing Europe’s structural energy price gap. In this respect, the EU ETS Indirect Carbon cost Compensation (ICC) system remains a far more efficient tool to ensure that renewables-based aluminium in Europe competes on equal terms with global peers.
More about our CBAM position:
- Europe’s low-carbon aluminium is threatened by a big loophole
- The cost of getting CBAM wrong for aluminium
- CBAM – a threat to European competitiveness?
Aluminium is essential for greener technologies, but keeping production in Europe requires an EU Emissions Trading System (ETS) that balances climate ambition with industrial competitiveness.
Hydro supports the EU’s climate neutrality goal and is investing in renewables, breakthrough technologies, and CCS. Since aluminium off-gases have low CO2 concentrations, new capture methods are needed; even then, CCS will only achieve 80–90% capture, and residual emissions will remain across sectors.
Designing the ETS around a near-zero cap by 2040 without necessary compliance flexibility would go beyond what is technically and economically feasible for industrial decarbonization. For aluminium, this risks further closures, undermining the Clean Industrial Deal and Europe’s strategic autonomy.
Enhanced compliance flexibility is essential, including:
- Addressing the estimated €500 billion decarbonization investment shortfall for energy-intensive industries between 2025 and 2040, as identified in the Draghi Report on EU Competitiveness
- Integrating permanent carbon removals
- Allowing high-quality international carbon credits (ETS Directive Article 6.4)
- Reforming the Market Stability Reserve
- Aligning ETS with realistic carbon abatement pathways
Finally, Indirect Carbon Cost Compensation (ICC) remains vital to offset higher power prices from the carbon costs of fossil electricity production. Weakening ICC would penalize producers investing in renewables and accelerate carbon leakage.
Carbon Capture and Storage (CCS) and Carbon Direct Removals (CDR) will be essential for the aluminium industry to reach net-zero emissions. Hydro is developing sector-specific CCS solutions since conventional CCS is not viable for low-concentration smelting emissions. An industrial scale pilot is targeted for 2030 at the earliest.
Technologies like Direct Air Carbon Capture and Storage (DACCS), Bioenergy with Carbon Capture and Storage (BECCS), and biochar can deliver permanent removals if securely stored, and such credits should count toward ETS compliance. Yet their availability will remain limited without dedicated financial support.
To bridge this gap, high-quality international carbon removals under the ETS Directive Article 6.4 must be integrated into the ETS to cover residual emissions.
For removals to be effective:
- They must count toward ETS compliance from 2028 at the latest
- Eligibility should be open to all installations
- Clear rules and funding are needed to create a viable business case
At Hydro, over 75% of our aluminium production already runs on renewable electricity, and the company is accelerating its share of renewables through new projects and long-term contracts. But Hydro cannot reach net zero by itself.
The green transition requires abundant, affordable clean energy. For energy-intensive industries, this is essential, not optional. That is why Hydro supports:
- Physically traceable consumption of renewable electricity in our products
- Long-term Power Purchase Agreements (PPAs) for stable, clean supply
- Continued ETS indirect CO2 cost compensation to remain competitive
EU energy policy must close the price gap with other regions and address Europe’s structural energy deficit through massive expansion in renewable electricity production and cost-effective electricity grids.
Policies must:
- Ensure access to cost-efficient renewables through better market design, faster permitting, and investment incentives
- Avoid support systems that disincentivize PPAs
- Distribute infrastructure costs fairly
- Incentivize flexibility without penalizing baseload demand
Closer cooperation between industry and system operators will be key.
At Hydro, transparency is essential to build trust and drive the shift to a low-carbon, circular economy. As demand for critical materials grows, so does the responsibility to reduce their environmental and social footprint. Acknowledging challenges openly is the first step to transforming how aluminium is produced and sourced. That’s why Hydro actively collaborates with EU policymakers to shape legislation on due diligence and responsible sourcing, ensuring that strong environmental and social standards are upheld.
Customers increasingly demand low-footprint aluminium with a credible path to net zero. Hydro delivers certified products like Hydro REDUXA and Hydro CIRCAL, made with renewable power and high recycled content, including at least 75% post-consumer scrap in Hydro CIRCAL.
Not all recycling is equal: Pre-consumer scrap is clean, sorted leftovers from manufacturing, which has never been used in a product and retains the carbon footprint of its original production. Post-consumer scrap, by contrast, comes from products that have reached the end of their life, and it starts a new lifecycle with a significantly lower footprint. Treating both types of scrap as equal in recycled content targets risks misleading consumers, inflating scrap prices, and undermining industrial efficiency.
Policy should:
- Recognize the difference between scrap types to ensure credible carbon accounting, avoid greenwashing, and build a true circular economy
- Prioritize end-of-life recycling in the forthcoming Circular Economy Act
- Support markets for low-carbon products through Green Public Procurement, harmonized standards, and transparent labelling, making sustainability claims credible, comparable, on both carbon and wider social and environmental impact
Hydro supports a global trade system based on fairness and respect of international trade rules. Aluminium is a globally traded material and a key enabler of Europe’s green and digital transitions. The company is in favor of balanced free trade agreements reached by the main regions where Hydro is present.
We stand against unfair trade practices and one-sided measures that tilt the global playing field. We take our responsibilities seriously. We assess environmental risks and carry out human rights' due diligence across our value chain. We are committed to promoting the principles of the Universal Declaration of Human Rights, UN Global Compact and IFC, among others, to our suppliers.
Updated: October 13, 2025
