Electricity is everything. And CBAM covers Scope 2.
Approximately 80% of India’s aluminium embedded emissions come from captive coal power plants. CBAM covers both Scope 1 and Scope 2, making electricity source the decisive competitive variable. The €800–1,000/t CBAM cost gap between a coal smelter and a hydro smelter — on a product worth ~€2,200/t — makes structural change unavoidable.
Aluminium smelting runs almost entirely on electricity. That makes the sector’s carbon footprint almost entirely a function of where that electricity comes from. In India, most of it still comes from captive coal power plants — and that is the problem that CBAM and CCTS are now forcing the sector to confront simultaneously. Approximately 80 percent of India’s aluminium sector emissions originate not from the electrolysis process itself but from the coal burned to generate the power that drives it. The CBAM update that expanded coverage to Scope 2 indirect electricity emissions has made this exposure financially live.
The decarbonisation case for Indian aluminium is structurally cleaner than for steel or fertilisers. There is no technology uncertainty about the pathway — renewable electricity replaces coal power, and emission intensity falls proportionally. The challenge is execution: open access procurement barriers, cross-subsidy surcharge variation across Odisha, Chhattisgarh, and other smelter states, stranded coal CPP asset exposure, and the capital cost of transitioning multi-gigawatt captive power complexes that are deeply integrated into smelter operations. The CCTS GEI targets — plant-level, from the Official Gazette — have put a financial clock on this transition that did not exist before FY2025-26.
See the Industrial Decarbonisation Policy Map for a full view of how these regulations interact. For India’s NDC targets and climate commitments, see the India Decarbonisation page. To compare aluminium with the other four covered sectors, visit the Sectors overview.
Aluminium producers face energy, carbon, and environmental obligations alongside CBAM trade pressure — and CCTS GEI targets that are plant-specific, legally binding, and already in their first compliance year.
EU Carbon Border Adjustment Mechanism — Scope 1 and Scope 2
India exports approximately 0.7 MMTPA of aluminium to Europe. CBAM now covers both direct process emissions and indirect electricity emissions, making the coal CPP dependency a live financial exposure for every exporting smelter. The CBAM benchmark of 1.55 tCO₂/t for electrolysis means coal-dependent Indian producers face a cost gap of €800 to 1,000 per tonne against hydro-powered competitors. This gap is structural — it cannot be reduced without changing the electricity source, not just the electrolysis process.
Read our CBAM aluminium Scope 2 analysis →CCTS GEI Targets — Plant-Level from the Official Gazette
GEI targets for all primary aluminium smelters were notified in the Official Gazette in April 2025 (first batch). Vedanta Jharsuguda Smelter II: 13.49 → 12.83 tCO₂e/t. BALCO Korba: 15.71 → 14.81. Mahan Aluminium: 15.63 → 14.74. NALCO Angul: 17.35 → 16.25. Hindalco Renukoot: 20.55 → 19.36. Plants that outperform earn CCCs to sell at Rs 1,740/tCO₂e on IEX; those that miss must buy at the same price or face a penalty at 2× the average CCC price.
Read the CCTS aluminium compliance strategy →Open Access and Renewable Consumption Obligation
The Green Energy Open Access Rules 2022 and the ISTS waiver create the policy conditions for aluminium producers to procure renewable electricity cost-effectively across state borders. Odisha’s 50 percent cross-subsidy surcharge exemption for renewable open access makes solar cost-competitive with coal CPP in the state today — delivering CCTS, CBAM, and electricity cost benefits simultaneously. The Renewable Consumption Obligation requires growing non-fossil energy shares from designated consumers under the Energy Conservation Act.
Read the open access renewable analysis →Air Act, EIA Notification and State Regulations
Aluminium smelters and associated refineries are subject to stack emission standards under the Air Act and effluent discharge limits under the Water Act, administered by State Pollution Control Boards. New smelter capacity and refinery expansions require environmental clearance under the EIA Notification from MoEFCC. For producers in Odisha and Chhattisgarh — where most of India’s primary smelting capacity is concentrated — state-level environmental regulations add an additional layer of compliance planning that is material to expansion and transition timelines.
Environmental Regulations repository →Unlike steel, aluminium’s pathway is clear — it is execution, not technology, that determines the timeline
The aluminium sector has a relatively clear decarbonisation pathway: switch from coal-based captive power to renewable electricity through open access procurement, captive generation, or a combination of both. The question is not which technology, but how fast, at what cost, and with what stranded asset exposure. CCTS GEI targets have added a compliance deadline to a transition that was previously driven only by long-term competitive positioning.
Open Access RE
Captive RE + Storage
Nuclear and CCUS
Aluminium’s decarbonisation connects directly to power market dynamics, the carbon credit market, and freight logistics through the DFC network.