Client Context

The client is a mid-size primary aluminium smelter based in eastern India with an installed capacity of approximately 300,000 tonnes per annum (300 KTPA) of primary aluminium. The production process follows the standard Hall-Heroult electrolytic smelting route, fed by an integrated alumina refinery processing domestically sourced bauxite. The facility’s electricity supply is predominantly from a captive coal-fired thermal power plant (1,200 MW installed capacity), with a small and growing share — approximately 8% in FY 2025–26 — from a captive solar installation commissioned in 2024.

The client exports approximately 40% of its primary aluminium production to European markets, primarily as unwrought aluminium (ingots, billets, and slabs) and aluminium extrusions. These product categories fall squarely within the scope of the EU’s Carbon Border Adjustment Mechanism (CBAM), which entered its definitive phase on 1 January 2026.

The company files BRSR reports and participates in the PAT Scheme but had not previously quantified emissions at the installation level using EU-compatible methodologies. Its sustainability reporting was adequate for Indian regulatory requirements but insufficient for the granularity demanded by CBAM’s Implementing Regulation.

The Challenge

In Q4 2025, the client’s largest EU importer — a major European metals distributor accounting for approximately 35% of the client’s EU-bound exports — formally requested installation-level embedded emissions data for inclusion in its CBAM quarterly declarations. The importer specified that the data must comply with the EU CBAM Implementing Regulation (Commission Implementing Regulation 2023/1773, as amended) and indicated that failure to provide compliant data would result in the importer applying EU default values for the next quarterly declaration.

The financial stakes were substantial. The EU’s default values for primary aluminium from India are calculated based on the emission intensity of the worst-performing 10% of global installations, augmented by a carbon intensity mark-up for indirect emissions based on coal-dominant grid assumptions. For Indian primary aluminium, the EU default embedded emissions are approximately 16.5 tCO2e per tonne of aluminium — a figure that reflects the global worst case rather than the client’s actual performance.

At the prevailing EU ETS allowance price of approximately EUR 68 per tCO2e, the difference between actual and default values represents a significant financial exposure. The client needed to determine its actual embedded emissions per EU methodology and, if lower than defaults, establish a compliant reporting pathway to protect its export margins.

Three specific technical challenges complicated the assessment:

1. Complex emission profile. Primary aluminium production generates emissions from multiple sources: direct process emissions from electrolytic reduction (perfluorocarbons — PFC — and CO2 from anode consumption), combustion emissions from the anode baking furnace, indirect emissions from captive coal-fired power generation, and upstream emissions from alumina refining. Each requires a distinct quantification methodology under CBAM rules.
2. Precursor allocation. Under CBAM’s complex goods methodology, the embedded emissions of aluminium must include emissions attributable to the alumina precursor. Since the client operates an integrated refinery-smelter complex, the allocation of refinery emissions to the smelter’s output required careful application of CBAM’s production process rules.
3. Indirect emissions methodology. CBAM requires indirect (electricity-related) emissions to be reported using the actual emission factor of the electricity source. For captive coal-fired power, this means calculating the specific emission factor (tCO2/MWh) of the client’s captive plant — not a grid average — based on actual fuel consumption, heat rate, and net generation data.

Our Approach

RSustain deployed a specialist team of three consultants over 10 weeks to conduct a comprehensive CBAM emissions assessment. The engagement was structured to produce EU-compliant embedded emissions data while simultaneously building the client’s internal capability for ongoing quarterly reporting.

Phase 1: Methodology Mapping and Boundary Definition (Weeks 1–2)

We began by mapping the client’s production process against the CBAM product categories and production process definitions in Annex II of the Implementing Regulation. The client’s product portfolio was classified into two CBAM categories: unwrought aluminium (CN code 7601) and aluminium extrusions (CN code 7604). For each category, we defined the system boundary encompassing all direct and indirect emission sources, including the alumina refining precursor.

We reconciled the EU CBAM methodology with the client’s existing data systems, identifying where data was already available in adequate form, where data existed but required transformation, and where new data collection was necessary.

Phase 2: Emissions Quantification (Weeks 3–7)

Emissions were quantified across four categories:

Direct process emissions (Scope 1 — smelter): CO2 from anode consumption was calculated using the mass balance approach, based on net anode consumption rates, anode carbon content (measured by proximate analysis), and current efficiency. PFC emissions (CF4 and C2F6) were quantified using the slope method (Tier 2) based on anode effect frequency and duration data from the pot line control system. The client’s modern pre-bake technology and automated pot control resulted in relatively low PFC emissions — 0.08 tCO2e per tonne of aluminium — compared to the global industry range of 0.05–0.50.

Direct combustion emissions (Scope 1 — anode baking and refinery): Emissions from the anode baking furnace were calculated from fuel oil consumption and process carbon from green anode volatiles. Alumina refinery emissions were quantified separately and allocated to the smelter output based on the specific alumina consumption rate (1.92 tonnes of alumina per tonne of aluminium).

Indirect emissions (Scope 2 — captive power): This was the decisive component. We calculated the captive power plant’s specific emission factor from first principles: actual coal consumption (tonnes, by grade), measured gross calorific values from the client’s coal testing laboratory, plant heat rate from CEA reporting data, auxiliary consumption, and net generation. The resulting specific emission factor was 1.04 tCO2/MWh — lower than the all-India grid average of 0.71 tCO2/MWh (which is irrelevant for CBAM) but critically lower than the EU’s default assumption for coal captive power in India.

The contribution of the 8% captive solar generation was accounted for at zero emissions, reducing the blended electricity emission factor applied to the smelter’s consumption.

Default value comparison: We compiled the complete embedded emissions calculation and compared it against the EU default value for each product category. The results were significant.

Deliverables

• CBAM-compliant embedded emissions report covering two product categories (unwrought aluminium and extrusions), with full methodological documentation, data sources, and uncertainty assessment — formatted per the EU CBAM communication template requirements
• Installation-level emissions calculation workbook (Excel-based) enabling the client’s sustainability team to update calculations quarterly with new activity data, without external support
• Communication package for EU importers — a structured data package, including a methodology summary in non-technical language, enabling the EU importer to populate their CBAM declaration with auditable actual values
• Gap analysis for accredited verification — identification of the documentation and evidence requirements for future third-party verification of embedded emissions data by an EU-accredited verifier, which will become mandatory as CBAM implementation matures
• Decarbonisation sensitivity analysis — modelling the CBAM duty impact of three decarbonisation scenarios (increased RE share to 20%, 35%, and 50% of smelter electricity consumption)

Outcome

The assessment revealed that the client’s actual embedded emissions for unwrought aluminium were 12.9 tCO2e per tonne — 22% below the EU default value of 16.5 tCO2e per tonne. For aluminium extrusions, actual values were 14.1 tCO2e per tonne versus a default of 17.8 tCO2e, a 21% reduction.

The primary drivers of the favourable variance were: the captive power plant’s above-average thermal efficiency (resulting from relatively modern supercritical boiler technology), the 8% solar contribution to the electricity mix, and the smelter’s low PFC emission rate attributable to advanced pot line controls and operational discipline. The alumina refinery’s use of waste heat from the captive power plant for steam generation also contributed to a lower-than-expected refining emission intensity.

The financial impact was substantial. Based on the client’s annual EU-bound export volume of approximately 120,000 tonnes and the prevailing EU ETS price of EUR 68 per tCO2e, the use of actual values instead of defaults translates to an estimated saving of approximately EUR 14 million per annum in CBAM certificate costs that the EU importer would otherwise pass through in the form of reduced procurement prices.

The EU importer accepted the client’s actual-value data for its Q1 2026 CBAM declaration, subject to their own internal review. The importer also indicated that the availability of auditable, methodology-compliant emissions data was now a factor in supplier selection decisions — effectively making CBAM data quality a competitive differentiator in the EU aluminium supply chain.

The decarbonisation sensitivity analysis provided an additional strategic insight: increasing the renewable energy share of smelter electricity from 8% to 35% — achievable through a combination of captive solar expansion and open-access RE procurement — would reduce embedded emissions to approximately 9.8 tCO2e per tonne, yielding a further EUR 25 million per annum in CBAM savings and positioning the client’s product as among the lowest-carbon primary aluminium available to EU buyers. The client has since initiated a feasibility study for a 500 MW hybrid renewable energy project to supply the smelter.