How Tariffs on Canadian Aluminum Hurt the Climate

It's all about the hydroelectricity

Bonneville Dam
Bonneville Dam.

 Public Domain

The American government has reimposed a 10% tariff on Canadian aluminum. This means more expensive beer, and perhaps more importantly, more carbon emissions.

Aluminum has been described as "solid electricity" because it takes 13,500 to 17,000 kWh to make a ton of it. The Bonneville Power Authority and the Tennesee Valley Authority used to supply dozens of smelters that provided aluminum to Boeing to build planes for the Second World War. But soon there were competing demands from cities, and increasing power prices made these smelters uneconomic; the last two closed in 2016. Big American aluminum companies like Alcoa went searching for cheaper power and found it in Canada, where they even built their own dams.

Aluminum was considered a North American market; if you look on the industry websites, they ignore the border with Canada.

Because of the geographical locations of most smelting facilities in North America, about 70 percent of electricity consumed in smelting facilities comes from hydroelectric sources. This renewable source of energy significantly contributes to the environmental efficiency goals set by the industry.
TVA poster
TVA Poster. Public Domain 

But the current president of the United States doesn't consider it a North American market, even just a few weeks after the North American trade agreement came into effect. He accuses the Canadian industry of dumping aluminum into the American market, after some producers complained that "they are hurting from a 'surge' of metal from Canada flowing into the U.S."

The head of the Aluminum Association of Canada says that there was an imbalance caused by the Covid-19 crisis and the collapse of demand, but that things have now stabilized and Canadian exports dropped 40% in July. He complains that the new tariff hurts people on both sides of the border since there is not enough American aluminum to go around.

The people who benefit, and the only people who apparently complained, are the owners of Century Aluminum, a mainly coal-fired producer, whose CEO says "the President’s leadership helps to secure continued domestic production of this vital strategic material and level the playing field for thousands of American aluminum workers."

Century Aluminum is the largest producer of primary aluminum in the United States. The Company’s Hawesville, Ky. smelter is the last U.S. smelter capable of producing high purity aluminum necessary for defense and military applications.  

The head of the largest American Aluminum company, Alcoa, (which smelts in Canada) thinks the tariffs are a bad idea, noting that "China’s overcapacity subsidized by the government is the real problem." All of the industries that use aluminum think its a bad idea, because there is not enough of the stuff smelted in the USA, so everything made from aluminum is going to cost more.

Green Aluminum
Sources of Green Aluminum.  Acuity Knowlege Partners

Many corporations are demanding "green" aluminum, with a carbon footprint of less than 4 tons of CO2 per ton of aluminum; the world average is 12 tons. Coal-fired aluminum's footprint is 18 tons of CO2 per ton of aluminum produced. Other companies, like Apple, are even pushing for what is called 0 emissions aluminum, although I have noted that it isn't really. I cannot find information on what the average is for American aluminum, but I suspect it is going to be closer to 12, given that even Century Aluminum appears to make a bit of green aluminum.

The new tariff doesn't appear to help anyone, certainly not the consumer who ends up buying the products. It seems that the only people who really benefit work at the Century Aluminum smelter in Kentucky.

When it comes right down to it, the tariff encourages the production and use of aluminum with between 3 and 5 times the carbon footprint of aluminum that is imported from Canada, where it is often made by American companies like Reynolds or Alcoa. It hurts the climate and it helps almost nobody. As the head of the Canadian Aluminum Association noted, "It's the wrong thing for the wrong reason at the wrong time for the wrong people."

Some Background

In the recent rebuilding of the Treehugger site, many older posts were archived, including one written when the tariffs were first imposed in 2018. I have retrieved the copy as background to this story from March 2, 2018:

Dirty Coal-Fired Aluminum Gets a Boost with New Trump Tariff

The President of the United States recently announced a 25 percent tariff on steel imports and a 10 percent tariff on aluminum, in the name of national security. He thinks trade wars are good.

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

— Donald J. Trump (@realDonaldTrump) March 2, 2018

It's not yet known if the tariff will be on all aluminum or whether some countries will be exempted; according to the New York Times, advisers have been bitterly divided over how to proceed on the tariffs, including whether to impose them broadly on all steel and aluminum imports, which would ensnare allies like the European Union and Canada, or whether to tailor them more narrowly to target specific countries.

UPDATE: 1:52 PM ET: Bloomberg says it will be a global tariff, quotes Commerce Secretary Wilbur Ross:

“Of the options that I presented, the president chose one -- which was put broad tariffs on all products from all countries,” Ross said in interview on Bloomberg TV. “We have to deal with a global problem on a global basis” to stamp out “this recurring phenomenon” of shipments going through other nations to evade tariffs.

This Treehugger has no comment on whether trade wars are good for Americans, or whether Canada (supplier of most of the imported steel and aluminum) is a threat to the USA's national security. But I do care about its effect on the environment, particularly the aluminum tariff.

Aluminum has been called "solid electricity" because of the amount used to make it (13,500 to 17,000 kWh per ton). That's why most of the aluminum smelters were built where the Tennessee Valley Authority and the Bonneville Power Authority could deliver cheap hydroelectric power.

The Bonneville and Grand Coulee dams were built by Franklin Roosevelt to create jobs during the depression, but the most important jobs they created were at Boeing and Douglas, who needed the aluminum for airplanes. As noted in our post on waste, after the war, the aluminum industry started cranking out single use packaging and aluminum foil. One energy expert I was discussing this with told me this morning:

When I was younger there was an anecdote making the rounds that eliminating aluminum foil would allow you to remove two dams from the Columbia. I’ve parsed out and reused foil ever since- and am mocked by my kids for it.

But while the population grew over the last 75 years, the number of dams cannot grow very much. The price of electricity kept rising to the point where making aluminum in the USA simply isn't economically viable; as Ana Swanson noted in the Washington Post last year when this issue first came up, "In Washington state, for instance, the smelters that used to operate near the hydroelectric power plants along the Columbia River have been priced out by the power-chugging server farms of tech companies such as Microsoft." So the companies moved their smelting to where power is cheap; to Iceland, which has lots of power and few people, and to Canada, where the Aluminum companies actually built dams and the power plants for their own use. American aluminum production dropped by three-quarters over the last few decades, squeezed by expensive electricity and cheaper coal-fired Chinese aluminum.

The proposed tariff will increase American production and even get a few smelters to re-open. According to the Wall Street Journal,

Century Aluminum said Thursday it will more than double production at a Kentucky smelter to 250,000 tons annually because of higher prices it expects to charge after the tariff is implemented. The company said the $100-million restart of idle smelting lines will double the plant’s workforce to 600 people.

That's good old Kentucky coal-fired aluminum production, which is for the President another bonus. But coal-fired aluminum produces 18 tonnes of CO2 equivalent for every tonne of aluminum made. Meanwhile, it probably means less "green" hydro powered aluminum will get imported.

The big Aluminum companies were already charging a small premium for low-carbon aluminum and even branded it; according to Reuters,

Rio Tinto is already selling branded RenewAl aluminum guaranteeing four tonnes or less of CO2 equivalent. Alcoa launched a product line called Sustana last year that includes Ecolum aluminum offering less than 2.5 tonnes - far below the industry average of around 11 tonnes.

Companies like Apple demand green aluminum but the value of the metal for them is a fraction of the value of the product. But not many other companies will pay both the green premium and the tariff.

For companies like Ford and Tesla, it is another story altogether. There is a LOT of aluminum in these vehicles and it just cost 10 percent more. Boeing just got less competitive with Airbus. Multiple family housing, which uses a lot of aluminum windows, just went up in price. But hey, maybe people will drink less canned soda and beer.

Trump's just made the biggest mistake of his Presidency: https://t.co/MfQT5tNFLJ
— WSJ Editorial Page (@WSJopinion) March 2, 2018

The editors of the Wall Street Journal, who just love everything the President does, are not so crazy about this move.

The immediate impact will be to make the U.S. an island of high-priced steel and aluminum. The U.S. companies will raise their prices to nearly match the tariffs while snatching some market share.... Instead of importing steel to make goods in America, many companies will simply import the finished product made from cheaper steel or aluminum abroad. Mr. Trump fancies himself the savior of the U.S. auto industry, but he might note that Ford Motor shares fell 3% Thursday and GM’s fell 4%. U.S. Steel gained 5.8%. Mr. Trump has handed a giant gift to foreign car makers, which will now have a cost advantage over Detroit. How do you think that will play in Michigan in 2020?

This is the Wall. Street. Journal.

The president says "We're going to build our steel industry back and our aluminum industry back." But at least for aluminum, that ship has sailed, following the price of electricity. If it comes back, it is at the cost of the climate from burning coal for electricity, and at the cost of fuel efficiency for cars, as they slow the switch to light aluminum.

But hey, it's all in the name of National Security. As Commerce Secretary Wilbur Ross noted last year, aluminum is “a hugely important thing to defense.” 

“Our industrial base is our most important, competitive weapon in any kind of global conflict,” he said. “I’m not a warmonger, but the best way to be sure you have to fight a war is if everybody knows you are incapable of defending yourself.”

Absolutely, Americans have to be ready to defend themselves from Canada.