© 2 006 APMG Alcan’s Response to Climate Change Challenge H.A. Porteous Vice-president,...

© 2 006 APMG

Alcan’s Response to Climate Change ChallengeH.A. PorteousVice-president, Government Relations, Alcan Europe

25 October 2007

© 2 0 06 APMG Diapositive 2

Global Presence December 2006

North American Global HeadquartersBauxite & Alumina MontrealPrimary Metal Montreal European Global Headquarters

Packaging Paris Engineered Products Paris

North AmericaEmployees: 24,000

EuropeEmployees: 30,000

AsiaEmployees: 8,000

Alcan Inc.Revenues: US$23.6 billionEmployees: 68,000Facilities: 430Countries & Regions: 61

A balanced presence and a global reach

South AmericaEmployees: 3,000

Africa/Middle EastEmployees: 1,000

OceaniaEmployees: 2,000


Business Groups BAUXITE AND ALUMINA PRIMARY METAL

ENGINEERED PRODUCTS PACKAGING


Rio Tinto IntegrationToday, Rio Tinto will announce it has completed acquisition of

Alcan

Alcan welcomes its integration into Rio, an industry leader

In the context of sustainability and climate change, we are very glad we share with Rio the same philosophy and objectives


Commitment to Sustainability


ALCAN COMMITTED TO SUSTAINABILITY

Alcan’s aspiration is to be an “industry shaper”

Being ahead of the curve and establish new standards


No company can be sustainable over the long term if it is not economically viable

No company can be economically viable in the 21st century if it fails to accept its social and environmental responsibilities

Leadership from the top

Dick Evans: managing the business in a way that supports “Alcan’s governing objective of maximizing value…in a sustainable way”, with Alcan’s commitment to sustainability…the glue that runs throughout our integrated management system.

What does “Sustainability” Mean at Alcan?


Committed to Sustainability Alcan’s sustainability framework directly supports the governing objective and

instils the highest standards for social responsibility, and environment, health and safety

Alcan’s 8 key topics related to sustainability: Energy Climate Change Natural Resource Management Life Cycle Product Stewardship Community Development Well-Being Environmental Releases Industry Shifts


Alcan, working with the global industry, has identified 4 means to address the climate

change challenge

1. Reduce direct GHG emissions per ton of aluminium ;

2. Improve aluminium production Energy efficiency;

3. Maximize collection and recycling of used products ;

4. Promote light vehicles.


Worked with IPCC and National Governments to develop Transparent and Accurate GHG Inventory Data from Interlocking Standards

http://www.ghgprotocol.org/

http://www.world-aluminium.org/environment/climate/pfc_measurement.pdf

http://www.world-aluminium.org/environment/climate/ghg_protocol.pdf

WRI/WBCSD CorporateGood Practice Standards

IAI Industry GHG Protocol

USEPA/IAI PFC Measurement Protocol

IPCC Good Practice Guidance

http://www.ipcc-nggip.iges.or.jp


Alcan’s Progress in GHG Reduction: Global

Smelter emissions - Worldwide comparison 1990 to 2005:

Total smelter emissions (direct + indirect) reduced by 25% Production increased by 35% Intensity decreased by 45% 2006-2010 objective to further reduce direct GHG intensity

by 10%

Through its TARGET program, Alcan’s company-wide greenhouse gas management program (launched in 2000)…

Alcan has taken a leadership role and has formalized a GHG reduction programme on a cross-company basis including the establishment of reduction objectives

© 2 0 0 7 A L C A N I N C. Slide 12 Business group or unit

How? - Alcan’s technology

© 2 0 0 7 A L C A N I N C. Slide 12 Business group or unit

Alpsys computerized pot control system

Requires large investment in workforce training and constant workforce vigilance

0

0,02

0,04

0,06

0,08

0,1

Mai 2005 - août2006

Septembre2006

Octobre2006

1st release 1998

ALCAN-AP Pot Process Control System all over the world

0

2000

4000

6000

8000

10000

12000

14000

16000

18000 ALCAN-AP Pot Process Control System around the world

ABIADG *

ALBA *ALMA *

Alouette *ALRO

ALUAR *Alucam

Baie ComeauComalco

DunkerqueEgyptalumHILLSIDE *

KarmoyKidriecevoLa Corogne

Lannemezan *Lauralco

Lochaber *Mostar

MOZAL *NALCO *

PNL *Podgorica

Saint-Jean *San Ciprian

Talum *Tomago *

SOHAR * ( * = ALPSYS)

ALPSYS® Potmicro

13

78% reduction in PFC emissions per tonne aluminium from 1990 baseline 2010 goal is a 80% reduction in PFC emissions per tonne aluminium

Encouraged IAI to adopt voluntary PFC Emissions reduction targets

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1990 1995 2000 2005 2010

PF

C E

mis

sio

ns

(t

CO

2-e

q/t

Al)

0.96

2010 Objective: 80% reduction

0.88

0.88

© 2 0 06 A L C A N I N C. 14 CEPS TF ‘Strategic Implications of the EU ETS Review’

Alcan’s AP technology, developed in France, when using the Alpsys® process control system, provides benchmark PFC performance (less than 0,1 tCO2eq / t Al)

AP Technology, the GHG emissions

PFC EMISSIONS IAI SURVEY 2004

0,0

0,2

0,4

0,6

0,8

1,0

0 5 10 15 20 25 30

PFC EMISSIONS (tCO2 eq./t Al.)

CWPB

PFPB

SWPB

VSS

HSS

AP technology with Alpsys®

Cu

mu

lativ

e P

rob

ab

ility

PFC emissionsAP techno+Alpsys

Dunkerque


AP Technology, the net carbon consumption

2004 IAI Energy SurveyPrimary Aluminium Smelting - Anode Consumption

All technology

0,38

0,40

0,42

0,44

0,46

0,48

0,50

0,52

0,54

0,56

0,58

3 000 000 6 000 000 9 000 000 12 000 000 15 000 000 18 000 000

Primary Aluminium Production (Tonnes cumulative)

An

od

e C

on

su

mp

tio

n (

kg

per

kg

alu

min

ium

)

Average AP Technology - Alcan plants

Dunkerque plant

Alouette


-10% Reduction objective16.1

15.3

14.514.4

14.6

14.8

15.0

15.2

15.4

15.6

15.8

16.0

16.2

Meg

awat

t h

ou

rs p

er t

on

ne

of

alu

min

ium

pro

du

ced

Voluntary Objective

Encouraged IAI to adopt global energy intensity reduction targets

Source : IAI


Alcan’s AP technology is benchmark for energy consumption

AP Technology, energy consumption

2004 IAI Energy Survey Primary Aluminium Smelting - Electrical Energy Consumption

All Technology

13000

14000

15000

16000

17000

18000

19000

20000

0 3000000 6000000 9000000 12000000 15000000 18000000 21000000

Primary Aluminium Production (Tonnes cumulative)

Ele

ctri

cal E

ner

gy

Co

nsu

mp

tio

n

(kW

h p

er t

on

ne

alu

min

ium

)

Dunkerque - AP35

AP-18

AP-30

BecancourBecancour

Baie ComeauBaie Comeau

Alma

Lauralco

Alouette

Alma

Lauralco

Alouette

KarmoyKarmoyLochaberLochaber

Dunkerque

St Jean

Dunkerque

St Jean

KidricevoKidricevo

AlbaAlbaNalcoNalco

AluarAluar

MozalMozal

HillsideHillsideTomagoTomago

BoyneBoyne

AP-18AP-18

AP-30AP-30

BecancourBecancour

Baie ComeauBaie Comeau

Alma

Lauralco

Alouette

Alma

Lauralco

Alouette

KarmoyKarmoyLochaberLochaber

Dunkerque

St Jean

Dunkerque

St Jean

KidricevoKidricevo

AlbaAlbaNalcoNalco

AluarAluar

MozalMozal

HillsideHillsideTomagoTomago

BoyneBoyne


Continuing to improve Process Energy Efficiency

Alcan has launched a new research and development (R&D) initiative focused on its leading AP series aluminum smelting technology. AP50 is the next generation smelter technology – to be piloted in Saguenay, Quebec.

Alcan has set an ambitious target of developing a 20% more energy efficient and environmentally friendly cell through the accelerated introduction of new innovative technologies.


1 Tonneof

aluminium

20 Tonnesof C02e

Emissions

1 Tonneof

aluminium48-80 Tonnes

of C02eEmissions

Sustainable Trains

Cars for today and tomorrow

Serving our Customers in a Carbon-Constrained World

300,000 tonnes less CO2e emissions

15 tonne reduction in weight due to new

aluminum alloys & techniques

Cooperation with customers in aerospace


Other Product Applications

Energy Savings and Greenhouse Gas Reductions through Building and Renewable

Energy Applications

Wind TurbinesSolar SheetingGreen Buildings


• Recycling only requires 5% of the energy

• Greenhouse gas emitted is 95% less

100%

5%

0%

20%

40%

60%

80%

100%

New Aluminum Recycled Aluminum

22

Recycling


Total ProductsStored in UseSince 1888538.5

FinishedProducts (output)36.3

OtherApplications3

1.1

Fabricated andFinishedProducts (input)60.5

TradedNewScrap7 7.7

FabricatorScrap2

16.5

TradedNew

Scrap1 1.3

Ingots 61.8

Metal Losses 1.3 Not Recycled in 20048 3.4 Under Investigation4 3.3

OldScrap

7.4

Bauxite5 153.7

Bauxite Residues 56.7and Water 39.7

Alumina6 57.3

Values in millions of metric tonnes. Values might not add up due to rounding. Production stocks not shown1 Aluminium in skimmings; 2 Scrap generated by foundries, rolling mills and extruders. Most is internal scrap and not taken into account in statistics; 3 Such as powder, paste anddeoxidation aluminium (metal property is lost ) 4 Area of current research to identify final aluminium destination (reuse, recycling or landfilling); 5 Calculated. Includes, dependingon the ore, between 30% and 50% alumina; 6 Calculated. Includes on a global average 52% aluminium; 7 Scrap generated during the production of finished products from semis;8 Landfilled, dissipated into other recycling streams, incinerated, incinerated with energy recovery.

METAL FLOW

PrimaryAluminium used

30.2

MATERIAL FLOW

RecycledAluminium 31.6

Excl. FabricatorScrap 15.1

Net Addition 2004: 21.1

Transport 28%o.a.Automotive16%

Building 31%

Packaging 1%

Other 11% Engineering and Cable 29%

Source: GARC, 11.05.06

Global aluminium flow 2004

Energy: 50%Hydropower

0

200

400

600

800

1000

1970 1980 1990 2004 2010 2020

Alu

min

ium

in 1

000

ton

nes/

year

Total Aluminium

Other

Engineering and Cable

Packaging

Building

Transport

200 Primary SmeltersX‘000 Manufact. Plants1200 Recycling Plants


Importance of primary and recycled Aluminium production in EU

(EU15 data until 1999, EU25 data 2000-2004, EU27 data 2005-2006)

0

2.000.000

4.000.000

6.000.000

8.000.000

10.000.000

12.000.000

1980 1985 1990 1995 2000 2005

Alu

min

ium

in t

onnes p

er

year

Primary production Total recycling Net-imports

41%

24%

35%


Global Policy LeadershipWe have made much progress and Alcan and with the other

International Aluminium Institute members (70 percent of global production)

We believe, however, that more must be done to encourage aluminium industry progress, everywhere

We are encouraging the industry to adopt even more ambitious voluntary targets and to consider development of a global sector agreement


Policy context

European aluminium producers support global market-based mechanisms to:accelerate real GHG reductions, with existing technology;stimulate the development of new emission abatement

solutions; and,give business the flexibility to adapt its GHG reduction plans in

time and in geographical implementation

The world, however, is far from an effective global system and remains divided on how best to tackle climate change

Industry welcomes sound approaches to reduce CO2e emissions and, generally, views the AP6 and Kyoto plans as complementary


Competitiveness challenges

Even though excluded from the EU ETS, our industry is severely impacted by the CO2 cost in the price of electricity

We can not pass through any of these costs

This threatens further dislocation, for no environmental gain

Two independent reports have assessed the impact of EU ETS on production costs for aluminium

- Carbon Trust – European ETS: Implication for Industry Competetiveness (2004) – Conclusion: €25/t CO2 will increase marginal production cost by 13,1%

- International Energy Agency – Industrial Competetiveness under the EU ETS (2005) – Conclusion: €30/t CO2 will increase the cost by 11,2%

Rather than regional constraints a global sector approach/agreement would be a better means to make progress; especially, to bring in those regions of the world which do not yet participate


Aluminium Sector SuitabilityHomogeneous sector

Facilitates the development of sector-wide baselinesSignificant variations in emissions from the same technology

type could be closed with best practices

Standard technology : two major electrolytic technologies, with a couple of major sub-grouping in eachSöderberg technology (older, smaller and less efficient)Prebake technology

Most new investments generally use best available technologyAccelerated adoption of BAT would reduce emissions,

significantly, while meeting ever increasing demand


A Sector ‘Agreement?Target primary production (80% of emissions)

Baseline Setting: Global BAT for new facilitiesGlobal top X% for older technology typesProcedures to ensure credits for results supplementary to BAU

Definition of the sector and its boundaries Indirect emissions could be included on a basis of BAT by fuel

source and/or calculated on regional baselines

Rate-based or indexed crediting : entities or projects emitting below a certain level (e.g. XtCO2/unit of primary metal) would generate creditsCredits would flow through a bridge from the Clean

Development Mechanism


Questions What is sufficient participation (companies and countries)?

Availability and reliability of emissions data (Russia/China?)

Volume of credits, prices and buyers?

How to recognize full life cycle benefits and promote recycling to help satisfy the growing demand for aluminium?

Role of international associations Negotiation of baselines and other terms of agreement

Role of independent international authorities (CDM model or a new multilateral agreement)Monitoring/Supervision of the systemEnforcement issues

Country-based approach Legal authority to ensure compliance


EU Aluminium Sector Competitiveness

While a global sector crediting agreement could promote environmental progress in non-annex (developing) countries, it will do nothing to promote the competitiveness of the EU aluminium industry

CDM/JI trap – Even the existing CDM/JI mechanism militates against developing countries doing voluntarily what western industry already has done, as they expect to receive credits for adopting best practices.

This would be exaggerated by a global sectoral crediting agreement; especially, if it was to include indirects

EU industry will require mitigation of the CO2 cost pass through and to remain outside the EU ETS, post 2012, if it is to remain competitive


ConclusionsAlcan is well advanced in addressing GHG emissions on a

voluntary basis

Alcan’s technology can contribute further to GHG reduction

Alcan’s R&D will reduce emissions and electro-intensity, further

Alcan is encouraging the global industry, through the IAI approach, further to accelerate widespread adoption of best practices and best available technology

Alcan is leading an industry consideration of how a sectoral crediting agreement could provide industry in developing countries further incentives to make environmental progress

© 2 006 APMG Alcan’s Response to Climate Change Challenge H.A. Porteous Vice-president,...

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