Aluminum, Revitalized: Strengthening the Backbone of our Clean Economy
June 27, 2023
State of the Industry
Up until the turn of the century, the U.S. was the world’s leading aluminum producer. The industry had long provided the country with a stable supply of aluminum and good jobs. But decades of decline have left the industry in tatters. With the closure of nearly 20 smelters, production has dropped by over 80% since its peak in the 1980s. As the industry languished, tens of thousands of aluminum workers have lost their jobs. These losses have been particularly hard since aluminum manufacturing jobs tend to offer better wages, benefits, and access to unions than other available jobs, especially for workers without a college degree. As displaced aluminum workers lost their high wage jobs, their communities have had to grapple with the economic fallout of shuttered smelters. These forces, as seen within the broader manufacturing sector, have contributed to increased inequality, especially along racial lines. But job losses and increased inequality have not been the only consequence of the industry’s decline. The U.S. aluminum industry’s deterioration has also led to increased climate pollution. As companies closed U.S. smelters and domestic output diminished, the world’s aluminum started to come from countries with lower environmental and labor standards and higher emissions. China and India, in particular, began to ramp up production. Both countries produce aluminum with substantially higher emissions than the U.S. China’s aluminum production is about 65% more emissions-intensive than ours and India’s aluminum is made with double the emissions compared to U.S. aluminum. As a result of these trends, about two-thirds of the world’s aluminum is now made in countries with more emissions-intensive production than in the U.S. Building up clean aluminum manufacturing in the U.S. will ensure that our growing use of aluminum in clean technology won’t drive pollution overseas.A Clean Aluminum Future
A revitalized U.S. aluminum sector has the potential to provide family-sustaining union jobs for tens of thousands of workers and hard-hit communities; support fenceline communities’ fight for clean air and water; offer a reliable supply of a critical material for clean energy and national defense; and serve as a pivotal first mover in our efforts to slash industrial climate pollution. Notable benefits of a revitalized aluminum sector may include the:- Increase in the share of U.S. aluminum demand for critical clean energy and national defense purposes that’s met via domestic supplies;
- Creation of new—and retention of existing—union jobs in the domestic aluminum industry;
- Increase in the average wage in the domestic aluminum industry;
- Economic benefits from increased aluminum production shared with impacted communities, including environmental justice, deindustrialized, and low-income communities and communities of color;
- Reductions in GHG emissions and toxic pollution from domestic aluminum facilities, relative to the current baseline; and
- Improved ranking of the U.S. versus other major aluminum producers in the carbon and pollution intensity of aluminum production.
Federal Policy Recommendations
The federal government has an array of tools to help advance a thriving U.S. aluminum industry. These include national security measures; federal procurement policies; programs for investing in industrial efficiency, emissions reductions, and clean manufacturing; authority over federally supported electricity generation; and trade policy. These policy recommendations lay out a set of three tools the federal government can deploy to help build and sustain clean aluminum manufacturing.Procurement—Buy America(n):
To revitalize U.S. aluminum manufacturing, part of the solution is to catalyze a large domestic market for clean U.S. aluminum. Buy America, Buy American, and related domestic content rules offer policy tools to do just that. For example, the Inflation Reduction Act, signed into law in 2022, includes domestic content provisions that could help compel private developers and manufacturers of solar, wind, transmission, and electric vehicle components to purchase U.S.-made aluminum. The law offers solar and wind developers a 10% bonus tax credit if a little over half of their parts and materials are U.S. made. Given that aluminum is a primary ingredient in solar panels and other clean energy technologies, this policy creates a strong incentive for clean energy firms to buy domestic aluminum.Investment—Loan, grant, and tax credit programs and use of national defense policies:
The federal government should directly invest in clean aluminum production. It can do so by extending a mix of tax credits, loans, and grants to aluminum manufacturers to ramp up their capacity while cutting emissions. For example, The Inflation Reduction Act includes more than $50 billion for new grants, loans, and tax credits to support clean manufacturing. Some of this financing could help existing U.S. aluminum smelters become even cleaner and more globally competitive by boosting efficiency and slashing pollution. New investments also could help to reopen recently closed smelters by cutting production costs and offering an affordable supply of clean electricity. Specific Inflation Reduction Act investments that could help revitalize clean aluminum manufacturing include:- A new manufacturing production tax credit (45X) worth over $30 billion to support expanded manufacturing of solar and wind components, batteries, and critical materials like high-purity aluminum;
- An expanded tax credit (48C), worth $10 billion, that is now available for manufacturers to install technology that achieves an at least 20% reduction in climate pollution; and
- New grants and loans worth $5.8 billion for energy-intensive industrial facilities, including aluminum manufacturers, to adopt transformative, first-at-scale technologies with the potential for deep emissions cuts and sector-wide adoption.