more electrifcation and the climate friendly energy transition will create increased demand for metals Chapter 3 Hence the transition to a climate neutral economy will be powered by metals The transition which on its turn will enable metals production to achieve very deep emission reductions A t the same time the electrointensity of metals production also comes with a competi tiveness vulnerability to higher electricity prices chapter 7 It will therefore be essential to ensure that nonferrous metals industries have access to competitively priced stable and carbonneutral electricity to power the road to a climate neutral economy Electrointensive industries source power for their consumption based on various strate gies normally a portfolio of dayahead 1 to 5 years forward hedging on the e x changes and bilateral longerterm contracts of 5 to 30 years more commonly referred to as powerpur chaseagreements The chosen portfolio i e the power price risk management strategy will depend among others on global competitive position willingness to tak e pricing position in a longterm contract appetite for fuctuating wholesale prices e xpectation of power prices development and other factors A smart design of EU renewables and industrial policies could create a virtuous cycle where longterm contracts with utility scale renewables reduce the cost of investments and hence promote further investments in renewables Nonferrous metals producers can also help facilitate the challenges that come with more variable sources of electricity through Higher engagement in climate friendly powerpurchaseagreements PP A s Ancillary services e g demand response to an electricity system that will need inte gration of more variable power generation Climate friendly e g carbon free energy PP A s can be mutually benefcial for both industrial energy consumers and electricity producers The consumer will get a longterm contract which can ofer price stability the producer will receive a guaranteed revenue stream which will reduce the risk s associated with large investments in e g renewable production and hence reduce the cost of capital Expected further declining costs in renewable electricity will mak e climate friendly PP A s an interesting longterm contracting option for industrial consumers Nonferrous metals producers are baseload consumers with predictable updates in electricity While wind energy has a more variable production profle nonferrous metals producers are able to engage in this type of contract In 2018 Norsk Hydro secured 165 TWh baseload supply for a period of 19 years from wind energy Alcoa also in Norway has 8 Indus trial policy f or nonf err ous me tals t o war ds a clima te neutr al ec onom y the canary tha t surviv es the c oalmine 8 1 Introduction summary of contributions and challenges Europe s nonferrous metals industry fnds itself at the forefront of the transition to a circular and climate neutral European economy Major new and growing value chains that will power a climate neutral economy critically depend on the availability of nonferrous metals and their value chains Nonferrous metals have already fully embraced the circular economy and strive to increase shares of recycled metals in European production Major steps have been tak en to reduce direct and indirect GHG emissions with current direct and indirect GHG emissions currently over 60 lower compared to 1990 The industry is further innovating to reduce energy use GHG emissions improve recovery of metals and increase symbiosis between metals producers and other sectors in the economy It is hence possible for nonferrous metals production as a whole to achieve further large emission reductions by 2050 However such evolution will depend on factors that are not in the hands of metals produc ers themselves First of all the overwhelming share of future GHG mitigation will depend on the decarbonisation of the EU s power sector This does not only mean eliminating the GHG emissions in the power sector but doing this in a way that electricity for electrointensive nonferrous metals producers remains competitively priced and reliable T o further advance with new technologies that lower energy consumption and GHG emissions innovation support will be required in particular for high risk and capitalintensive pilot and demonstra tion plants Beneftting from new green value chains e g batteries electric vehicles and enhanced circularity will require more horizontal industrial strategies that cover the entire value chains including the endoflife of products Such industrial strategy must also include a more assertive approach towards international trade distortion as well as ensuring that the rest of the world follows Europe s higher environmental standards 82 Nonferrous metals powering and powered by a carbon free electricity system As mentioned before Chapter 5 a decarbonized electricity system in the EU will bring about the most important GHG emission reductions related to metals production Further MET ALS IN A CLIMA TE NEUTRAL EUROPE A 2050 BL UEPRINT 74