Abstract
Aluminium smelting is electricity intensive. Within the OECD region, electricity generation is based largely on fossil fuels, and a carbon tax would have a significant impact on the cost of electricity. Outside the OECD, there are large amounts of additional electricity that could be generated through hydro–electricity or flare gas. If carbon limits were adopted unilaterally by the OECD nations, domestic producers would be at a competitive disadvantage. To quantify these ideas, we have updated a global aluminium trade model constructed at the World Bank during the early 1980s. According to our business–as–usual scenario, there will be a gradual shift toward new sources of production located outside the OECD region. Unilateral OECD carbon restrictions could dramatically accelerate this process.
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