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Speaker 1: I'm Dana Perkins, and you're listening to Switch on the

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Speaker 1: B and d F Podcast. Today we're going to talk

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Speaker 1: about decarbonizing aluminum, a metal you are likely familiar with

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Speaker 1: because you interact with it in your everyday life. Aluminum

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Speaker 1: foil in your kitchen or the soda can you're drinking from,

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Speaker 1: also the cars and airplanes you travel in, the windows

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Speaker 1: and doors in your home or office, or as a

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Speaker 1: conductor for electrical parts and so many other things. It's

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Speaker 1: also infinitely recyclable. So I speak with Sharon Mostry, metals

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Speaker 1: and mining analyst at B and EF, along with Julia Outwood,

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Speaker 1: our head of sustainable Materials, and we talk about a

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Speaker 1: research note they recently wrote titled Decarbonizing Aluminum Technologies and Costs. Now,

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Speaker 1: this research note was one of a series that B

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Speaker 1: and e F is doing on the hard to abate sectors,

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Speaker 1: and it was not a short piece of research, and

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Speaker 1: it likely won't surprise you that the solutions are complex,

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Speaker 1: but one thing is clear. The cleaner your energy sources,

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Speaker 1: the cleaner the aluminum for this very energy intensive metal.

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Speaker 1: If you'd like to read more about this topic, it

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Speaker 1: can be found at the Bloomberg terminal at b andF

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Speaker 1: Go or on BNF dot com or our mobile app.

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Speaker 1: As a reminder, Biennf does not provide investment or strategy advice,

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Speaker 1: and you can hear a complete disclaimer at the end

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Speaker 1: of the show. But for now, let's speak with Sharon

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Speaker 1: and Julia about decarbonizing aluminium. Sharon, Julia, thank you for

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Speaker 1: being on the show today to talk about aluminium. Thank you,

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Speaker 1: thanks for having We're going to refer to it as

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Speaker 1: aluminum on the podcast today, although I will say so,

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Speaker 1: you guys are recording from New York. I'm recording from London,

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Speaker 1: and they call it aluminium here. And I did a

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Speaker 1: little bit of research on it, and as it turns out,

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Speaker 1: many chemists also call it aluminium. And it's otherwise just

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Speaker 1: a real cultural divide and there's no excellent reason for

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Speaker 1: why give extra syllables here. A funny story that where

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Speaker 1: I was always told that they were looking at the

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Speaker 1: periodic table and thinking about the different pronunciations and spellings,

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Speaker 1: and they were like, okay, one of you can get

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Speaker 1: aluminum and one of you can get like sulfur with

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Speaker 1: a pH. And I'm not sure who negotiated what, but

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Speaker 1: it kind of sounds like aluminium lost out here. Okay,

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Speaker 1: somewhere somewhere in there in the folklore of the periodic table. Everybody,

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Speaker 1: this is for your next cocktail party chat, Okay, So

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Speaker 1: here we are. We're going to talk about the decarbonization

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Speaker 1: of aluminum, which has a lot of different pathways. So

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Speaker 1: as those who are listening to the show realize, when

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Speaker 1: we talked to analysts, we're talking to them about a

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Speaker 1: in depth piece of research that they've written, and this

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Speaker 1: one is a jozy It's fifty pages. So we are

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Speaker 1: going to do our very best to pull out some

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Speaker 1: of the most interesting parts, but of course there will

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Speaker 1: always be more. So I would like to start by

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Speaker 1: really understanding the scale of the industry and the scale

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Speaker 1: of the emissions issue. So first of all, where are

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Speaker 1: we finding aluminum and how big of an industry is this, Daniel,

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Speaker 1: We really think of aluminum as one of the major metals.

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Speaker 1: When you think about them. You've got steel, and steel

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Speaker 1: is a huge industry, and then you have aluminum, which

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Speaker 1: is second but quite a bit behind steel in terms

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Speaker 1: of volume. So it's seen as a material that you

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Speaker 1: use when you need a slightly more advanced metal. So

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Speaker 1: it's used a lot in airplanes, it's used in kind

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Speaker 1: of middle of the road bicycles, it's used in cars

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Speaker 1: where it's important for them to be a little bit lighter,

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Speaker 1: like potentially in electric vehicles. So the aluminum industry is

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Speaker 1: kind of an order of magnitude smaller than the steel industry,

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Speaker 1: and because it is made with hydro power in a

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Speaker 1: lot of places, that also means that its emissions aren't

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Speaker 1: on the same scale. So whereas steel is about seven

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Speaker 1: or eight percent of global emissions, you have aluminum being

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Speaker 1: more like one percent of global emissions, so very meaningful,

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Speaker 1: especially if you think it's one material contributing one percent

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Speaker 1: of emissions. But it's not. It's not as big a

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Speaker 1: problem as steel, and so that's why it often seems

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Speaker 1: like kind of an easier place to start when you're

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Speaker 1: trying to negotiate NAZIERO emissions. By one of the things

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Speaker 1: that I found out when I was prepping for today,

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Speaker 1: it was that it's also the most plentiful metal in

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Speaker 1: the Earth's uppermost layer. So there we are. We've got

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Speaker 1: lots of aluminum out there, and we see it in

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Speaker 1: all parts of the industry. So this one percent of

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Speaker 1: emissions that come from aluminium. Would you consider this one

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Speaker 1: of the difficult to decarbonized sectors or is this one

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Speaker 1: where you know the solutions are readily available and may

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Speaker 1: just be an issue of implementing them. We have a

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Speaker 1: kind of a combination here data It'll depend what part

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Speaker 1: of the supply gene you're looking at and which technologies.

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Speaker 1: For primary aluminum, it's kind of in a great position

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Speaker 1: because the biggest emitting process within that production is going

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Speaker 1: to be electrified already, so you essentially just need to

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Speaker 1: figure out how to make that electricity clean. And as

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Speaker 1: Julia mentioned, a lot of these smelters have the benefit

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Speaker 1: of being close to hydro power, so they're already pretty

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Speaker 1: much clean for most of their emissions, but they have

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Speaker 1: to deal with about thirty percent of emissions that aren't

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Speaker 1: just smelting. And then for the ones that don't have that, look,

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Speaker 1: they have a big challenge of where do they get

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Speaker 1: clean power from and how do they balance that with

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Speaker 1: the smelter load. And then when you look at recycling,

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Speaker 1: recycling is in a way less challenging because it uses

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Speaker 1: less energy, but it's also more challenging because it uses

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Speaker 1: thermal processes rather than electrified processes, So both recycling and illumina,

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Speaker 1: which are thermal based processes, they will need to change

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Speaker 1: either the fuels used for their energy, or we'll need

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Speaker 1: to electrify and also incorporate clean electricity. And then there's

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Speaker 1: also always the option of ccs. However, we find it

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Speaker 1: tends to be very expensive. So let's talk about the

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Speaker 1: different stages of the primary aluminum process and say we've

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Speaker 1: got mining, refining, anode production, smelting, casting, and then the

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Speaker 1: final goods. Where is the majority of the emissions coming

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Speaker 1: from or where which areas may be plural. The majority

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Speaker 1: of emissions, about two thirds is going to come from

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Speaker 1: the smelting process, and then one third is roughly going

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Speaker 1: to come from the refining process. So converting box into aluminum,

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Speaker 1: the smelting process, it's purely electricity, and then a bit

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Speaker 1: of it is going to be from anode consumption. So

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Speaker 1: in the process itself use carbon A nodes. As they

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Speaker 1: are used up, they release c O two, so that's

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Speaker 1: a minor part of the smell doing process. But most

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Speaker 1: of it is going to be electricity. Okay, so electricity

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Speaker 1: clean energy. That's something we at Bienny f no O

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Speaker 1: thing about Where does the electricity for this industry largely

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Speaker 1: come from? Right now, you had mentioned that hydropower was

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Speaker 1: the primary source of green electricity for aluminum. Is that

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Speaker 1: the majority that's being produced or is there a real

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Speaker 1: opportunity to displace things like coal and gas? I have

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Speaker 1: to say no, hydro power isn't the major source, not

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Speaker 1: by a long shot. And that's really because of China's

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Speaker 1: dominance here. China makes more than half of the world's aluminum,

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Speaker 1: and a lot of that is with electricity that's been

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Speaker 1: generated using coal power. Now China is recognizing that this

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Speaker 1: is going to be an issue for them, and they

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Speaker 1: were starting to see them actually moving their capacity to

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Speaker 1: provinces in China where there is a lot of hydro power.

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Speaker 1: So hydro is the best solution in the initial stages

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Speaker 1: where you can find it because you need that power seven.

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Speaker 1: And luckily we do have a lot of expertise with

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Speaker 1: energy modeling at BEN because one of the tough things

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Speaker 1: that Sharon had to do in this modeling was to

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Speaker 1: figure out what kind of a price and what kind

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Speaker 1: of resources we could use to get seven clean power

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Speaker 1: out of things like wind and solar in places where

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Speaker 1: you don't have hydro it was tough. We had to

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Speaker 1: pull in a lot of b NF models and try

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Speaker 1: to figure that out, and it did bump up our

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Speaker 1: electricity prices a little bit. If you think about the

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Speaker 1: cheapest p p as they're like fifteen dollars and the

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Speaker 1: goat hour, we were using something more like in the

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Speaker 1: forties and fifties because we had to account for that palancing.

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Speaker 1: So definitely the aluminum industry is arcing towards clean power,

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Speaker 1: and goodness me, I don't know where else but in China.

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Speaker 1: You could just pick up a smelter and move it

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Speaker 1: to a province where you have hydro power, but it's

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Speaker 1: going to be challenging for them to work at the balancing.

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Speaker 1: So hydropower is definitely very location specific. So I can

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Speaker 1: understand why that can't be the solution for every single

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Speaker 1: green aliminium or aluminium manufacturer. So what are some of

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Speaker 1: the other solutions that exist specifically with smelting. You'll essentially

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Speaker 1: have to use cleaner electricity if you want to be competitive,

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Speaker 1: If you want to use offsets or ccs, it's in

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Speaker 1: our model link going to be too expensive. If you're

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Speaker 1: trying to use clean an electricity. You have several options. Basically,

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Speaker 1: we've seen in parts like the Middle East they're starting

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Speaker 1: to use solar power, and the way they do this

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Speaker 1: is by buying huge p p A s with kind

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Speaker 1: of their sleeve pp A, so you buy it from

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Speaker 1: a utility that confirm up this power for you, rather

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Speaker 1: than buying it directly from a single project. So that's

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Speaker 1: going to provide this two seven power that Julia is

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Speaker 1: talking about. You're going to make sure that there's no

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Speaker 1: risk to your smelter that if the power goes off

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Speaker 1: for more than a couple hours, you'll essentially lose the assets.

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Speaker 1: So these kind of new contracts with p p A

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Speaker 1: s are able to give a solution. However, they're in

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Speaker 1: a sense virtual clean power, so you pay kind of

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Speaker 1: for your total power consumed in the year, but you

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Speaker 1: can't be sure that every electron you're consuming is actually

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Speaker 1: solar versus another thing that it was firmed up with.

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Speaker 1: And there's also additional costs that you pay for firming

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Speaker 1: it up too, so it ends up being more expensive.

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Speaker 1: What we think might happen in the future is that

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Speaker 1: they'll mix storage technologies with things like solar or wind

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Speaker 1: or a combination of solar and wind. So we've heard

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Speaker 1: actually from one of these companies doing in the Middle

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Speaker 1: East they might try pumped hydro, and there's kind of

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Speaker 1: clever solutions being discussed with pump hydro. You can actually

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Speaker 1: use old mind puts as well to do pump tado,

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Speaker 1: So the industry is going to have to be quite creative.

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Speaker 1: And then there's also kind of getting more expertise about

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Speaker 1: training your kind of power side of the company and

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Speaker 1: getting them to trade your access generation, make money off

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Speaker 1: of that and potentially get getting new revenue streams now

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Speaker 1: for a very short break stay with us. So these

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Speaker 1: clean power purchase agreements are more expensive as you're identifying,

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Speaker 1: So that does there and lie a place for innovation.

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Speaker 1: Would you say that the aluminum industry is actively looking

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Speaker 1: to green itself or is it one of the industries

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Speaker 1: that maybe the attention hasn't been on it as of

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Speaker 1: yet in terms of a net zero target. I think

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Speaker 1: aluminium is one of the industries that recently came under pressure,

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Speaker 1: as with many other metals and materials companies. So right

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Speaker 1: now there is a lot of interest in green aluminum.

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Speaker 1: We've seen really large companies like Roussel they're starting to

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Speaker 1: kind of spin off their green assets so that they

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Speaker 1: can market themselves as a green company. So there is

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Speaker 1: some kind of interesting movements. However, it's still quite new

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Speaker 1: to the industry, and ultimately these are materials producers, and

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Speaker 1: the fact that so much of the costs and also

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Speaker 1: the risks in producing aluminium have to do with power,

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Speaker 1: there is kind of a large room for learning and

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Speaker 1: for innovation on the power side that could help them

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Speaker 1: become greener. The only thing I'd add to that is

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Speaker 1: we actually have been tracking the companies that are making

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Speaker 1: net zero targets. When we tally that up next to

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Speaker 1: global aluminium capacity, it looks like about nineteen percent of

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Speaker 1: it is covered by corporate net zero goals right now.

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Speaker 1: That's pretty comparable to steal. It's well behind what governments

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Speaker 1: have done. So if you look at global emissions and

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Speaker 1: how many of those are covered by governments, it's more

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Speaker 1: like fifty and it's increasing every day. So industry as

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Speaker 1: a whole is kind of lagging in terms of net

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Speaker 1: zero commitments, and it's because they're waiving this banner of

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Speaker 1: hard to abate and trying to claim that they should

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Speaker 1: get a lot of the emissions that might be going

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Speaker 1: spare from somewhere else. But honestly, I think a lot

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Speaker 1: of people look at the aluminum sector and say, come on,

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Speaker 1: electrified power is already becoming greener. That's going to take

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Speaker 1: care of itself, right, And I think what Sharon is

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Speaker 1: just illustrated is it's really not something that the aluminium

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Speaker 1: industry can just leave to the power sector. They need

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Speaker 1: to take a little bit of responsibility to Hopefully there

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Speaker 1: it lies a opportunities for us to choose green or

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Speaker 1: we'll get to it recycled aluminum. But in a moment

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Speaker 1: before we get there, you know, you mentioned innovation, and

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Speaker 1: an area that people in our industry are talking about

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Speaker 1: a lot is hydrogen. Is hydrogen powered aluminium something that

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Speaker 1: we think will be used widely or even even in

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Speaker 1: a good number of cases, or is it one of

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Speaker 1: those things that just fits into the general energy mix,

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Speaker 1: And yeah, it's a solution, but maybe very expensive. I

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Speaker 1: think if I ever seen an aluminium smelter powered by hydrogen,

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Speaker 1: I will be pretty gob smacked. And my little engineer

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Speaker 1: heart is kind of shriveling at the ideas of the

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Speaker 1: efficiency losses there. But where hydrogen can play a role.

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Speaker 1: Of course, we couldn't leave it out, you know, in

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Speaker 1: this research report is really in the aluminum recycling because

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Speaker 1: there you're just you're heating up a furnace. You're chucking

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Speaker 1: in a bunch of scrap aluminium. You just need something

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Speaker 1: to provide some heat. And we do think that hydrogen

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Speaker 1: can be pretty competitive there when you're looking at alternatives

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Speaker 1: like biofuels or electrification or ccs. So if there's a

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Speaker 1: role for hydrogen to be paired with aluminum, it's going

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Speaker 1: to be in recycling, which is a great place for

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Speaker 1: us to get to in terms of recycling and circular

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Speaker 1: So let's let's talk about that a little bit more.

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Speaker 1: I'm remembering when I was a kid collecting cans and

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Speaker 1: getting a rebate actually in the state of California. I

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Speaker 1: think I got five cents per can, which added up

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Speaker 1: and made me feel pretty good about myself when I

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Speaker 1: went to recycle the cans, And I think that still

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Speaker 1: exists now. The question is is it profitable for the

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Speaker 1: aluminum industry to be recycling this. Are they getting a

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Speaker 1: lot more than five cents per can every time we

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Speaker 1: turn one in? Because as we know, waste streams just

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Speaker 1: because something can be recycled doesn't mean that it is

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Speaker 1: economically viable for it to be recycled. Hive sense a can, yea,

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Speaker 1: I think it's still five cents a can, so clearly

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Speaker 1: they haven't moved one that much. And actually it's it's

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Speaker 1: it's a very interesting point in the market where you're

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Speaker 1: trying to incentivize this group of mass actors, whether that's

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Speaker 1: the girl guides or kids, or people going around looking

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Speaker 1: through everybody's recycling on my street in Brooklyn to see

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Speaker 1: if they can fish out any of the cancer bottles.

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Speaker 1: This is a market on the collection side where a

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Speaker 1: very small change in price can have a huge impact.

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Speaker 1: So Oregon went from having a five cent deposit and

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Speaker 1: they were getting about their beverage containers collected, they doubled

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Speaker 1: that to ten cents, which a dime. It's not that much,

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Speaker 1: not a big deal. Suddenly they were getting more than

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Speaker 1: eighty percent of their beverage containers returned. So on the

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Speaker 1: collection side, you don't need to do much to incentivize people.

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Speaker 1: That's it. It's a deposit. It's not they're not paying

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Speaker 1: me for the can. I've already paid for it. I'm

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Speaker 1: just getting my money back. I think when you were

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Speaker 1: a kid, your mom paid for it. I think so,

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Speaker 1: and maybe I owe her, you know you coin she

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Speaker 1: augmented your allowance a little bit there with the can deposit.

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Speaker 1: Pretty In terms of is recycling makes sense, Is it

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Speaker 1: going to make sense for the aluminium industry, Yeah, it does.

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Speaker 1: I mean scrap prices have started to rise. We've seen

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Speaker 1: most scrap prices across steel and aluminum and plastics all rising.

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Speaker 1: So that's why everybody should be fishing out p et

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Speaker 1: bottles as well as their aluminum cans. But you still

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Speaker 1: have like a production cost will below the price of aluminum.

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Speaker 1: And if you have a closed loop system like a

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Speaker 1: lot of automakers do, and you know what you're getting,

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Speaker 1: then it's a pretty good deal. But when you start

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Speaker 1: talking about net zero, that's when things get a little tricky,

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Speaker 1: which I'll let you and talk about. Just to add

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Speaker 1: on to what Julia said, we think that in our

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Speaker 1: modeling we'll get close to about thirty nine per scent

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Speaker 1: of total aluminium supply coming from secondary sources. So that

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Speaker 1: still leaves a majority of the industry having to produce

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Speaker 1: from primary aluminium and having to decarbonize the secondary production,

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Speaker 1: which has a lot lower emissions in itself, but there's

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Speaker 1: still some emissions you have to address. So to get

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Speaker 1: to net zero, Really where we have to focus on

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Speaker 1: is the power we use for smelting, and then the

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Speaker 1: fuels we use for aluminum refining. Hydrogen is going to

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Speaker 1: be important there too, as will be electrification essentially, And

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Speaker 1: the challenge is not only the costs, which we think

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Speaker 1: when you read our note, there are clear pathways in

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Speaker 1: terms of costs, but it's also going to be these

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Speaker 1: kind of more nuanced issues of availability of these fuels,

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Speaker 1: how you incorporate them into green field versus brown field

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Speaker 1: existing projects, how you kind of try these technologies out

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Speaker 1: and figure out which one suits your business best depending

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Speaker 1: on your location or things like that. So availability of

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Speaker 1: the energy sources and then you know, I'm going to

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Speaker 1: go back to these cans because I'm fixated on this

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Speaker 1: memory availability of the aluminum for recycling. So my question

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Speaker 1: really comes down to is there enough supply of recycled

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Speaker 1: aluminum coming from vehicles all over the place for us

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Speaker 1: to actually meet demand or at least a meet a

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Speaker 1: good percentage of existing demand for aluminum, And also what

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Speaker 1: is the future demand for aluminum. Do we see this

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Speaker 1: as going up dramatically? And is this a space that

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Speaker 1: maybe is one percent of global emissions now but could

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Speaker 1: be a lot more if we don't take care of

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Speaker 1: the problem. Yeah, So in terms of meeting demand right

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Speaker 1: now with recycling, we can meet about pent of demand

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Speaker 1: a little bit higher, and then by which is when

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Speaker 1: we're aiming to get to net zero, we can meet

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Speaker 1: about thirty nine percent of demand. And then Julia has

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Speaker 1: run some scenarios which she can walk us through if

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Speaker 1: she wants. We could improve recycling and get a bit

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Speaker 1: above forty, but not that much more. So there's no

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Speaker 1: way essentially that we can meet a hundred percent of

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Speaker 1: demand just from recycling. How we can improve some things,

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Speaker 1: and that's still worth doing. And then in terms of

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Speaker 1: demand increasing, I'll let Julia give her take care, but yes,

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Speaker 1: demand will increase in the near term and then kind

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Speaker 1: of plateau in the future. From our modeling, I think

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Speaker 1: that was a great summary. How much of supply you

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Speaker 1: can meet with scrap really depends on what happens to demand,

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Speaker 1: And in all of the modeling that we've done so far,

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Speaker 1: we see a luminum demand carrying on growing all the

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Speaker 1: way out to so we think that plateau really happens

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Speaker 1: after that, and what this depends on and the reason

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Speaker 1: why you can't push it any further than about you know,

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Speaker 1: forty percent of a total aluminium demand really has to

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Speaker 1: do with how much aluminium did you use in the

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Speaker 1: past and how long is that being used for, Because

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Speaker 1: if it's still in your airplanes flying around, can't as

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Speaker 1: grab them over to the sky and say well, sorry,

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Speaker 1: we need this for beams story building now will come back.

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Speaker 1: So if there is um earth shattering amazing innovation and

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Speaker 1: material science and we find something way better and way

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Speaker 1: lower carbon than aluminum, short demand could change. But assuming

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Speaker 1: that we carry on pretty much as we are, there

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Speaker 1: are a lot of places that are going to want

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Speaker 1: to use more aluminium. If we're doing a lot more

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Speaker 1: flying around, we're going to need more airplanes, more aluminum.

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Speaker 1: We also have a really awesome report that looks at

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Speaker 1: how much more transmission is going to need to be built,

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Speaker 1: and our colleagues Sanjeet Singara wrote that it's an amazing

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Speaker 1: note and it also looks at all of the aluminium

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Speaker 1: that you would need there. So the energy to transition,

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Speaker 1: you have to have aluminium for that as well. So

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Speaker 1: that's why we think it's going to be tough for

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Speaker 1: recycled material to make up a more than significant for action.

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Speaker 1: I mean, you can you can push it to like

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Speaker 1: just over fifty at certain points, which is pretty cool.

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Speaker 1: So suddenly you've got more aluminium being made from scrap more.

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Speaker 1: But that is a very extreme scenario, and it basically

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Speaker 1: means we need to mobilize every girl Guide out there

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Speaker 1: to be not just collecting cans, but to be yanking

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Speaker 1: aluminum doors and trunks and hoods off cars as well.

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Speaker 1: So it's part of the solution for the energy transition.

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Speaker 1: It's definitely going to lead to de carbonization and other sectors,

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Speaker 1: but decarbonizing this specific sector. If I really had to

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Speaker 1: sum it up, what I'm hearing from you is it

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Speaker 1: really comes down to cleaning up the grid, power purchase

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Speaker 1: agreements and looking at a cleaner, greener grid for production.

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Speaker 1: What else really stood out to you when you were

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Speaker 1: doing this, because this was really a thought exercise to

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Speaker 1: go through things like hydrogen and ccs and a lot

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Speaker 1: of these technologies which really have some economic barriers right now,

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Speaker 1: but we hope will be part of this decarbonization. Mixed

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Speaker 1: for the future. What was the thing that stood out

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Speaker 1: to you most across everything that you researched. One of

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Speaker 1: the more surprising things was that it's not that straightforward

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Speaker 1: just to rely on clean power for smelting. So we'll

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Speaker 1: have to be a bit more creative on how we

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Speaker 1: use that clean power and it's going to be a

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Speaker 1: huge challenge for the industry and something that will be

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Speaker 1: interesting to see what solutions we get out of. Beyond that,

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Speaker 1: the role of hydrogen was also very interesting, both in

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Speaker 1: recycling and in illumina refining. So and recycling, what we

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Speaker 1: found is that it's quite it's still viable, but quite

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Speaker 1: expensive right now, but by that will probably be one

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Speaker 1: of the more competitive technologies, not only because of a

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Speaker 1: low work costs but because of how much you can

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Speaker 1: scale it. Right so, there's not that many restrictions on

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Speaker 1: availability of hydrogen if the industry really needs it. And

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Speaker 1: similar with alumina, hydrogen is one of the more expensive

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Speaker 1: options at the moment, but it will become one of

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Speaker 1: the cheaper options in and the good news there too

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Speaker 1: is that hydrogen is being produced in countries that are

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Speaker 1: already kind of mining or metals in like heavy in

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Speaker 1: their industry, so it will be quite convenient to have

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Speaker 1: it close by. It will probably reduce the costs. So

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Speaker 1: we see a big role for hydrogen too. If I

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Speaker 1: can add one thing, what I found really cool was

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Speaker 1: that I was stealing myself when we were writing this

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Speaker 1: note and doing the modeling for having to write an

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Speaker 1: entire section and all of the carbon prices that we're

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Speaker 1: going to be needed. And I was expecting them to

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Speaker 1: be like fifty hundred dollars, the stuff that we can

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Speaker 1: only dream of. But what we found was that there

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Speaker 1: are actually roots where you can make aluminum today at

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Speaker 1: a lower price than the fossil fuel business as usual.

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Speaker 1: That blew my mind because that's not just a sustainability

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Speaker 1: mandate for this, it's an economic mandate, and that means

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Speaker 1: that companies don't really have anywhere to hide here now,

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Speaker 1: So that is pretty cool. I mean, the modeling that

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Speaker 1: we've done says you can make it five cheaper today.

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Speaker 1: Admittedly you have to start building with a new inrd

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Speaker 1: anto technology, but by TIFT it's twelve percent cheaper, and

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Speaker 1: in such a tight margin industry as aluminum, that's really meaningful.

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Speaker 1: So that brings up a good point though in terms

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Speaker 1: of competitiveness of this industry, because, as you mentioned at

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Speaker 1: the very beginning when we started recording, you know, huge percentage,

433
00:25:56,440 --> 00:25:59,520
Speaker 1: what was it, half of the aluminum that's manufactured in

434
00:25:59,560 --> 00:26:02,200
Speaker 1: the world right now, at least from a primary standpoint,

435
00:26:02,320 --> 00:26:06,080
Speaker 1: is coming out of China. So how do companies from

436
00:26:06,080 --> 00:26:08,760
Speaker 1: other parts of the world. How do they compete? Is

437
00:26:08,800 --> 00:26:12,080
Speaker 1: it by looking for these uh, if they're looking at

438
00:26:12,119 --> 00:26:15,280
Speaker 1: making green aluminum, these cost efficiencies that this five percent

439
00:26:15,359 --> 00:26:18,720
Speaker 1: that you're discussing, is it from really focusing in on

440
00:26:18,880 --> 00:26:22,480
Speaker 1: recycling and only having primary aluminum as in, when you

441
00:26:22,520 --> 00:26:25,320
Speaker 1: can't meet demand that way, how do they maintain being competitive?

442
00:26:25,520 --> 00:26:29,280
Speaker 1: So you can't really be competitive in aluminum unless you

443
00:26:29,359 --> 00:26:33,280
Speaker 1: have cheap power costs, and that's going to be a

444
00:26:33,320 --> 00:26:36,560
Speaker 1: problem in China as well as around the world. China

445
00:26:36,640 --> 00:26:41,600
Speaker 1: has the benefit of having pretty low capital costs, which

446
00:26:41,680 --> 00:26:46,240
Speaker 1: aid with essentially being able to recover their money sooner

447
00:26:46,440 --> 00:26:51,160
Speaker 1: with slightly higher opics costs because power is a bit

448
00:26:51,200 --> 00:26:55,199
Speaker 1: more expensive in China, But if you're producing outside of China,

449
00:26:55,560 --> 00:27:00,360
Speaker 1: you essentially have to decarbonize without sacrificing this competitive advantage

450
00:27:00,720 --> 00:27:03,600
Speaker 1: on power costs, and there's going to be a huge

451
00:27:03,640 --> 00:27:07,919
Speaker 1: pressure for these companies to make sure that if they

452
00:27:07,960 --> 00:27:11,359
Speaker 1: are switching to clean energy that it's still competitive and

453
00:27:11,880 --> 00:27:15,080
Speaker 1: kind of the upper limit there is around forty dollars

454
00:27:15,160 --> 00:27:19,040
Speaker 1: per megawatt hour. But just what Julia was saying now

455
00:27:20,200 --> 00:27:24,720
Speaker 1: is that actually renewables with their kind of current costic

456
00:27:24,800 --> 00:27:29,560
Speaker 1: clients have the potential to make aluminum process is a

457
00:27:29,560 --> 00:27:33,960
Speaker 1: lot cheaper if the companies are able to incorporate them

458
00:27:33,960 --> 00:27:38,600
Speaker 1: into their operations. So that's kind of the bright silver

459
00:27:38,760 --> 00:27:43,320
Speaker 1: lining for aluminum is that renewables could be a huge

460
00:27:43,359 --> 00:27:48,560
Speaker 1: tool to become competitive, and countries that already have renewables

461
00:27:48,560 --> 00:27:53,119
Speaker 1: being integrated into their grids or being built near infrastructure

462
00:27:53,160 --> 00:27:55,960
Speaker 1: that aluminum smelters can use are going to have a

463
00:27:56,040 --> 00:27:59,520
Speaker 1: huge competitive advantage. I know this research note was very

464
00:27:59,600 --> 00:28:04,160
Speaker 1: much to technologies and costs, and there was definitely enough

465
00:28:04,200 --> 00:28:07,239
Speaker 1: there to fill this fifty pages, But I want to

466
00:28:07,280 --> 00:28:11,120
Speaker 1: know about the manufacturers. So is this a fragmented industry

467
00:28:11,240 --> 00:28:13,520
Speaker 1: or there are a few very large companies that are

468
00:28:13,560 --> 00:28:17,720
Speaker 1: doing this. It tends to be a few very large companies.

469
00:28:17,960 --> 00:28:22,119
Speaker 1: Like I mentioned that this is a very high topics industry,

470
00:28:22,200 --> 00:28:25,600
Speaker 1: so you need to be well monetized and also kind

471
00:28:25,600 --> 00:28:29,000
Speaker 1: of need to have the government on your side to succeed,

472
00:28:29,680 --> 00:28:33,720
Speaker 1: So there's not going to be that many primary producers

473
00:28:33,840 --> 00:28:38,880
Speaker 1: in any given region. However, recycling is another deal altogether.

474
00:28:39,400 --> 00:28:42,320
Speaker 1: Recycling in general, for alumina, is going to be a

475
00:28:42,360 --> 00:28:46,880
Speaker 1: lot more distributed. It's going to potentially make it more

476
00:28:46,960 --> 00:28:50,800
Speaker 1: difficult for all these smaller companies to have access to

477
00:28:50,880 --> 00:28:54,120
Speaker 1: these new technologies and try them out and have kind

478
00:28:54,160 --> 00:28:58,240
Speaker 1: of the money as well to have these experiments, let's

479
00:28:58,280 --> 00:29:00,880
Speaker 1: say with hydrogen or stuff like that. But it means

480
00:29:00,920 --> 00:29:05,400
Speaker 1: that there's a lot more diversity that can bring innovation

481
00:29:05,440 --> 00:29:09,920
Speaker 1: into the industry potentially sooner too. So we keep coming

482
00:29:09,920 --> 00:29:13,880
Speaker 1: back to costs here, and I think one of the

483
00:29:13,880 --> 00:29:16,600
Speaker 1: things that we found with some sources of renewable energy

484
00:29:16,720 --> 00:29:19,640
Speaker 1: that they have become cheaper and will continue to become

485
00:29:19,720 --> 00:29:24,560
Speaker 1: cheaper over time and increasingly cost competitive and the preferred

486
00:29:24,560 --> 00:29:28,160
Speaker 1: source of energy and a bunch of locations when compared

487
00:29:28,240 --> 00:29:32,720
Speaker 1: to heavy emitting sources of generation. However, here we're seeing

488
00:29:32,920 --> 00:29:36,760
Speaker 1: that the renewable energy sources might end up actually being

489
00:29:36,800 --> 00:29:39,960
Speaker 1: in a premium for this particular application because of how

490
00:29:39,960 --> 00:29:43,440
Speaker 1: they're being used. You mentioned that the government has to

491
00:29:43,480 --> 00:29:45,320
Speaker 1: be on your side in order for this to work.

492
00:29:46,000 --> 00:29:49,400
Speaker 1: Do you see policy intervention? Is this something that governments

493
00:29:49,400 --> 00:29:51,600
Speaker 1: are actively talking about in different parts of the world

494
00:29:51,720 --> 00:29:55,400
Speaker 1: right now? It's so dependent on region. I mean, any

495
00:29:55,480 --> 00:29:59,560
Speaker 1: kind of materials manufacturing always gets the attention of a

496
00:29:59,600 --> 00:30:04,080
Speaker 1: government because they see it as almost a national security issue.

497
00:30:04,400 --> 00:30:06,760
Speaker 1: If you don't have access to aluminium and steel, a

498
00:30:06,760 --> 00:30:09,240
Speaker 1: lot of your construction is going to grow into a halt.

499
00:30:10,160 --> 00:30:14,000
Speaker 1: So there's always been some kind of subsidy or support

500
00:30:14,640 --> 00:30:20,160
Speaker 1: for materials at large. When it comes to net zero materials,

501
00:30:20,880 --> 00:30:23,520
Speaker 1: you're starting to see policy just at the very edges

502
00:30:23,600 --> 00:30:27,040
Speaker 1: getting involved here. And that might be something like lowering

503
00:30:27,080 --> 00:30:31,320
Speaker 1: electricity prices by not making you know, a smelter pay

504
00:30:31,480 --> 00:30:35,040
Speaker 1: grid vegas or something like that, and that'll sweeten the

505
00:30:35,080 --> 00:30:40,040
Speaker 1: deal for electrification. Or you're seeing some governments potentially Germany

506
00:30:40,120 --> 00:30:44,880
Speaker 1: thinking about how they might have procurement mandates for green

507
00:30:44,960 --> 00:30:48,960
Speaker 1: metals or look at as was discussed or Munich summit

508
00:30:49,280 --> 00:30:53,920
Speaker 1: about how you could judge a vehicle on its whole

509
00:30:54,000 --> 00:30:57,440
Speaker 1: of life carbon footprint rather than its tailpipe emissions. So

510
00:30:57,520 --> 00:31:00,360
Speaker 1: that starts to make things like green aluminiums start to

511
00:31:00,400 --> 00:31:04,040
Speaker 1: look a lot better, and it's a less direct way

512
00:31:04,040 --> 00:31:07,120
Speaker 1: of giving some support there out there and podcast land

513
00:31:07,280 --> 00:31:11,240
Speaker 1: interested in knowing more about de carbonizing aluminum just the

514
00:31:11,280 --> 00:31:14,840
Speaker 1: tip of the iceberg, but definitely an interesting industry to watch.

515
00:31:15,200 --> 00:31:18,480
Speaker 1: Is going to be one of a series of research

516
00:31:18,560 --> 00:31:22,120
Speaker 1: notes that we are writing about decarbonizing the hard to

517
00:31:22,200 --> 00:31:25,160
Speaker 1: abate parts of the metals industry. Am I correct and

518
00:31:25,600 --> 00:31:27,920
Speaker 1: on that? Which is the next one up? Next is

519
00:31:27,960 --> 00:31:31,040
Speaker 1: going to be steel, Then we're going to do petcams

520
00:31:31,160 --> 00:31:34,080
Speaker 1: and then cement. So by the end of it we

521
00:31:34,120 --> 00:31:37,160
Speaker 1: should have a pretty good idea about how much pain

522
00:31:37,240 --> 00:31:39,400
Speaker 1: all those industries are going to be in hard to

523
00:31:39,440 --> 00:31:41,760
Speaker 1: abate sectors. If you're in one, well you can go

524
00:31:41,840 --> 00:31:44,120
Speaker 1: through this thought process together. Thank you very much for

525
00:31:44,200 --> 00:31:55,000
Speaker 1: joining today. Today's episode of Switched On was edited by

526
00:31:55,080 --> 00:31:58,320
Speaker 1: Rex Warner the Gray Stoak Media. Bloomberginnia is a service

527
00:31:58,360 --> 00:32:01,400
Speaker 1: provided by Bloomberg Finance LP and its affiliates. This recording

528
00:32:01,440 --> 00:32:04,680
Speaker 1: does not constitute, nor should it be construed as investment advice,

529
00:32:04,800 --> 00:32:08,280
Speaker 1: investment recommendations, or a recommendation as to an investment or

530
00:32:08,320 --> 00:32:11,400
Speaker 1: other strategy. Bloomberginny F should not be considered as information

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00:32:11,480 --> 00:32:14,680
Speaker 1: sufficient upon which to base an investment decision. Neither Bloomberg

532
00:32:14,760 --> 00:32:18,320
Speaker 1: Finance LP, nor any of its affiliates makes any representation

533
00:32:18,400 --> 00:32:20,840
Speaker 1: or warranty as to the accuracy or completeness of the

534
00:32:20,880 --> 00:32:23,840
Speaker 1: information contained in this recording, and any liability as a

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00:32:23,880 --> 00:32:25,800
Speaker 1: result of this recording is expressly disclos