European producers were singled out among the worst performers in a new environmental ranking of the world’s largest publicly-listed cement companies, published on Monday (9 April).
Cement companies need to “more than double” their emissions reductions if they are to limit global warming to below 2°C, in line with the UN’s climate goals, according to new research by CDP, a UK-based research organisation pushing for greater transparency in the way companies communicate environmental performance to investors.
Cement is the second most polluting industry after steelmaking and is used in concrete, which after water is the most consumed product in the world, CDP pointed out.
However, the sector has so far remained largely below the radar.
“Cement is a heavy and largely invisible polluter, yet taken for granted as a necessary building block of basic civilisation,” said Paul Simpson, the CEO of CDP.
This could change. The cement industry itself accounts for only 6% of global CO2 emissions. But the built environment, which includes offices and residential buildings, uses concrete extensively and accounts for over a third of global emissions, the report pointed out, suggesting pressure may in future come from downstream users of cement.
Indian companies taking the lead
In the meantime, European cement companies appear to be lagging behind when it comes to decarbonisation.
“Strong regional trends are clear, with Indian companies taking the lead” on reducing carbon emissions during the cement-making process – for instance, by using fly ash sourced from other carbon-intensive sectors such as steel production, CDP said.
Indian companies also benefit from “newer and more efficient cement plants” driven by high market growth in the region, while European peers rely on “older cement plants”, the CDP pointed out.
“European companies will need to find scalable and sustainable alternatives to fly ash and slag or develop low-carbon technologies to be able to improve current emission intensity levels,” the report said.
CDP acknowledges that cement is a “hard-to-abate” sector because of its high proportion of inherent process emissions and a lack of obvious replacement materials.
“The localised nature of its production, the low margins of the industry and the traditionally low rate of innovation all make change at global scale harder to implement relative to other industries,” it says.
In Europe, the Emissions Trading Scheme (ETS) was intended to regulate emissions from the sector. “However, structural issues and lobbying of policymakers have undermined the potential for change,” the report pointed out.
When the ETS was reformed last year, green lawmakers in the European Parliament pushed for cement and clinker to be removed from a list of vulnerable energy-intensive industries eligible to receive free CO2 emission permits. However, industry representatives lobbied to keep as many free allowances as possible, saying the ETS drives up their electricity costs, putting them at a disadvantage against global competitors.
‘Carbon leakage’ argument “particularly weak”, CDP says
According to CDP, the deal that was eventually struck did not go far enough to spur low-carbon innovation in the industry.
“Carbon regulation for the sector remains benign,” the report pointed out, saying cement factories in Europe continue to benefit from surplus free allowances under the ETS. “Carbon prices need to rise by three to six times to provide incentives to deploy technologies such as CCS,” it said.
CemBureau, the European cement association, was guarded in its response to the reform. “The deal reached contributes to predictability and legal certainty for business operations,” the trade association said in a statement welcoming the ETS deal last November.
However, it said cement makers “had hoped for a stronger signal towards best-performing plants” and greater protection against the risk of relocation, also referred to as “carbon leakage”.
But analysts have cast doubt on industry claims that the sector is at risk of delocalisation.
“Cement is a relatively shielded sector that has limited competition from non-EU countries,” said consultants CE Delft in a report for the EU Commission. Cement imports amount to less than 1.3% of total EU production, according to 2014 data.
This analysis is backed up in the CDP report. “The high carbon-intensive sectors continue to undermine the system with their ongoing lobbying of policymakers to allocate allowances to them based on the argument of carbon leakage,” CDP told EURACTIV in e-mailed comments.
“We ﬁnd this argument particularly weak for the cement companies given the regional and local nature of cement markets and our analysis of trade flows shows that currently 90% of EU imported cement is coming from other EU countries”.
Few European companies praised
The CDP report is not entirely critical of Europe, however, recognising that cement companies there “benefit from alternative fuels sourced from organised waste collection” and that “emerging market producers are behind on this, due to limited infrastructure”.
Germany’s HeidelbergCement and Switzerland’s LafargeHolcim were both praised for their leadership in using alternative fuels and developing new low-carbon products, respectively.
But CDP says more could be done. “Cement companies should be looking at ways to further use alternative materials and fuels, improve the energy efficiency of their plants, and accelerate investments in low-carbon technologies such as carbon capture and storage, which is crucial for their long-term viability,” said Marco Kisic, Senior Analyst at CDP.
Regulation is likely to be the key driver of change, said Kisic.
“Interestingly, this may come from downstream as building regulators and owners shift their focus from operational emissions to those associated with creating the buildings themselves.”
- CDP: Building Pressure report (9 April 2018)