Regulatory reform, investor scrutiny and carbon capture all part of the mix if hard-to-abate industry is to achieve 2050 ambitions.
The cement sector faces a hard road to net zero, according to a new report by Credit Suisse, due to the difficulties in decarbonising its inherently carbon-intensive processes.
The report said that cement and concrete producers would struggle to achieve significant emissions reductions before 2030, but said firms with long-term strategies for reducing CO2 emissions stood the best chance of meeting industry-level commitments to net zero concrete by 2050.
Achieving significant reductions in emissions would depend largely on the deployment of carbon capture technologies, which are largely unproven at scale, and the incentives provided by widespread and rising carbon pricing.
Credit Suisse highlighted the need for higher global carbon prices to advance decarbonisation, but said the current lack of widespread carbon allowance systems would limit the ability of the cement and concrete industry to reduce emissions at a sufficient pace to reach net zero concrete by 2050, resulting on the costs per ton of carbon capture being too high relative to profitability.
The report recommends that the global carbon prices need to be increased to encourage the use of environmentally- friendly alternatives and advance decarbonisation. The European cement industry accounts for 7% of all carbon permits traded on the EU Emissions Trading System, but most non-European output is not currently covered by similar schemes.
“Even if carbon allowances are implemented in a manner that leads to [carbon capture] being economically appealing at scale (as is the case currently in Europe), cement pricing will need to reflect the incremental costs, something we understand is not happening fully in this region,” the report said.
Concrete is the most used material in the world by volume after water and due to the extensive usage of concrete in construction projects, the sector is responsible for at least 7% of man-made CO2 emissions. World cement demand has grown in recent years, with demand particularly strong through the pandemic, but is likely to remain stagnant in the medium term.
Reporting for construction, infrastructure and building projects generally under-estimates total emissions as they only cover Scope 1 and 2 emissions, rather than those from further along the supply chain, including from construction materials, of which cement can represent upwards of 60. Including emissions from materials may increase life-cycle emissions by 30% for a typical residential project.
“The cement industry’s outsize share of emissions is causing investors to avoid the industry altogether and to bypass consideration of the lack of viable substitutes, cement’s vital importance for construction activity, as well as its successful CO2 reduction track-record and ambitious targets,” the report added.
But by more actively monitoring Scope 3 emissions of construction projects and companies, Credit Suisse said investors could enable “impactful change”, as this would help to unlock premium pricing for lower-emission alternatives, incentivising and providing capital for cement companies to accelerate decarbonisation.
The report also called for stronger incentives for regulators and other stakeholders to voice a clear preference for cleaner cement, such as ‘green building’ indexes incorporating low-emission materials or regulations favouring the usage of lower-clinker cement products.
A key issue with the production of cement is the majority of its emissions are generated during the production process, not in the consumption of power or fuels, with 60% of cement emissions coming from the process of calcination. This makes the industry more difficult to decarbonise than most others.
Substitutes for concrete are also very limited, with possible popular replacements such as wood, steel and compacted materials not being able to match concrete’s durability, malleability, or ease of production on-site. According to the report, there are materials that can replicate cement’s binding properties for production of concrete, such as fly ash, silica fumes or blast furnace slag.
These are by-products of other production processes such as the combustion of coal, production of steel, and silicon, which implies that they cannot be produced at will. But the sector has begun more widely implementing proven technologies, such as alternative materials and fuels, more efficient kilns, and greater use of renewable and clean power. The Credit Suisse report also recommends switching to low-carbon fuel sources such as tyres or disposed of materials.
The industry is still attempting to make changes to reach net zero, with members of trade association GCCA – which account for most of the world’s cement production ex-China – having made pledges to reach net-zero concrete by 2050. These companies have aggressive plans for reducing per-ton cement-related emissions by 15% on average in 2020-2030. Credit Suisse estimates these companies will have reduced emissions per ton of cement by 32% from 1990 to 2030.
The example of the steel sector was highlighted by the report, with the sector accounting for 7-9% of man-made emissions. An increased proportion of steel production seems set to shift toward recycled production, with steel scrap supply reaching 50% of total consumption. This could lead to a 20-40% reduction in steel-related emissions and potentially provides an example of some approaches the concrete industry could use to yield similar results.
