Regional cement conferences held over the last month from Tunisia to Turkey, Duesseldorf to New Delhi, have offered a timely opportunity to compare and contrast sentiment in the cement industry across a wide range of markets.
One of the most striking differences is the level of attention given to decarbonisation, not just in the conference hall, but on the sidelines of these events in conversation with cement producers and equipment suppliers.
In Europe, the VDZ Congress programme in November was one of intense focus on net-zero cement production, reflecting the concerns of cement producers, who are now watching the clock tick down to 2034 and the complete phase-out of free carbon allowances to the EU cement industry under the EU ETS, which will be replaced full by the Carbon Border Adjustment Mechanism (CBAM). This transition will dramatically alter the economics of cement manufacture, with the taxation of CO2 emissions potentially reaching EUR150/t by 2030 and EUR250/t by 2034 (read Navigating EU CBAM).
For EU cement producers, this poses a potentially existential question: can they harness decarbonisation technologies within this remaining decade – including the fiendishly complex, uncertain and costly adoption of carbon capture – to operate profitably within the new carbon taxation regime?
Over in Türkiye, where Türkçimento's meeting was held in November, the conversation is also taking place around decarbonisation as the country and cement industry seek to align themselves closely with EU standards and norms. The government is finalising the legal framework to establish the country’s own carbon emissions trading system, which will align with CBAM (read the forthcoming article by the Government of Türkiye in ICR January 2025).
In so doing, Türkiye’s government recognises the benefits of incentivising its own heavy emitters to decarbonise, while ensuring carbon taxes are paid in Türkiye through its own ETS, rather than potentially to European governments through import taxes via CBAM.
Therefore, the discussions between cement producer and the government in Türkiye are moving in the direction of Europe – with net-zero activities high up on the agenda of cement producers, who are actively exploring advanced decarbonisation technologies (see Limak’s recent trial of hydrogen as an alternative fuel).
Moving to Tunisia, which hosted the AUCBM’s annual conference this week, decarbonisation is certainly entering into conversations between government, producers and equipment suppliers but is not a universal priority for cement producers.
Across the MENA region, cement producers are primarily focussed on the fundamentals of cement plant operation, improving efficiency and profitability – often in challenging markets with over supply, such as the UAE or Tunisia – or busy with new plant construction as in Iraq or Nigeria.
The hard economic reality is that absent a viable business case, which in Europe is provided by the carbon price, no cement producer anywhere can justify the adoption of costly decarbonisation technologies, above all carbon capture.
Global carbon market
This is why the news of an agreement on Article 6.2 of the Paris Agreement at the recently concluded COP29 meeting in Baku so important, as it heralds the possibility of establishing a global carbon price.
After 10 years’ of negotiation, the Parties agreed standards for a centralised carbon market under the UN.
This paves the way for the emergence of domestic carbon markets and provides an agreed mechanism through which they will be able to link to ultimately create a global carbon market, regulated by the UN, where countries can buy and sell emissions reductions across borders.
Cement companies worldwide, not just in Europe, will have to pay for their carbon emissions. Once operating within a carbon trading system, cement producers may need to purchase carbon allowances or credits to cover their emissions. This should create an economic incentive for companies to reduce emissions, either by improving production efficiency, adopting carbon capture and storage (CCS) technologies, or shifting to low-carbon fuels.
A global carbon market would also solve the problem of carbon leakage for EU producers, who fear CBAM will not be a watertight, and that in practice cement and clinker from higher CO2 emitting nations will be able to permeate the system and undermine the domestic cement base, which is exposed to high carbon prices. Their fear is that CBAM will create opportunities for those in on the EU’s periphery, where net zero has been less aggressively pursued, to undercut EU producers and throttle the sector in the process.
Will the Baku agreement have the transformative impact its brokers are hoping for?
Carbon is everyone’s problem, therefore its reduction must take place everywhere. All 195+ signatories to the Paris Agreement have now endorsed the central role that carbon markets in delivering on the net-zero climate goals.
A global carbon regime will not appears overnight, but it has the potential to radically transform the industry. How soon depends on the pace of development of domestic carbon pricing systems. It will not be overnight. And following the election of Donald Trump, who is bitterly opposed to the Paris Agreement, it will not be straightforward.
But at a near point in the future, cement producers in all regions, and not just Europe, will be intensely focussed on decarbonisation, even in the conference sidelines.