How the cement industry can pave a path towards decarbonisation

The cement industry is responsible for 7% of global carbon emissions, and many of the highest-intensity emitters in the world are cement producers. The sector’s path towards a net-zero future looks uncertain, but there is a way forward.

Why does cement produce such high emissions?

Emissions during cement production result from heating commonly used materials such as silica sand, limestone, slate, clay and iron ore. When these materials are heated, a new substance called clinker – grey balls the size of marbles that can be finely ground, ready to be transformed into concrete – is produced. 

But the heating process also releases CO2. This means cement is particularly emissions-intensive – as well as requiring a lot of heat to make, which produces emissions, the chemical process itself results insubstantial emissions too

What are the lower carbon alternatives for cement companies?

One way to reduce emissions during the production process is to mix in some fly ash, a waste product from burning coal that is inexpensive and widely available. When mixed with water, it forms products with cement-like properties. Using some fly ash means less traditional cement is required.

Carbon capture combined with storage or utilisation looks set to play a vital role in the cement industry in the years ahead. It has been forecast that by 2050 around 85% of cement produced around the world will come from facilities fitted with carbon capture technology.

Meanwhile, some start-ups are creating bio-cement bricks made from bacteria – a technique that results in significantly reduced carbon emissions relative to traditional cement.

Another option is to use a relatively new form of cement – Portland Limestone Cement (PLC). Thanks to its higher concentration of limestone than the traditionally used Ordinary Portland Cement (OPC), its production results in around 10% less emissions. However, many construction companies are choosing not to use PLC for full projects, fearful of its structural integrity. They only use PLC when they want to offset some emissions from OPC.

Cement industry solutions for a lower-carbon future

There is no single process, product, or technology that will result in the cement industry reaching its goal of carbon neutrality by 2050 – a range of approaches is needed. Below we list some of the strategies that are included in the Portland Cement Association’s Roadmap to Carbon Neutrality by 2050.

Near-term solutions

  • Replace raw materials with recycled materials 
  • Produce low-carbon cement mixes 
  • Optimise designs for the lowest lifecycle emissions

Medium-term solutions

  • Increase the use of alternative fuels 
  • Use renewable energy 

Long-term solutions

  • Carbon capture 
  • Introduce new cement mixes 

The most energy-intensive phase of the cement production process is at the cement plant, but there are opportunities to optimise energy use and shift away from traditional fossil fuels in other parts of the production chain. 

Elements like aluminium, iron and silica that are used to produce clinker can be sourced from industrial by-products of the coal and steel industries. 

Recycling concrete should be considered. The Construction Materials Recycling Association estimates that around 140 million tons of concrete are recycled each year in the US, reducing the environmental impact of construction projects. 

However, the International Energy Association believes that emissions from cement will continue to increase due to major players’ reluctance to shift to cleaner technologies. At present, the industry is dominated by a few major companies. Once they decide to change, the entire industry can follow suit. 

Credit markets are not pricing in emissions

To what extent are markets responding to the emissions generated by cement companies around the world? In short, credit spreads are not at all correlated with emissions. In fact, the lack of correlation is striking, even compared with other industries where we have seen a similar story.

The chart below shows there is a huge disparity of spreads with companies with similar emissions, and similar spreads for companies with spread levels that are multiples of each other. The market clearly is not looking at emissions as any guidance for credit quality, especially when assessing creditworthiness.

Emissions intensity (emissions per dollar value of sale) vs. credit default swap (CDS) spreads (basis points)

Sources: NatWest Markets, Bloomberg

How the cement industry can go beyond commitments

The cement industry is taking steps to work towards the 2050 carbon neutrality target, but for now the picture looks challenging. Direct emissions intensity of cement production increased by 1.5% per year between 2015-21, while emissions so far this year were 2% higher vs last year. 

Technology is not the problem: we are at the point where we could implement available alternatives and the cement sector could become a leader in adopting sustainable behaviour. 

Inspired by some of the world’s leading research institutes, proven cross-industry solutions and our own ideas, below we propose a set of possible policy and private sector actions to effect change in the cement industry. 

The most important point is that the world needs to act now. Governments in OECD countries, China, and India should set target dates for achievement of net-zero carbon emissions and point to the technologies that will help the industry get there.

  • Private companies should use low-carbon materials in new buildings and retrofitting. 
  • Flexible and innovative product standards can guide the industry towards lower-carbon products. 
  • Sufficiently high carbon prices can create an incentive to scale up investment in early-stage, low-carbon cements. 
  • Emissions caps should be reduced every year and an innovation fund introduced to support the deployment of novel technologies.
  • Using lower-carbon cements in US, Chinese and Indian megaprojects would reduce emissions considerably.
  • Certified labels for CO2 footprint material based on emissions would enable consumers to make more transparent decisions. 
  • Governments should reward producers that follow through on their commitments, giving multi-year contracts to those that act first, enabling them to de-risk their operations by using lower-carbon materials.
  • By setting ambitious targets and creating an oversight body, governments can better engage with the industry’s successes and challenges in reaching net-zero. 
  • Government policy should focus on functional and performance-based 

Get in touch

For more insights on managing the transition to net-zero, get in touch with your NatWest Corporates & Institutions representative or contact us here.

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