Big companies need to pave decarbonisation pathways
Cement has been one of the key global carbon-emitting sectors for decades. Over the last 25 years, we have seen a global production expansion of roughly 400 per cent, leading to a 7-8 per cent share of global carbon emissions, according to the data provider Global Cement. Rising construction demand is the prima facie driver of this increase. Because of ties to spatially dispersed natural resources and traditional production routes that require significant upfront investments and heavy assets, the cement industry is in the hands of large, vertically integrated international conglomerates. These are the big companies that shape the way Central and Eastern Europe will decarbonise the cement industry.
Portland-type cement is an essential industry product. To produce it, companies must first convert calcium carbonate into clinker, an intermediate product, which is then blended with other inputs to create the final cement blend. Clinker production is at the core of the emission-intensive processes: it requires 1450°C heat and produces about 60 per cent of the cement plant’s total carbon emissions.
The EU Emissions Trading System (EU ETS) covers all these emissions. Paradoxically, while cement is not widely traded in the EU and mostly remains a local product with a high weight-to-value ratio, the sector is believed to be at risk of carbon leakage and hence benefits from free EU ETS allocation, covering almost all its surrendered allowances. The industry is left with stable and high and high margins and profits.
According to ISFC’s Sustainable Investment Roadmap, there are tens of such cement plants in the V4 countries (Czechia, Hungary, Poland, Slovakia). The sector contributes 6 per cent to the V4 greenhouse gas emissions. All these plants are integrated into the international conglomerates, namely, the big ones such as Heidelberg Materials (ex-HeidelbergCement), Holcim-Lafarge or CEMEX and the smaller players, including Dyckerhoff/Buzzi Unicem or CRH.
With the foreseen cuts to free allocations due to the carbon border adjustment mechanism (CBAM) phase-in, the cement industry must eliminate fuel combustion emissions through fuel-switching or electrification and hard-to-abate process emissions through investments into novel technologies.
Carbon capture and utilisation (CCU) or storage (CCS) are the two most prospective carbon management technologies for the cement industry. Although not fully operational at scale, demonstration projects are a matter of moments. In the Norwegian Brevik CCS project, the cement plant will be fully operational in 2024. In Central and Eastern Europe, Poland is leading the way towards CCS.
Not surprisingly, international conglomerates lead and pilot the projects in plant installations where it pays off the most. The V4 countries come only after the pilot projects in Western and Northern Europe. Yet, Poland has sizable domestic plants and access to the North Sea storage sites; hence the boom in CCUS comes earlier than in the other V4 countries.
Is there any other scalable solution to process emissions than CCUS? Not quite yet. Nevertheless, all the companies invest in renewing their assets, bringing better energy efficiency, waste heat recovery, fuel-switching and possibly electrifying operations to decrease fuel combustion emissions.
Research and development will help to use other cementitious materials instead of clinker. Decreasing the clinker-to-cement ratio can make a difference in the process emissions. Moreover, amending material and construction standards can lead to a preference for low-carbon cement or other building materials instead, which public procurement policies of tomorrow should demand.
Eventually, all investment decisions into novel technologies are in the hands of big companies that steer their global decarbonisation strategies, and the V4 cement plants will be on the receiving side of such decisions. Granted, V4 countries move forward blinded by a lack of detailed decarbonisation strategies and missing sectoral transition pathways for hard-to-abate industries including cement.