Displaying items by tag: Emissions Trading Scheme
EU: The European Commission has introduced a Draft Guidance document regarding the Free Allocation Regulation (FAR), now expanded to include ‘alternative hydraulic binders’ within the cement clinker benchmark. To qualify for allocation under this benchmark, these binders must meet three specific criteria: they must be used in cement production, not be included in any other benchmark under the European Union's Emissions Trading Scheme (ETS), and must not be by-products of waste or other production processes.
The European Cement Association (CEMBUREAU) has expressed concerns regarding these criteria. Namely, that the proposed changes suggest a shift from a clinker to a cement-based benchmark approach, making current methodologies and regulations inconsistent and impractical, especially as cement production often occurs outside ETS-covered sites. CEMBUREAU also states that some materials like pozzolana and calcined clay, requiring activation by lime or grey cement clinker, do not fit the hydraulic binder definition. Lastly, the association suggests that only materials covered by the standard EN 197-1 should be considered as alternative hydraulic binders, implying that the current definition in the FAR is overly broad and potentially problematic.
EU: The World Cement Association (WCA) has lent its voice to cross-industry support for the roll-out of the European Union's Carbon Border Adjustment Mechanism (CBAM). The mechanism taxes carbon-intensive imports, including cement, in order to prevent carbon leakage under the Emissions Trading Scheme. It first entered force on 1 October 2023, and will conclude its transitional period on 31 December 2025. Through its involvement, the WCA aims to inform and facilitate understanding of CBAM's reporting requirements, emission calculation methodologies and the workings of the CBAM Transitional Registry. WCA members and other stakeholders can access up-to-date CBAM information via a dedicated page on the association’s website.
WCA chief executive officer Ian Riley said "I'm pleased to announce our commitment to supporting our members in addressing the challenges and opportunities of this crucial initiative. The WCA is committed to supporting solutions that promote environmental responsibility and sustainability within the cement industry. We aim to work closely with our members and other stakeholders to navigate the challenges and opportunities presented by the CBAM regulation, ultimately contributing to a greener and more resilient global economy."
Cembureau sets manifesto for industrial transformation
10 January 2024EU: Cembureau has published its manifesto for industrial transformation for the European Parliament’s 2024-2029 legislative term. The manifesto calls for an ambitious EU agenda focused on the implementation of the European Green Deal along five key lines: 1 - turbo-charging EU and national funding and developing national industrial decarbonisation plans; 2 – Rolling out the EU Carbon Border Adjustment Mechanism (CBAM) to create a level playing field for EU industries; 3 – Building a pan-European CO2 capture network and moving towards circular carbon feedstocks; 4 – Placing circular economy at the heart of industrial decarbonisation; 5 – Enhancing the EU buildings’ agenda to significantly cut emissions.
Cembureau said “The European cement industry was one of the first sectors to present a 2050 Carbon Neutrality Roadmap following the publication of the European Green Deal. The past five years were marked by the development of a comprehensive EU legislative framework and the launch of significant decarbonisation investments in our industry. Now, with the deployment of carbon-neutral cements within our grasp, we need to implement transformative measures on innovation, infrastructure, public acceptance, digitalisation and skills development.”
Mineral Products Association welcomes UK cement carbon border adjustment mechanism plan
19 December 2023UK: The Mineral Products Association (MPA) has welcomed government plans for the implementation of a UK carbon border adjustment mechanism for cement by 2027. The association urged the government to develop policy and business models for carbon capture, use and storage, including supporting a domestic carbon neutral and negative products sector.
MPA executive director for energy and climate change Diana Casey said “We cannot take our supply of cement for granted and neither can we put ourselves at risk of unstable international trading markets. That is why today’s commitment to a UK CBAM is so important. Levelling the carbon cost between domestic production and imports will help the UK attract the investment required to decarbonise and ensure our long-term security of supply. The Government’s commitment to bring in the UK CBAM by 2027 is very welcome, and ideally it should be introduced in 2026 to align with the EU scheme. This is the only way to prevent any detrimental impact of the EU CBAM on UK industry.” She added “As well as a CBAM on cement, the MPA would be interested in exploring a CBAM on lime. However, the challenge for the lime sector is ensuring that lime exports can compete in international markets.”
UAE: Emirates Steel Arkan (ESA) has appointed consultancy A³&Co. to help plan and implement decarbonisation initiatives at its 5.7Mt/yr Al Ain cement plant in Abu Dhabi. The collaboration will focus on reducing CO2 emissions and costs, in line with the Science-Based Targets Initiative (SBTi)’s 1.5° Pathway for Net Zero and in conformity to the EU’s Carbon Border Adjustment Mechanism (CBAM).
ESA is committed to reducing its CO2 emissions by 40% between 2018 and 2030, and to achieving carbon neutrality by 2050.
Germany and Chile to launch club to help countries reduce emissions from cement production
27 November 2023Chile/Germany: The governments of Chile and Germany are reportedly preparing to launch a so-called ‘climate club’ to help developing nations invest in technologies to decarbonise sectors such as cement and steel production. The partners will set up a platform to connect countries with funding and technical support from governments and the private sector, according to a draft statement seen by Reuters. The statement is expected to be published at the United Nations’ Conference of the Parties (COP) 28 event on 1 December 2023 set to take place in Dubai.
"On hard-to-abate sectors, starting with steel and cement, we will advance conducive policy frameworks for accelerating decarbonisation," the statement said. It added that this will include attempting to coordinate international green industry standards, such as counting the emissions in industrial products.
A website for the club lists 33 members including the US, Argentina, Australia, Canada, Colombia, Egypt, the European Union (EU), Indonesia, Japan, Kenya, Mozambique, Morocco, Ukraine and the UK. It has been viewed, in part, as an attempt to reconcile countries annoyed by the EU’s Carbon Border Adjustment Mechanism (CBAM), which started in October 2023. However, neither China nor India appears to have joined the ‘climate club’ so far.
Mineral Products Association bemoans UK budget’s lack of commitment to a UK carbon border adjustment mechanism
23 November 2023UK: The Mineral Products Association (MPA) has called on the UK government to publish its promised response paper to consultations over a proposed UK carbon border adjustment mechanism (CBAM) for imports of goods produced by heavy industries, including cement. This follows the failure of the government’s latest budget for 2023 to commit to the development of a national CBAM. The MPA said that it was ‘deeply disappointed’ with the outcome.
MPA executive director for energy and climate change Diana Casey said “The delay in committing to a CBAM sends the signal that the UK is not the place to invest. Cement is essential to our everyday lives. The construction of our homes, hospitals, offices and much more depend on it. We cannot take its supply for granted and neither can we put ourselves at risk of unstable international trading markets. Levelling the carbon cost between domestic production and imports is vital to attract the investment required to decarbonise and ensure our long-term security of supply. The UK government must urgently commit to a CBAM on cement.”
Arabian Cement Company to establish decarbonisation roadmap for Sokhna cement plant
21 November 2023Egypt: Arabian Cement Company has hired consultancy A³&Co. to help develop a decarbonisation roadmap for its 5Mt/yr Sokhna cement plant. The roadmap will include the implementation of an integrated environmental, social and governance (ESG) business model, Science-Based Targets Initiative (SBTi)-verified targets, carbon market trading and EU carbon border adjustment mechanism (CBAM) registration. Arabian Cement Company will execute projects to achieve its goals via a strategic partnership with A³&Co and the European Bank for Reconstruction and Development (EBRD).
Arabian Cement Company CEO Sergio Alcantarilla said “We are excited about this partnership with EBRD and A³&Co., which showcases our commitment to environmental stewardship and sustainable development. By embracing cutting-edge solutions and adopting greener processes, we are not only reducing our carbon footprint but also setting new benchmarks for the industry.”
A³&Co. CEO Amr Nader said “Through our collective expertise, we are confident that we can drive meaningful progress towards decarbonisation and the production of green cement, setting a precedent for responsible business practices in the region. The renewed cooperation between Arabian cement and A³&Co. is an additional milestone in our successful collaboration over the past two years. A³&Co. will also develop a Climate Corporate Governance (CCG) framework for Arabian Cement Company, which is the cornerstone for a fully-functioning ESG system in line with international norms.”
Update on UltraTech Cement, November 2023
01 November 2023UltraTech Cement approved a US$1.5bn capacity expansion plan this week. The initiative intends to add 21.9Mt/yr in production capacity by setting up four new cement plants, four upgrades and four new terminals. It will also add 39MW in waste heat recovery (WHR) units and alternative fuels feeding and handling investments. Commercial production at the new sites is scheduled to start from the 2026 financial year onwards.
The company is India’s largest cement producer by production capacity and the third biggest globally outside of China. Yet it is still growing as this latest announcement shows. Kumar Mangalam Birla, the chair of parent company Aditya Birla Group, revealed the ambition earlier this year, that UltraTech Cement wants to reach a production capacity of 200Mt/yr in the near future. This is likely to be ordinary Portland cement (OPC) capacity from both integrated and grinding plants. It reported a figure of 132Mt/yr in its annual report for the 2023 financial year. This latest capacity investment is its third in recent years. In December 2020 it announced investment of just below US$560m to add 12.8Mt/yr of capacity with commissioning by around the end of the 2023 financial year. It later confirmed that most of this had been completed on schedule. Then another US$1.55bn investment was ordered in June 2022 to add 22.6Mt/yr. This tranche of new plants and terminals is planned to be completed by the end of the 2025 financial year.
Graph 1: UltraTech Cement’s OPC production capacity and utilisation rate, 2017 - 2023 financial years. Source: Company annual reports.
The graph above shows how the company’s capacity has grown since 2017. This is the year in which it acquired 21Mt/yr of capacity from Jaiprakash Associates for US$2.5bn. These plants then show up in the capacity figure for 2018. The next big bump to capacity arrived in 2019 when UltraTech Cement was able to complete its purchase of Century Textiles & Industries, adding another 15Mt/yr of capacity. Since then though it has mainly been newly built plants or upgrades. It is also worth noting the capacity utilisation figures the company has reported. There has generally been an upward trend since 2017 with a dip during the Covid-19 pandemic years in 2020 and 2021. This has also been happening despite adding more capacity through both acquisitions and building new plants. The other point to note is that the cement company is mostly a wholly India-based one. It has presences in the UAE, Bahrain and Sri Lanka but these are small compared to the operations back home. In the 2023 financial year, 23 of its 24 integrated plants were domestic, 25 out of 29 grinding plants were and seven out of eight terminals were too.
UltraTech Cement’s current nearest rival, Adani Group, appeared on the scene in 2022 when it bought Holcim’s subsidiaries in India. The timing may have been coincidental but, after Holcim agreed to sell to Adani Group in May 2022, UltraTech Cement announced its US$1.55bn capacity drive in June 2022. A year later in June 2023 Adani Group targeted a capacity of 140Mt/yr by 2028. To give an idea of the market both of these companies are competing in, Ratings Agency ICRA’s last forecast in September 2024 predicted that cement volumes would grow by 9 - 10% in the 2024 financial year. Capacity expansion by all cement producers was expected to be driven by “steady demand for housing and increased government investments in infrastructure.”
UltraTech Cement may be the fastest expanding cement company in the world at the moment. India certainly needs the cement as its population overtook China’s in April 2023. The Aditya Birla Group company is not taking any chances with its competitors by maintaining its lead in capacity. One risk it may want to watch out for though is India’s nascent Carbon Credit Trading Scheme. Some form of carbon trading for the petrochemicals, steel, cement and paper sectors looks set to start in the second half of the 2020s. However, any such scheme is likely to favour incumbent manufacturers with newer plants. With the country’s net zero target set at 2070, UltraTech Cement has plenty of room to manoeuvre.
EU: The EU launched the transitional phase of its carbon border adjustment mechanism (CBAM) on 1 October 2023. Parties that import cement - and five other commodities - into the EU must now show the embodied CO2 emissions of their products.
The transition comes ahead of the full implementation of the CBAM in January 2026. At this point, those importing cement into the region will have to pay for the embodied CO2 of their products in order for them to enter the EU Common Market. Producers within the EU already pay for a proportion of emissions under the auspices of the EU Emissions Trading Scheme (ETS).
The intention of the CBAM is to reduce the risk of 'carbon leakage' as the costs of making cement rise in the EU due to changes in the ETS. While cement producers, as heavy CO2 emitters, are currently shielded from the full cost of their emissions, the number of free allowances they receive is set to fall substantially by 2026. At the same time, the cost of emitting a tonne of CO2 under the ETS, currently Euro80-90/t on the open market, is widely expected to rise.