ÃÛ¶¹ÊÓƵ

Cement production is around 4bn tonnes and expected to grow to 5bn by 2050. This results in 25-30bn tonnes of annual concrete production, the most consumed good after water, and is the basis for virtually all construction and the basis for development. The issue is that the industry emits 2.8bn tonnes of CO2 annually, equating to7-8% of global CO2 emissions, of which around 60% are process emissions and 40% are related to the burning of fossil fuels^*. There was a consensus on the panel that reducing cement and concrete consumption is unlikely to be a solution to this issue.

There are a number of known solutions, including: (1) supplementary cementing materials (SCM) lowering the clinker ratio; and (2) increased use of alternative fuels. Carbon capture is a mid-term solution with initial projects being launched now, but costs are high (particularly with traditional amine solutions), though newer approaches could be interesting. In any case, the key for scaled de-carbonization is industrial feasibility (e.g. availability of raw materials) and economic feasibility (additional variable costs below local CO2 price). So the crux is ultimately costs and incentives. There is a cost curve on carbon abatement which starts at a negative value (e.g. burning waste) and then rises. There was a view that a very large opportunity exists to de-carbonize at below US$50/tonne of CO2 through conventional means. Regulation will be important, including setting incentives appropriately (e.g. through carbon pricing), creating level playing fields (e.g. through a carbon border adjustment mechanism), building codes (e.g. allowing use of recycled materials) and subsidy (e.g. funding of CO2 pipeline infrastructure and other pilots).

The cement sector will be EU taxonomy eligible but only for revenues that are below the Emissions Trading Systems benchmark (by definition, the top 10% of EU plants). There was a view that the focus should be more on concrete emissions (not cement) or the CO2 intensity per square metre built. One panellist noted the irony of being able to use polluting materials for building that reduces emissions by 15% and being able to account this as taxonomy eligible. How investors can help / participate in solving this problem is somewhat less clear: there are higher risk opportunities in the private market with a plethora of start-ups which may become listed in due course. From the incumbents, another panellist argued there are significant differences in innovation capability.

^*Chatham House report (2018), ‘Making Concrete Change: Innovation in Low-carbon Cement and Concrete’. International Energy Agency (2017), A blueprint for a climate friendly cement industry, WWF International.