New report from CDP suggests cement companies urgently need to step up climate action or risk jeopardising Paris goals
In the fight against climate change, the battle lines are often drawn along energy lines, with eyes firmly on rates of coal burning and deployment figures for wind turbines.
But while the decarbonisation of the energy industry is continuing apace - evidenced by fresh figures last week revealing solar outstripped all fossil fuel installations last year - another, major emissions source is operating largely under the radar.
The manufacturing and heavy industries sector remains one of the world's main sources of emissions. Cement alone is responsible for around six per cent of global CO2 emissions and rising. Only last week it was revealed emissions under the EU's Emissions Trading System (ETS) rose for the first time in seven years this year, in part due to growth in the cement sector.
Warnings of cement's threat to global climate efforts will become even starker today, with a new report from CDP claiming cement companies must more than double their rate of emissions reductions if the sector is to do its fair share in averting dangerous levels of global warming.
The paper ranks the world's 13 largest publicly listed cement companies on their climate action efforts, and finds most lagging. "In its current form, [the cement industry] is not compatible with the commitment taken at COP21 in Paris, and needs a significant change in business-as-usual practices to align to a 2-degrees trajectory," it warns.
Cement's contribution to global warming is two-fold. First, it releases pure carbon dioxide directly into the atmosphere when calcium carbonite is heated to produce lime. In addition, this process - called calcining - requires a lot of heat, which results in further combustion emissions from the fuel that is used.
"Cement is a heavy and largely invisible polluter, yet taken for granted as a necessary building block of basic civilization," says Paul Simpson, CEO of CDP.
As Simpson notes, cement is a critical component of the construction sector, and therefore vital to economic growth in many countries. Regulation of the sector to date has therefore been light, and although some forward-looking firms have been proactive in trying to source greener fuels and cleaner technologies to enable lower carbon cement production, in general the sector has been relatively slow to respond to the climate challenge, in part because of the inherent difficulty in decarbonising the production process. Generally abatement measures available to the cement sector are limited, but include carbon capture and storage and the use of alternative, waste-based fuels.
CDP found that the 13 companies on average have reduced their emissions by one per cent over the last four years - not nearly quickly enough to meet a two degrees trajectory promised under the Paris Agreement. Just three of the companies tested had emissions targets that meet a two degrees goal.
According to the rankings, Indian firms Dalmia Bharat, Ambuja claimed the top spots for emissions intensity levels, and Columbian cement firm Cementos Argos was placed third. Indian cement companies were among the cleanest thanks to their use of alternative materials such as fly ash and steel from other carbon-intensive sectors such as the coal industry, according to CDP. The Indian cement sector also tends to boast newer, more efficient plants, unlike in Europe where firms rely on older, less efficient sites, the paper noted.
But cutting emissions isn't just about moving up the league tables for these firms, CDP stresses. The report warns of a number of looming threats to high-carbon comapnies: changes to water supply and weather patterns pose risks to the supply chain, while regulatory risks are increasing as governments around the world take steps to improve the carbon footprint of new cities.
Even the cement industry itself accepts the need for change. Bernard Mathieu, director of World Cement Association's Climate Programme, admits the industry is "at a crossroads".
"Either it will succeed in the definition and faster implementation of greenhouse gas mitigation roadmaps, working closely with public authorities to shape regulation that enables a smooth transition towards a low carbon construction sector; or it could face more aggressive moves from investors, regulators and other stakeholders," he tells BusinessGreen.
Although developing new clean technologies and upgrading ageing plants will be a capital intensive undertaking for many companies, Simpson insists it is necessary for firms to secure their future viability in a low-carbon world.
"With potential pressure coming from multiple sources, including down the value chain in the form of building and city regulation, cement companies need to invest and innovate in order to avoid impending risks to their operations and the wider world," he says. "This may seem challenging at first, but every year it is delayed, the cost becomes greater, so management teams, regulators and investors need to think long term. There is a solution - cement companies just need to invest properly in finding it."
In particular, the paper recommends cement companies invest in large-scale CCS, rather than small pilots, in order to scale emissions abatement efforts. However, to make CCS economic CDP warns that carbon prices will need to be three to six times higher than their current levels.
Meanwhile, firms need to boost their R&D into low-carbon technologies to jump-start other potential emissions savings breakthroughs, boost the use of biofuels, and roll out internal carbon pricing across the sector, the report argues. Such strategies should be incentivised by linking climate action to executive pay, CDP suggests.
"Long-term carbon risk management should be better embedded into companies' management processes - and more specifically into remuneration schemes," WCA's Mathieu agrees. "Cooperation at sector level and industrial symbiosis models across sectors are crucial to help accelerate the transition."
Industry and environmentalists appear to be singing from the same hymn sheet, but it's clear the industry needs to rapidly ramp up decarbonisation action. The upcoming WCA Global Climate Change Forum, taking place in Paris in June, will be one event to watch closely to see if fresh efforts materialise.
Cement might be easy to miss on the list of climate change culprits, but it seems clear that getting to grips with the sector's hefty emissions will be crucial to getting the world on a two degrees trajectory.
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