In its Competitiveness Compass, published on 29th January, the European Commission sets the direction of travel in line with the findings of the Draghi Report: the EU needs to focus on innovation, balance decarbonisation and competitiveness, and ensure security of supply. The much-needed transformation of society further requires a strong care for quality jobs, a leveraging of public and private financing and a stronger focus on the completion of the single market. Coordination between various levels of government will be the oil that makes the wheels turn around.
The cement industry is ready to contribute to that debate. CEMBUREAU published an update of its 2050 Roadmap in May 2024 on the back of more than 100 decarbonisation projects in Europe. These projects span a wide range of technology levers and contribute to the cement industry’s ambition to net zero by 2050 with the potential for negative emissions down the cement-concrete value chain.
The roll-out of these projects happens against a legal framework that has been developed over the past years. The cement sector does not join the chorus of those who are eager to roll back the Green Deal. One of the cornerstones of the Fit for 55 package is the Carbon Border Adjustment Mechanism (CBAM), which needs to be implemented within the time foreseen and will create a level playing field for the cement industry to invest in decarbonisation. Overall, the security of our investments now depends on the implementation of the rules in the Fit for 55 package complemented by a range of enabling conditions that we expect to see in the Clean Industrial Deal and that allow for an investable business case.
It is these enablers that need to be at the heart of the Clean Industrial Deal. Over the years, the cement industry has invested and continues to invest in research and innovation, driven by the European Cement Research Academy. The thirty-year business cycle in our sector requires investments and projects to be launched today if the ambition for 2050 is to be turned into reality. Now is the time for deployment and that is where the regulatory focus should be.
Deep decarbonisation projects go with substantial investments both in terms of CAPEX and OPEX where the latter are often at equal level with the first, certainly considering the elevated level of electricity cost in Europe compared to other parts of the world.
Funding mechanisms have been developed but are still largely insufficient and access to funding lacks a coordinated approach. Companies submitting a project for financing need certainty about the amounts of financial support available, the degree to which several funding sources can be cumulated, consistency in eligibility conditions and all of this within a coherent time limit. The need for leveraging private capital through deeper capital markets and a stronger focus on venture capital or equity financing takes a prominent place in recent documents published by the European Commission. The Clean Industrial Deal should include these items in an all-encompassing approach to financing which looks at a stronger focus of the Innovation Fund on deployment, a thoughtful rethink of state aid rules that allow for a fair return of ETS payments into sector-specific funds, taking into account the cost and abatement curves proper to each of them, and a more transparent and coordinated approach to de-risking financial instruments such as contracts for difference.
Project development implies submitting requests for permits, be it for technical installations or for low carbon energy assets. Both the Net Zero Industry Act and the Renewables Energy Directives include provision to streamline and accelerate the permitting process. However, the implementation on the ground is still very uneven among the Member States and this is not necessarily because national legislation does not get adopted. Many Member States that have implemented the rules struggle with a lack of administrative capacity or finding the right balance between due process and shorter permitting times in case of legal challenges. This is an area where capacity building and best practice sharing could be coordinated at EU level.
The need for the Clean Industrial Deal to come forward with a CO2 infrastructure package is a key condition for the decarbonisation of the cement industry. Carbon capture and storage /use represents 43% of the CO2 reduction efforts in the cement industry by 2050. Our Roadmap sets an ambition of up to 14 million t CO2 storage by year by 2030, up to 50 Mt by 2030 and up to 62 Mt by 2050. The CO2 captured needs pipeline transport and fair access to storage sites and those plants not close to this essential infrastructure, need urgent legal certainty about the types of CO2 use that can build an investable business case. With energy demand from the cement sector projected to increase from 21 TWh in 2021 to between 47 TWh and 113 TWh in 2050, the financing of the electricity grid, improved interconnection, a fast permitting regime for the installation of low carbon energy assets on-site and access to affordable electricity are certainly amongst the key enablers for transformation of the industry.
Creating lead markets is equally critical. The cement and concrete value chain adds EUR 93 bn to the European economy and taps into the construction market which represents 10% of the EU GDP. Both at European and global level, the cement industry has elaborated a definition of low carbon cement through a banding approach where cement types are plotted according to Global Warming Potential values. We stand ready to discuss how lead markets can be created and demand for low carbon products can be leveraged through a reform of public procurement rules, financial incentives through contracts for difference and methods for aggregating demand.
The cement industry is looking forward to a Clean Industrial Deal that will provide the framework to deliver on the many projects in the pipeline and allow our industry to take our workforce along, and motivate them with a focus on quality jobs, skills development and an attractiveness of the sector.
Koen Coppenholle is the CEO of CEMBUREAU.
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