(Credit: Pixabay)The European Union’s largest cement manufacturers have committed to reducing their direct emissions by 30% by 2030, and that target is attainable, according to insight by S&P Global Ratings — but enhanced EU reduction targets and doubts surrounding sustainable technology advancements could hold the industry back.
S&P Global Ratings released a two-part report on the cement industry’s decarbonization potential in Europe. The first focuses on how manufacturers are increasing their emissions reduction targets while maintaining a strong business, and the second looks at the financial and rating implications the industry faces in terms of the targets and increasing outside pressures.
The report finds that the 30% reduction in Scope 1 and 2 emissions by the end of the decade is attainable, especially through thermal-energy efficiency and fuel switching. Beyond that, S&P Global Ratings says a significant drop in direct emissions may only be obtained by reduced demand and accelerated carbon capture and storage.
That is because technologies to advance emissions reduction in the cement industry have been slow to come online and significant investment is needed for that to happen. Additionally, the EU’s Fit for 55 targets, which calls for a 55% emissions reduction by 2030 and the EU becoming carbon neutral by 2050, may lower emissions standards for cement companies, which would increase their costs if they emit too much carbon.
With all of that factored in, S&P Global’s current ratings on cement companies in Europe face uncertainties, and it sees the industry’s financial stability among the most vulnerable to 55% by 2030 target. S&P Global analysis finds that if carbon allowances are completely phased out, yearly carbon costs could be as much as 75% of European cement businesses’ earnings before interest, taxes, depreciation, and amortization.
If cement companies are too greatly impacted by the increased carbon costs, S&P Global says it would downgrade their risk assessment ratings.
That would lead to significant financial pressure on the industry, the report finds. Having the time and capacity to adapt could help credit ratings, and without a steady cement alternative, demand should remain steady to help counter some of those pressures, according to S&P Global.
Cement emissions from production account for around 7% of the world’s total direct emissions, according to the Global Cement and Concrete Association. The International Energy Agency says concrete is the second-most consumed substance after water, and the cement industry’s carbon intensity rations are about six times larger than the average for the materials sector, according to the S&P report. The EIA says 3% annual reductions are needed by 2030 to reach global net-zero goals.
Internationally, the US Department of Energy recently invested $4.1 million to accelerate the development of concentrating solar-thermal power (CSP) technology. Earlier this year Cemex said it would use Coolbrook’s Roto Dynamic Heater to reduce emissions from cement production, as a company-level example. California company Mighty Buildings is developing homes from 3-D printing, which includes using concrete-free materials.
Most European cement companies have emissions reduction targets through 2030, but they range from 30% to a little less than 50%, according to the S&P Global analysis. That falls short of the EU’s 55% goal.
S&P Global says while there are multiple ways for the cement industry to lower emissions, carbon capture and storage is the only technology to help without changing the chemical makeup of cement or making significant changes in production. Carbon capture can reduce emissions by up to 36%, according to the Global Cement and Concrete Association.
Cement currently makes up 6% of the world’s carbon capture and storage pipeline, according to the analysis, with most of that coming from Europe.
Other ways cement companies are attempting to reduce emissions are through increasing low-carbon and reusable products, and even switching to producing other building materials instead of cement. In the end, with limited material substitution possibilities, S&P Global says the industry likely will raise the price of cement to counter carbon costs.
