While increased use of alternative fuels is a positive signal, CCUS adoption remains critical for net zero and needs to scale from less than 1% to 90% by 2050.

The clinker production process is the primary contributor to emissions in the cement industry, accounting for roughly 60%. The remaining 40% is generated through the intense heating energy required to heat cement kilns, primarily supplied by the combustion of coal and gas.²⁷⁶

Absolute CO2 emissions declined by less than 1% over the last four years amid increases in global production. Emissions intensity remained static over the same time period despite a 9% rise in the clinker-to-cement ratio.²⁷⁷ The average ratio is currently 72%,²⁷⁸ while the proposed GCCA target is 56% by 2040.²⁷⁹ The twin forces of urbanization and population growth are driving cement consumption in China (51% global demand) and India (9% global demand),²⁸⁰ which necessitates accelerated action to decarbonize the sector to mitigate the impacts of increased production.

Energy intensity for cement production is a function of kiln type, combustion, fuel quality and heat transfer efficiency and averages 2-3 GJ/t. Over the last five years, global cement energy intensity decreased by 2%,²⁸¹ due to increased use of biomass and non-renewable waste in the fuel mix.

The GCCA is targeting a 20% emissions reduction by 2030 and net zero emissions by 2050 (from 2020 levels).²⁸² In the near term, efficiency measures,
circularity measures, clinker substitution with SCMs and decarbonizing the kiln heating process may contribute to a 25% emissions reduction.²⁸³ However, the additional reduction will require decoupling cement emissions from market demand increases through a reduction in non-abated fossil fuels from 92% of the fuel mix to 10%, requiring a significant step up in CCUS deployment. The scenario considers a 10-fold increase in the proportion of biofuels in the fuel mix and a 25% deployment of renewables, with clean hydrogen projected to represent 5%.²⁸⁴ Further scaling of CCUS, clean electrification and hydrogen will likely be required in some regions.

Three leading decarbonization pathways have emerged, and CCUS technologies are the most developed (TRL 6-9). Clean hydrogen and clean power-based technologies are limited to prototype stage (TRL 5-6). Production costs for these technologies are nearly double the cost of Portland cement.²⁸⁵

Scaling in-plant CCUS from less than 1% to 90% by the 2040’s²⁸⁶ to capture the CO2 emitted during the clinker production process is critical to achieve near-zero-emissions. The CO2 from cement process emissions is a rich stream and can be attractive to the CCUS industry alongside the right blend of policies and incentives. Lehigh Cement, a division of Heidelberg Materials in Alberta, Canada,²⁸⁷ is set to launch the industry’s inaugural full-scale CCUS facility. Designed to capture around 1 MTPA of CO2 emissions, equivalent to about 95% of the plant’s total emissions, the facility aims to be operational by 2026. This marks a positive step towards technology adoption among major industry players.

In the near term, cement should work to cut emissions from clinker production, scaling the deployment of both clinker substitution (SCMs) and alternative cement composition (green cement). Though commerciality and scalability challenges still need to be solved, these innovations complement the near-zero decarbonization strategies.

Kiln electrification supplied by clean, renewable electricity alongside clean hydrogen to replace coal and natural gas as fuel sources target the approximately 40% of emissions associated with fuel consumption. The requirements for intense heat energy align with electrification and clean hydrogen as critical net-zero pathways.

However, most projects are currently prototyped at scale, energy storage requirements to overcome intermittency need to be considered, and clean hydrogen is not currently cost-competitive or widely available. In the near term, increasing the volume of biomass in the fuel mix can reduce energy emissions while near-zero technologies advance to commercial scale.

Decarbonization of cement is dependent on the availability of CCUS, clean hydrogen and clean power infrastructure. However, less than 1% of the necessary
infrastructure for near-zero-emission production has been installed.²⁸⁸ The total infrastructure required to support the global cement industry is estimated at
up to $300 billion through 2050.²⁸⁹

The rich CO2 streams from clinker production position the cement industry as a leading candidate for investment in CCUS. It is likely that cement production can form one of the anchors of emerging CCUS hubs, such as the Northern Lights JV Longship Project,²⁹⁰ due to become operational in 2024 and capture up to 1.5 MTPA of captured carbon. Longship is Europe’s first cross-border CO2 transport and storage network, in which cement collaborates with infrastructure owners and other co-located industrial players to accelerate the build-out of CCUS infrastructure.

Given the scale of their demand, cement plants may need to consider captive on-site generation, as clean hydrogen grids may not have the capacity to meet their intermittent clean hydrogen demand profile without additional storage investment.

Clean power is a pre-requisite for delivering the CO2 reduction potential of kiln electrification. The cost of the renewable generation, transport and distribution and likely storage for intermittency is yet to be quantified.

The ability of customers to absorb a green premium of 60-100% per tonne²⁹¹ is untested beyond prototype projects, as low-emission cement represents less than 1% of global supply.²⁹²

A 60% increase in the per tonne cost of cement translates into a 3%²⁹³ increase in the cost of a built house. When considered as a share of the total lifetime emissions of a building, the green premium for near-zero-emission cement is more competitive.

The ability of the industry to pass along this premium or to monetize near-zero-emission cement as a differentiating attribute depends on the target consumer segment (B2B vs consumer) and geography (developed vs developing cost of housing). The largest forecasted increases in cement consumption globally align with the markets with likely the lowest ability to absorb a significant green premium.

While current adoption is low, industry demand for near-zero-emission and “green” cement products is emerging. Industry consortia, such as the FMC, are mobilizing market demand through purchase commitments. In 2023, the FMC²⁹⁴ pledged to buy 10% of its annual cement supply as near-zero-emission cement by 2030. Comparable initiatives are occurring in the cement and building materials sector. In March 2023, Hoffman Cement295 contracted with Alkern Group to supply 28% of their current production as decarbonized cement until 2027.

The absence of standardized definitions, certifications and traceability mechanisms has prevented consumers from having the necessary transparency to fully consider paying the green premium or for the industry to fully define the pathway to understand the market potential at a higher cost of production. The introduction of ISO 19694-3²⁹⁶ in March 2023 may improve the tracking of CO2 emissions.

The global construction landscape is showing signs of change as industries move to reduce CO2 emissions on various fronts. Breakthrough developments such as low-carbon design,²⁹⁷ nanotechnology,²⁹⁸ algae-based biogenic cement²⁹⁹ alternatives and 3D printing, which can reduce the volume of cement used in construction by up to 70%³⁰⁰ may disrupt business-as-usual requirements. The cement industry may need to diversify traditional portfolios and adapt business models to remain competitive and maintain market share through the evolving landscape, balancing supply with demand for an increasing number of lower-emission products.

Policy measures to support the decarbonization of the cement industry remain at an early stage; in particular, policy frameworks are yet to be established in the Asia Pacific region, where 70% of cement is produced.³⁰¹

Global cement production is dominated by multinational players alongside smaller local players. Local regulations, for example at urban or municipal levels, often focus on pollution control, life cycle assessments and performance standards without addressing CO2 emissions reduction. A suite of targeted policies on the supply side can subsidize technology adoption while discouraging emissions through carbon pricing and cross-boarded adjustments. To drive demand, a transparent definition of low-emission cement is needed, together with green public procurement and updated building codes with standards for waste material use and co-processing, landfill bans or taxes and regulations on building demolition, and mandated minimum quantities of recycled materials.

The cement industry is estimated to require $750-900 billion in CapEx for CCUS enabled plants by 2050.³¹⁷ This translates into an annual investment of approximately $30 billion, equivalent to 71% of existing CapEx³¹⁸ (without adding new capacity or generating additional returns). Further capital will be needed to adopt clean hydrogen and electrified kilns.

The business case for investment in near-zero-emission cement assets remains weak. Current industry profit margins of approximately 16%³¹⁹ and WACC is 10%.³²⁰ Despite relatively low end use green premium, considering the heavy amount of CapEx involved, it may be a challenge for the industry to self finance in the absence of carbon pricing in certain regions.³²¹ Cement companies also need to balance capital allocation towards low-emission assets, with competing objectives of funding dividends and share buybacks to fulfil investor expectations.

Funding mechanisms to direct capital to developing market cement production to incentivize institutional investors and multilateral banks could be considered, linking capital to emission reduction. Organizations like the Climate Bonds Initiative,³²² which introduced cement sector certification in 2022, aim to enhance transparency and guidance around clean investments, which may help to accelerate this effort. In Europe, the industry will need to replace 30% of kilns by 2030 and capital needs should prioritize newer assets with CCUS.³²³

Approximately 61% of large, publicly-traded cement companies consider climate change as a key consideration for their strategic assessment and integrate it into their operational decision-making.³²⁴ Meanwhile, 14% of companies are building basic emissions management systems and process capabilities. Finally, 16% of companies acknowledge climate change as a business issue.