EU policy uncertainty hampering the cement industrys climate goals
23 October 2020 | Trading
The European Green Deal builds on the consensus to tackle climate change achieved during the 2015 Paris Agreement and sets out an action plan for Europe’s transition to be the first climate-neutral continent by 2050. The plan places the decarbonisation of industry and building efficiency at the top of the agenda, the implications of which will transform the European cement industry. Carbon neutrality and the pace at which it will have to be achieved will place huge responsibilities on the cement industry to decarbonise fully within the next 30 years.
If there were any doubts as to whether the EU resolve has been watered down or derailed by the pandemic, then the answer is a resounding ‘No!’. In his keynote speech which opened the proceedings, Jochen Flasbarth, State Secretary at the German Ministry of Environment, Nature Conservation and Nuclear Safety, argued that the pandemic has strengthened the resolve not only of politicians and society but of industry too, to move decisively to climate neutrality.
However, to get from this commitment to a reality will require unprecedented “collaboration between industry and governments,” commented Mr Flasbarth, who also praised the industry's “intensive, credible and open” engagement with the EU Commission.
Mr Flasbarth is well aware of EU industry concerns surrounding the financial burden of great ambition. “Support for the Paris Agreement will provide a level playing field in the long run, but this level playing field doesn’t exist yet,” he conceded, adding in reassurance: “The carbon leakage provisions are therefore essential in the existing EU Legislation and it will remain a building block for the future EU climate policy, and Germany [which holds the European Presidency until the end of the year] is keen to support everything to ensure that climate ambition does not go along with competitive disadvantages.”
Mr Flasbarth noted some of the measures put in place to support the transition to net zero, including the EUR1bn industrial decarbonisation fund, to support accelerated innovation into carbon abatement technologies.
“I understand that getting going to organise springboard innovation, the industry has to get also support from the government. This won’t come from the markets themselves.”
Nevertheless, rather than slowing down the pace of change, ambitions have even been tightened. As Mr Flasbarth pointed out, the European Commission has proposed an increase in the intermediate GHG reduction targets on a national level from 40 per cent to 55 per cent by 2030. This more stringent target will require further policy reform of the EU Emissions Trading Scheme and therefore, additional provisions for carbon leakage. New targets will also be set for renewable energy and energy efficiency.
Regulatory uncertainty is the biggest problem
Speaking in the subsequent panel discussions, Jon Morrish, member of the Managing Board of HeidelbergCement, argued that for industry to be able to manage this transition, stable and consistent regulatory framework is essential but is not yet in place. Without regulatory certainty, industry is unable to build the business case its needs to invest in the carbon transition.
Policy uncertainty prevails and Mr Morrish explained that developing a carbon border mechanism to create a level playing field between European cement producers and those outside the EU Emissions Trading System is today’s urgent priority. This should be done alongside Phase IV, to prevent cement producers simply switching investment to countries outside the ETS, and be compatible with the WTO rules.
Examples of successful regulations, Mr Morrish argued, include the EU Waste Framework Directive (1999), which has stimulated alternative fuels utilisation through Europe, but anomalies even in this persist and illustrate the challenge ahead: HeidelbergCement, for example, burns Italian waste in German kilns, because it cannot get the permits it requires in Italy.
Furthermore, governments also need to be more progressive in terms of adopting new cement standards and cement norms, which will allow the low-carbon cements with lower carbon content to be sold in the market: “Actually, when we work with governments, they're very, very cautious about adopting the norms of the building standards to allow that to happen,” argued Mr Morrish.
The role of government extends to public procurement, an area where they can play a key role in supporting the transition to new types of low-CO2 cements. However, according to panellist Arthur Runge-Metzger, director Climate Strategy, Governance and Emissions for the European Commission, DG Climate Action, demand for green cements will not be an issue. “In the coming years, we need to double the renovation rate in Europe. We won’t have a demand problem in Europe. So in that respect upskilling in the construction sector and using materials more efficiently will be more important.”
Mr Morrish stressed the need for government action on breakthrough decarbonisation technologies such as CCUS: “The bigger picture for policy involves assistance in early stage technologies; we're really working hard to capture carbon. But those are early stage technologies and certainly the use of such things as the horizon Fund and the Innovation Fund to get those projects really moving, is important in the implementation. Furthermore, help is needed on the infrastructure pipelines for carbon, so that we can move it to where to ideally where we can use it again.”
However, Arthur Runge-Metzger noted that there are other cheaper ways for Europe to reduce carbon emissions, starting with building more renewable energy and also renovating buildings. These are cheaper and more accessible decarbonisation priorities, and only when they have been harvested, should CCUS be relied upon.
Certainly, despite being one of the central pillars of decarbonisation, CCUS is not just a monumental technological challenge but a political challenge too.
Circumstances vary widely across European countries, but in Germany CCUS is not permitted by law, admitted Mr Flasbarth, partly due to the legacy associations with lignite which has negative perceptions from society.
However, Mr Flasbarth argued that society’s acceptance of CCUS can be won: “If we can prove credibly that we – government as well as industry – have done everything to avoid emissions, then I think we can have acceptance in society for CCUS.”
Source: Cement News