Substudy 8, final: Climate Change - The Cement …wbcsdcement.org/pdf/battelle/final_report8.pdf(...

∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙

Toward a Sustainable Cement Industry

Substudy 8: Climate Change March 2002

by Ken Humphreys and Maha Mahasenan

with contributions from

Marylynn Placet and Kim Fowler ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙

An Independent Study Commissioned by:

World Business Council for Sustainable Development This substudy is one of 13 research investigations conducted as part of a larger project entitled, "Toward a Sustainable Cement Industry". The project was commissioned by the World Business Council for Sustainable Development as one of a series of member-sponsored projects aimed at converting sustainable development concepts into action. The report represents the independent research efforts of Battelle Memorial Institute and their subcontractors to identify critical issues for the cement industry today, and pathways forward toward a more sustainable future. While there has been considerable interactive effort and exchange of ideas with many organizations within and outside the cement industry during this project, the opinions and views expressed here are those of Battelle and its subcontractors. Battelle Battelle endeavors to produce work of the highest quality, consistent with our contract commitments. However, because of the research nature of this work, the recipients of this report shall undertake the sole responsibility for the consequence of their use or misuse of, or inability to use, any information, data or recommendation contained in this report and understand that Battelle makes no warranty or guarantee, express or implied, including without limitation warranties of fitness for a particular purpose or merchantability, for the contents of this report. Battelle does not engage in research for advertising, sales promotion, or endorsement of our clients' interests including raising investment capital or recommending investments decisions, or other publicity purposes, or for any use in litigation. The recommendations and actions toward sustainable development contained herein are based on the results of research regarding the status and future opportunities for the cement industry as a whole. Battelle has consulted with a number of organizations and individuals within the cement industry to enhance the applicability of the results. Nothing in the recommendations or their potential supportive actions is intended to promote or lead to reduced competition within the industry.

( C L I M A T E C H A N G E )

i

Foreword Many companies around the globe are re-examining their business operations and relationships in a fundamental way. They are exploring the concept of Sustainable Development, seeking to integrate their pursuit of profitable growth with the assurance of environmental protection and quality of life for present and future generations. Based on this new perspective, some companies are beginning to make significant changes in their policies, commitments and business strategies. The study, of which this substudy is a part, represents an effort by ten major cement companies to explore how the cement industry as a whole can evolve over time to better meet the need for global sustainable development while enhancing shareholder value. The study findings include a variety of recommendations for the industry and its stakeholders to improve the sustainability of cement production. Undertaking this type of open, self-critical effort carries risks. The participating companies believe that an independent assessment of the cement industry’s current status and future opportunities will yield long-term benefits that justify the risks. The intent of the study is to share information that will help any cement company – regardless of its size, location, or current state of progress – to work constructively toward a sustainable future. The pursuit of a more sustainable cement industry requires that a number of technical, managerial, and operational issues be examined in depth. This substudy, one of 13 conducted as a part of the project, provides the basis for assessing the current status or performance and identifies areas for progress toward sustainability on a specific topic. The project report entitled Toward a Sustainable Cement Industry may be found on the project website: http://www.wbcsdcement.org.

Study Groundrules

This report was developed as part of a study managed by Battelle, and funded primarily by a group of ten cement companies designated for this collaboration as the Working Group Cement (WGC). By choice, the study boundaries were limited to activities primarily associated with cement production. Downstream activities, such as cement distribution, concrete production, and concrete products, were addressed only in a limited way. Battelle conducted this study as an independent research effort, drawing upon the knowledge and expertise of a large number of organizations and individuals both inside and outside the cement industry. The cement industry provided a large number of case studies to share practical experience. Battelle accepted the information in these case studies and in public information sources used.

The WGC companies provided supporting information and advice to assure that the report would be credible with industry audiences. To assure objectivity, a number of additional steps were taken to obtain external input and feedback. A series of six dialogues was held with stakeholder groups around the world (see Section 1.5). The World Business Council for Sustainable Development participated in all meetings and

monitored all communications between Battelle and the WGC. An Assurance Group, consisting of distinguished independent experts, reviewed both the quality

and objectivity of the study findings. External experts reviewed advanced drafts of technical substudy reports.

The geographic scope of the study was global, and the future time horizon considered was 20 years. Regional and local implementation of the study recommendations will need to be tailored to the differing states of socioeconomic and technological development.

( T O W A R D A S U S T A I N A B L E C E M E N T I N D U S T R Y )

ii

List of Acronyms AFR Alternative fuels and resources (AFR) CFB Coal fluidized bed CPC Combined power and cement ESP Electrostatic precipitator FBC Fluidized bed combustor FBHE Fluidized bed heat exchanger FSU Former Soviet Union GDP Gross domestic product HVFO Heavy fuel oil IEA International Energy Agency IPCC Intergovernmental Panel on Climate Change KPI Key Performance Indicator LCA Life Cycle Assessment MHI Mitsubishi Heavy Industries NGO Non-Governmental Organization PPP Purchasing power parity ROK Republic of Korea SD Sustainable Development SRES Special Report on Emissions Scenarios UNFCCC United Nations Framework Convention on Climate Change WGC Working Group Cement (ten core cement company sponsors)


iii

Glossary Alternative Fuels Energy containing wastes used to substitute for conventional thermal energy sources. Biomass Plant materials and animal waste used as a source of fuel. Blended cement* Cement with a fixed percentage of pozzolans (for example, supplements such as slag and fly ash produced by the steel and electric power industries, respectively) replacing the Portland cement clinker portion of the cement mix. Blended cement is usually understood as cement that is blended by a cement manufacturer rather than a ready-mix supplier (also referred to as composite cement). Clinker Decarbonized, sintered, and rapidly-cooled limestone. Clinker is an intermediate product in cement manufacturing. Concrete A material produced by mixing binder, water, and aggregate. The fluid mass undergoes hydration to produce concrete. (Average cement content in concrete is about 15%.). Fly ash By-product with binding properties typically produced as a residue from coal-fired power plants. Greenhouse gases Gases in the earth’s lower atmosphere that may contribute to global warming, including the major component CO2. Industrial ecology Framework for improvement in the efficiency of industrial systems by imitating aspects of natural ecosystems, including the cyclical transformation of wastes to input materials. Ordinary Portland Cement (OPC) Cement that consists of approximately 95 percent ground clinker and 5 percent gypsum. Stakeholder A person or group that has an investment, share, or interest in something, as a business or industry.

* The International Council for Local Environmental Initiatives (ICLEI), 2001, http://www.iclei.org/about.htm.


v

Executive Summary Climate change has become a prominent global issue, and governments are beginning to take significant steps to address the problem. For the cement industry, the climate change issue carries serious financial consequences, in addition to its environmental importance. Without action, the financial liabilities associated with the industry’s CO2 emissions will be large*. But, through a well-managed strategy, significant financial benefits could accrue to the industry, particularly in the near-term. Carbon dioxide (CO2) is the primary greenhouse gas that drives global climate change and is the only greenhouse gas emitted by the cement industry in a significant amount. The cement industry emits approximately 5% of global, manmade CO2 emissions. When all greenhouse gas emissions generated by human activities are considered, the cement industry is responsible for approximately 3% of global emissions. Due to the unique nature of the product it manufactures, the cement industry currently emits 0.73 to 0.99 kilograms of CO2 for every kilogram of cement produced†. At any emission rate within this range, current proposals to curb CO2 emissions will profoundly affect the activities and finances of the industry. Future proposals will likely call for far more significant reductions. Cement-related greenhouse gas emissions originate from fossil fuel combustion at cement manufacturing operations (about 40% of the industry’s emissions); transport activities (about 5%) and the combustion of fossil fuel that is required to make the electricity consumed by the cement manufacturing operations (about 5%). The remaining cement-related emissions (about 50%) originate from the manufacturing process that converts limestone (CaCO3) to calcium oxide (CaO), the primary precursor to cement. It is chemically impossible to convert CaCO3 to CaO, and then cement clinker, without generating CO2. This CO2 is currently emitted to the atmosphere. Table ES-1 summarizes the industry’s strengths and weaknesses on the issue of climate protection. The challenge is great, and although some companies reduced emissions by ~10% during the 1990s, the cement industry as a whole has not significantly reduced emissions over the last decade. Fortunately, there are numerous opportunities for the industry to reduce both its emissions and the associated financial liabilities. Further, the nature of the challenge has the potential to spur innovation, which could lead to new manufacturing processes, new products, and new business lines. In the face of the climate challenge, creative and proactive cement companies have the potential to emerge as leaders in carbon dioxide management across all industries and remain profitable.

* A carbon tax of $50/tonne, an amount implicit in a number of potential government policies, would add an average of ~$12/tonne to the manufactured cost of cement. † Based on the average rate of emissions for the cement industry in each of 14 cement producing regions of the world. Some individual plants may have emission rates that extend outside this range.


vi

Table ES-1. Cement Industry Status on the Issue of Climate Protection

Strengths: Some companies have demonstrated

reduced average CO2 released per ton of product A standardized CO2 inventory protocol has

been developed by ten major cement companies, together with external stakeholders

Weaknesses: Heavy dependence on fossil energy Reliance on limestone-based cement Limited attention to the significant CO2

reductions required Inadequate investment in R&D that would

enable future cost-effective CO2 reductions Intermittent engagement in climate policy

activities without a clear long-term agenda

Opportunities: Energy efficiency improvement Use of alternative raw materials (e.g., fly ash

and blast furnace slag) Use of alternative, low-carbon fuels Emission reduction credits CO2 capture and sequestration or possible

resale Trading schemes to reduce costs

Threats: Large financial burdens Possibility of imposed technological controls Early retirement of plants and equipment Potential for the cement industry to be

overlooked in the policy debate and disadvantaged by policies designed for larger polluters Loss of market share to competing materials that

are less GHG intensive It is therefore recommended that cement companies establish corporate carbon management programs, set company-specific and industry-wide CO2 reduction targets, and initiate long-term process and product innovation. An industry response to this recommendation should include a strategy with at least two major parts, both parts of which must be started now: First, companies must progressively pursue cost-effective CO2 reductions by: expanding

sales of cement with lower clinker content (e.g., composite cement with fly ash or blast furnace slag), increasing the use of alternative fuels (bio-based, low-carbon, or waste fuels that provide a net carbon dioxide emissions reduction), and initiating energy efficiency enhancements (improving equipment and phasing out inefficient plants).

Second, to enable additional, long-term, cost-effective CO2 reductions, the cement industry must undertake or support R&D at a much higher level than today. This R&D must be focused on the development of highly innovative low-CO2 products and processes, as well as low-CO2 business ventures. Examples of such ventures, might include: capturing and sequestering CO2, co-producing electricity and cement in low-CO2 facilities, or earning royalty income from low-CO2 processes or products licensed to other companies. Without a commitment to long-term innovation, the industry will likely find itself facing growing emission liabilities as individual nations commit themselves to ever-tighter CO2 constraints in an attempt to stabilize atmospheric concentrations of greenhouse gases*.

This two-part strategy would help support specific reductions† of approximately 30% (from 1990 levels) by 2020‡ and greater reductions thereafter which is commensurate with the level of

* Treaties such as the Kyoto Protocol and other government policies that target 5 to 20% reductions are only the first steps toward what will ultimately be necessary to stabilize atmospheric greenhouse gas concentrations. † That is, tonnes of CO2 per tonne of cementituous product produced. ‡ The estimate of 30% is based on analysis discussed in this substudy. Key assumptions associated with the analysis include: 1) society is committed to stabilizing atmospheric greenhouse gas concentration at twice pre-industrial levels (note that many NGOs do not think this is a low enough level); 2) moderate economic and population growth occurs nearly doubling global cement demand by 2020 (over 1990 demand levels), with significant portions of the growth coming from China; 3) all industries act using a theoretically minimum cost approach to reduce CO2


vii

reductions that are necessary for the industry to be on a sustainable path forward. Because country-specific conditions vary considerably, individual companies will likely face reduction opportunities and requirements that are either larger or smaller than 30%. The actions shown in Table ES-2 would facilitate achievement of the strategy by establishing mechanisms to document corporate-level CO2 emission levels and reductions, setting reduction targets for various time periods, allowing companies to manage costs, and encouraging development of innovations that would dramatically decrease industry-wide emission levels over the long-term. Table ES-2. Potential Actions for Climate Protection Recommendation: Establish corporate carbon management programs; set company-specific and industry-wide medium-term CO2 reduction targets; and initiate long-term process and product innovation. Potential Actions Responsibility Timeframe References 1. Establish a CO2 emissions baseline and

mechanisms to enable cost-effective emission reductions. Develop and implement a standardized cement industry CO2 accounting protocol, which allows companies to establish emissions baselines and to track and report future progress.

Cement companies working collaboratively Independent review by NGOs, governments

Short term Substudy 8: Climate Change

2. Set challenging emission reduction targets and state them publicly. Establish goals and adjust them over time as technology and management techniques advance.

Cement companies (Note: Industry-wide and company-specific targets should be set.)

Short term and Medium term

Substudy 3: Business Case Substudy 5: KPIs Substudy 8: Climate Change

3. Cooperate with stakeholders to develop government policies, product standards, and market practices that remove barriers to: 1) the sale of innovative (but safe) cement products with lower embodied CO2 emissions, and 2) the use of appropriate waste fuels that reduce lifecycle CO2 emissions. Encourage industry associations to support such policies. Develop government liaison function related specifically to climate issues within individual companies.

Cement companies Cement associations Standard setting bodies Government regulatory agencies Non-governmental organizations

Short term and Medium term

Substudy 3: Business Case Substudy 6: LCA Substudy 8: Climate Change Substudy 13: Public Policy

4. Explore prospects of reducing CO2 emission reduction costs through emissions trading or offset schemes. Investigate cost of controlling CO2 using various options, and compare control costs among plants and between cement industry and non-cement emission sources.

Cement Companies Governments Other industries

Short term Substudy 8: Climate Change

5. Cooperate with governments, customers, suppliers, and competitors on pre-competitive R&D projects that develop low-carbon products and processes. Initiate a major R&D effort focused on long-term, cost-effective CO2 reductions. Work collaboratively to lower the risk and hasten the development of breakthrough innovations.

Cement companies Government agencies Customers Suppliers Academia

Short term, Medium term, and Long term

Substudy 7: Innovation Substudy 8: Climate Change Substudy 9: Industrial Ecology

emissions; 4) the cement industry CO2 emissions are never higher than they are today, as a fraction of the world’s total fuel-related and process-related CO2 emissions.


viii

Table of Contents

1. The Climate Change Challenge.......................................................................................... 1 1.1. Total Anthropogenic and Cement Industry Greenhouse Gas Emissions ..................... 1 1.2. Unit-Based Cement Industry Emissions ...................................................................... 2 1.3. The Emissions Reduction Challenge........................................................................... 6 1.4. Summary of The Climate Change Challenge ............................................................ 14

2. CO2 Management: Opportunities ...................................................................................... 16 2.1. Conventional CO2 Management Approaches............................................................ 16 2.2. Advanced CO2 Management Approaches................................................................. 24 2.3. Flexible Market Instruments, Management Tools, & Policies .................................... 29

3. References ....................................................................................................................... 33

Appendix A: Understanding the Relationship Between Cement Demand, Economic Growth, and Population Growth............................................................................................................A-1 List of Tables Table ES-1. Cement Industry Status on the Issue of Climate Protection ...................................vi Table ES-2. Potential Actions for Climate Protection ................................................................vii Table 1-1. Year 2000 Cement Industry Emissions by Region and SubRegion........................... 3 Table 1-2. Cement Industry Unit-Based Emissions by Region and Sub-Region ........................ 4 Table 1-3. Cement Industry Energy Intensities by Region and Subregion ................................. 5 Table 1-4. Cement Industry Mid-1990s Clinker Factors by Region and SubRegion................... 5 Table 2-1. Technical Emissions Reduction Potential for CO2 per tonne of cement by 2020..... 17 Table 2-2. Estimated Availability of Fly Ash and Blast Furnace Slag in 2020........................... 19 Table 2-3. Kiln Types and Fuel Mix ......................................................................................... 20 Table A-1. Characteristics of Scenario A1 ..............................................................................A-6 Table A-2. Characteristics of Scenario B1 ..............................................................................A-8 Table A-3. Characteristics of Scenario A2 ............................................................................A-10 Table A-4. Characteristics of Scenario B2 ............................................................................A-12 Table B-1. Participating Industry Sectors within the BDI Listed in Descending Order of Their

Energy Consumption in PetaJoule in 1998.....................................................................B-18 Table B-2. Commitment of German Cement Industry in Accordance with Kyoto Protocol......B-33 List of Figures Figure 1-1. Year 2000 Greenhouse Gas Emissions from the Cement Industry, ......................... 1 Figure 1-2. Projected Cement Demand ..................................................................................... 8 Figure 1-3. Global Cement Industry CO2 Emissions for Scenario A1 with Theoretical

Assumption of No Improvement in Unit-Based Emissions ................................................... 9 Figure 1-4. Conceptual Example of CO2 Abatement Cost Curve ............................................. 11 Figure 2-1. CO2 Emissions Reduction Potential Using a Combination of Conventional

Reduction Approaches ...................................................................................................... 24 Figure 2-2. Global New Energy Cement/Power Plant .............................................................. 28 Figure 2-3. Alstom Combined Power and Cement Plant.......................................................... 29 Figure 2-4. CO2 for Enhanced Oil Recovery ............................................................................ 29 Figure 2-5. CO2 for Enhanced Coal Bed Methane Recovery ................................................... 29 Figure A-1. Per Capita Cement Demand vs Per Capita GDP for Japan .................................. A-2


ix

Figure A-2. Per Capita Demand vs. Per Capita GDP for Western Europe ...............................A-2 Figure A-3. Per Capita Cement Demand vs. Per Capita GDP for the USA. .............................A-2 Figure A-4. Per Capita Cement Demand vs. Per Capita GDP for Australia and New Zealand. A-2 Figure A-5. Per Capita Cement Demand vs. Per Capita GDP for Latin America......................A-3 Figure A-6. Per Capita Cement Demand vs. Per Capita GDP for China ..................................A-3 Figure A-7. Per Capita Cement Demand vs. Per Capita GDP for India....................................A-3 Figure A-8. Per Capita Cement Demand vs. Per Capita GDP for Korea..................................A-3 Figure A-9. Actual vs. Predicted Per Capita Cement Demand for

Selected Subregions ........................................................................................................A-4 Figure A-10. Projected Cement Demand.................................................................................A-5 Figure B-1. Breakdown of Kyoto Aim to European Member States .......................................B-16 Figure B-2. Breakdown of German Emission Reduction Aim to Association Level ................B-17 Figure B-3. Climate Protection Declaration by German Industry and Trade (Update 1998) ..B-19 Figure B-4. State of Fulfillment of the Sub-declarations in the Different Sectors in 1998 ......B-21 Figure B-5. Reduction of CO2 and Other emissions by Fuel Substitution ..............................B-34 Figure B-6. CO2 Reduction Potential in Cement Industry ......................................................B-35 Figure B-7. Specific Heat Energy Consumption per Ton of Clinker, Lengfurt Plant................B-38 Figure B-8. Feeding Points, Kiln Lengfurt Plant ....................................................................B-40 Figure B-9. Chemical Composition in Respect of Clinker Production ....................................B-41 Figure B-10. Waste Heat Boiler ............................................................................................B-42 Figure B-11. Flow Sheet of ORC-Plant .................................................................................B-42 Figure B-12. ORC Building ...................................................................................................B-43


1

1. The Climate Change Challenge Climate change has become an issue of global prominence that carries with it both significant environmental and financial consequences for the cement industry and other industries. The drivers for action on climate change include an emerging set of international and country-specific CO2 management regulations and intense attention on the climate change issue by environmentally concerned stakeholders. The policies that national governments are beginning to implement today to curb greenhouse gas emissions are the first, modest steps in a progression of ever-tighter emission restrictions. Successfully stabilizing atmospheric concentrations of greenhouse gases at commonly discussed levels (e.g., twice pre-industrial levels) will require emission reductions that could reach 50% (per tonne of product) by 2050 for the cement industry (see Section 1.3 below). By facing the challenge early, the industry can apply approaches that will minimize the associated financial burden. Unlike many industries, the cement industry has unique opportunities to begin reducing emissions at relatively low cost. The industry should pursue these opportunities, while simultaneously investing in product and technology R&D that will prepare the industry for future, substantially larger reductions. In this way, the industry can remain viable and profitable in a carbon-constrained world. The remainder of Part 1 discusses: total manmade (i.e., anthropogenic) and cement industry greenhouse gas emissions, unit-based emissions for the cement industry, and the environmental and financial dimensions of the emissions reduction challenge.

1.1. Total Anthropogenic and Cement Industry Greenhouse Gas Emissions

The cement industry is responsible for approximately 3% of global anthropogenic greenhouse gas emissions (see Figure 1-1). Other than CO2, the industry does not generate appreciable amounts of greenhouse gases. The cement industry is responsible for approximately 5% of the global anthropogenic CO2 emissions.

Figure 1-1: Year 2000 Greenhouse Gas Emissions from the Cement Industry*

* Battelle estimate based upon data from numerous sources, including the following major sources: Nakicenovic, N. and R. Swart;1 IEA 19992; IPCC 20017; CEMBUREAU 1998;4 CEMBUREAU 1996;3 and CEMBUREAU 19995.

Other GHGs 14.8 Gt (34%)

Deforestation 3.94 Gt (9%)

Fossil Fuel 23.9 Gt (54%)

Process 0.67 Gt (~50%) Transport 0.07 Gt (<5%) Electricity 0.07 Gt (<5%) Fossil Fuel 0.58 Gt (~40%)

Global Greenhouse Gas

Emissions: 44 Gt of

CO2-Equivalents

Cement Industry Greenhouse Gas

Emissions: 1.4 Gt of

CO2-Equivalents


2

Fossil fuel combustion outside the cement industry is the primary source of greenhouse gas emissions in the world, accounting for 54% of global greenhouse gas emissions. Deforestation, which accounts for 9% of global greenhouse emissions, releases large amounts of CO2 as trees are removed and soils are disturbed. Other greenhouse gases are released in large amounts as part of agricultural operations (e.g., methane (CH4) from rice paddies and cattle feedlots) and industrial operations. These other greenhouse gases account for 34% of the world’s emissions.1 Cement-related greenhouse gas emissions come from fossil fuel combustion at cement manufacturing operations (about 40% of the industry’s emissions); transport of raw materials (about 5%) and combustion of fossil fuel required to produce the electricity consumed by cement manufacturing operations (about 5%). The remaining cement-related emissions (about 50%) originate from the process that converts limestone (CaCO3) to calcium oxide (CaO), the primary precursor to cement:

CaCO3 CaO + CO2 As shown by the reaction equation, it is chemically impossible to convert limestone (CaCO3) to CaO and then cement clinker without generating CO2, which is currently emitted to the atmosphere. One of the difficulties associated with estimating cement industry CO2 emissions is that emissions data are not collected on a systematic basis worldwide. As a result, it is necessary to draw data from a variety of sources and assemble a reasonably consistent set of emission estimates. This difficulty is not unique to the cement industry. However, it is a problem that could be largely solved by industry-wide adoption of a standardized CO2 emissions inventory reporting protocol, such as the one under development by the World Business Council for Sustainable Development. This protocol is discussed further in subsequent sections of this report. Table 1-1 presents a breakdown of cement industry emissions by region of the world for the year 2000. These estimates were derived primarily by using emission estimates prepared by the International Energy Agency2 for the calendar year 1994 and adjusting these estimates, based on a variety of data sources, to reflect industry improvements and changes in cement production volumes between 1994 and 2000. These estimates include process, fuel, electricity, and transport emissions. The estimates do not include any emission credits that may accrue to the industry.* These possible credits are discussed in later sections of this report.

1.2. Unit-Based Cement Industry Emissions Based on total estimated year 2000 emissions (shown in Table 1-1) and a year 2000 worldwide production level of 1.57 billion tonnes of cement, the gross unit-based emissions for the industry were approximately 0.87 kg-CO2 per kg of cement. As shown in Table 1-2, unit-based emissions vary globally from 0.73 to 0.99 kg CO2 per kg of cement.

* To the extent that the industry currently uses AFR, processed biofuels, offset projects, or the purchases CO2 credits, the industry is reducing CO2 at offsite locations. The estimates do not reflect any credit for these reductions.


3

Table 1-1. Year 2000 Cement Industry Emissions by Region and SubRegion

Region SubRegion

Total CO2 Emissions by SubRegion

(Million tonnes/yr)

Total CO2 Emissions by

Region (Million

tonnes/yr)

Share of

Industry Emissions

Share of Industry Cement

Production

I. North America 99 7% 6% 1. USA 90 2. Canada 8 II. Western Europe 3. W. Europe 186 186 14% 14% III. Asia 732 53% 53% 4. Japan 60 5. Australia &

NZ. 6

6. China 449 7. SE. Asia 112 8. Rep. of Korea 40 9. India 64 IV. Eastern Europe 104 8% 8% 10. FSU 71 11. Other E.

Europe 33

V. South & Latin America

12. S. & L. America 109 109 8% 9%

VI. Middle East & Africa

142 10% 11%

13. Africa 74 14. Middle East 68 Total 1371 1371 100% 100%

Two of the important factors that drive unit-based CO2 emissions are the energy intensity and clinker factor associated with the cement production. Table 1-3 presents the energy intensities estimated for the years 1990 and 2000. Over the decade of the 1990s, on an industry average basis, improvement in energy efficiency was limited to a few percent. While some individual companies achieved improvements in the range of 10%, the majority of the industry demonstrated very low improvement. Table 1-4 presents clinker factors for the mid-1990s as estimated in IEA.2 The clinker factor is defined as units (by weight) of clinker used per unit (by weight) of cement sold. An independent review of clinker factors during the course of this study resulted in a number of findings: 1) clinker factor data are not collected on a consistent worldwide basis as there has not been a reason to do so in the past; 2) multiple analysts who have examined clinker factors in various countries of the world generate different results; 3) analysts who have examined clinker factors in an individual country over time have identified that the factor changes with no consistent trend varying up and down in a decade; 4) the IEA data2 for the mid-1990s generally falls in the middle of the range of values identified by others. Thus, the IEA mid-1990s clinker factor data was used as one of the inputs for estimating total 1990 and 2000 CO2 emissions in this study. While not ideal, the assumption of mid-1990s


4

clinker factors as relevant for estimating both 1990 and year 2000 emissions is unlikely to affect the total emissions estimates by more than a few percent one direction or the other. Given that overall improvement must be accelerated, the Japanese emissions reduction experience (documented below) provides several insights relevant to the rest of the world. From 1973 to the early 1990s, the energy intensity of clinker production was reduced by ~30%.6 As a result of a concerted effort by Japanese industry, they are now recognized as the industry’s world leader in energy efficiency (see Table 1-2). However, the Japanese experience also illustrates that there comes a point where additional incremental emission reductions become far more difficult. In the early 1990s, the dramatic improvement in Japanese emissions reduction trend came to an end, with emissions per tonne remaining essentially flat between 1990 and 2000. This leads to a supposition that in order stimulate further improvement, fundamental technology breakthroughs, product breakthroughs, or changes in market incentives will be needed to facilitate further, substantial reductions in emissions from the cement industry in Japan. This phenomenon will likely affect the pattern of emissions reductions in other regions of the world as well.

Table 1-2. Cement Industry Unit-Based Emissions by Region and Sub-Region

Region Unit-Based Emissions Sub-Region Unit-Based Emissions

Region Name

1990 kg CO2 Per kg Cement


Sub-Region Name



I. North America 0.99 0.99 1. USA 0.99 0.99 2. Canada 0.94 0.91 II. Western Europe 0.85 0.84 3. W. Europe 0.85 0.84 III. Asia 0.91 0.89 4. Japan 0.73 0.73 5. Australia & NZ. 0.80 0.79 6. China 0.95 0.90 7. SE. Asia 0.96 0.92 8. Rep. of Korea 0.94 0.90 9. India 0.98 0.93 IV. Eastern Europe 0.84 0.83 10. Former Soviet Union 0.81 0.81 11. Other E. Europe 0.94 0.89 V. South & Latin America 0.86 0.82 12. S. & L. America 0.86 0.82 VI. Middle East & Africa 0.87 0.85 13. Africa 0.87 0.85 14. Middle East 0.87 0.85 Global Average 0.89 0.87 0.89 0.87


5

Table 1-3. Cement Industry Energy Intensities by Region and Subregion

Region Energy Intensities SubRegion Energy Intensities MJ per kg Clinker MJ per kg Clinker Region Name

1990 2000 SubRegion Name

1990 2000 I. North America 5.47 5.45 1. USA 5.50 5.50 2. Canada 5.20 4.95 II. Western Europe 4.14 4.04 3. W. Europe 4.14 4.04 III. Asia 4.75 4.50 4. Japan 3.10 3.10 5. Australia & NZ. 4.28 4.08 6. China 5.20 4.71 7. SE. Asia 5.14 4.65 8. Rep. Of Korea 4.47 4.05 9. India 5.20 4.71 IV. Eastern Europe 5.58 5.42 10. FSU 5.52 5.52 11. Other E. Europe 5.74 5.20 V. South & Latin America 4.95 4.48 12. S. & L. America 4.95 4.48 VI. Middle East & Africa 5.08 4.83 13. Africa 5.00 4.75 14. Middle East 5.17 4.92

Table 1-4. Cement Industry Mid-1990s Clinker Factors by Region and SubRegion

Region Unit-Based Emissions SubRegion Unit-Based Emissions Region Name Factor, kg/kg SubRegion Name Factor, kg/kg

I. North America 0.88 1. USA 0.88 2. Canada 0.88 II. Western Europe 0.81 3. W. Europe 0.81 III. Asia 0.85 4. Japan 0.80 5. Australia & NZ. 0.84 6. China 0.83 7. SE. Asia 0.91 8. Rep. Of Korea 0.96 9. India 0.89 IV. Eastern Europe 0.83 10. FSU 0.83 11. Other E. Europe 0.83 V. South & Latin America 0.84 12. S. & L. America 0.84 VI. Middle East & Africa 0.89 13. Africa 0.87 14. Middle East 0.89


6

1.3. The Emissions Reduction Challenge

The Environmental Dimension of the Challenge The primary public policy instrument driving action to reduce CO2 emissions is the United Nations Framework Convention on Climate Change (UNFCCC), which has been ratified by more than 180 countries. This Convention makes clear that the ultimate climate protection goal is “the stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system....” (See box on left below for details). The Convention is the stimulus for many country-specific policies and is the framework under which a series of Protocols, the first of which is the Kyoto Protocol, will be negotiated. These Protocols will set interim emission reduction targets and the “accounting rules” for quantifying reductions (see box on right for detail).

While the final targets for emission reductions have not yet been set, and some aspects of climate science are uncertain, it is essential to at least approximate the level of emission reductions that may be required within the cement industry in order to develop a robust CO2 management strategy.

Scenarios for Future Cement Demand, Potential Future CO2 Emissions and Emission Reduction Requirements. Scenarios for Future Cement Demand. Future human social, economic, and technological development cannot be predicted with a high level of certainty. At the same time, it is important

The United Nations Framework Convention on Climate Change (UNFCCC)

The United Nations Framework Convention on Climate Change (UNFCCC) is the umbrella treaty under which global efforts on climate change are negotiated. Available for signature at the Rio Earth Summit in 1992, the UNFCCC has been ratified by more than 180 countries. The ultimate objective of this Convention is “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. Such a level should be achieved within a time-frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner.”

(Source: UNFCCC 1992; http ://www.unfccc.int).

The Kyoto Protocol

Upon the signing of the UNFCC in 1992, a process was established whereby the countries that have ratified the Convention meet annually to develop “Protocols” that set interim emission reduction targets and the accounting rules for measuring reductions. The Kyoto Protocol is the first of what will be many Protocols. The Kyoto Protocol requires that emissions be reduced by an average of 5% over 1990 levels across most developed countries for the time period of 2008-2012. Under the Kyoto Protocol, emission reductions are measured in absolute terms (i.e., total tonnes) not unit-based reductions (e.g., tonnes per unit of GDP). Due to a growing economy, unit-based reductions will be much greater than 5%. In addition, Kyoto is not the final answer. The Kyoto Protocol is first of many steps toward significant long-term reductions.

(Source: UNFCCC 1992; Kyoto Protocol 1994; http://www.unfccc.int)


7

to gain some understanding of how the world might evolve, because such trends directly affect the environmental challenges the cement industry will face. In looking at the future over long time horizons, it is helpful to examine a number of plausible future scenarios. This study explored four possible future scenarios and the associated cement demand and CO2 emissions. This exploration is summarized below and discussed in Appendix A in detail. In order to understand the mathematical relationship between population growth, economic growth, and cement demand, historical data from the past 50 years was statistically examined for 14 geographic regions of the world. A consistent pattern emerges. In developed economies (i.e., US, Canada, Japan, Australia & New Zealand, and Western Europe), growth in cement demand substantially slows when per capita GDP is approximately US$8000 (expressed in 1990 US dollars). This is consistent with the findings of other literature (e.g., Pierre-Claude Aitcin8). In developing economies, where per capita GDP has not yet reached US$8000, the relationship between cement demand and economic growth is relatively linear. As described in Appendix A, from this statistical analysis, an equation was developed that can be used estimate future cement demand as a function of population and GDP. As part of the United Nations’ Intergovernmental Panel on Climate Change’s (IPCC) activities, scientists and demographers have developed a range of scenarios that represent alternative futures.1 This study selected four of the commonly used IPCC scenarios for further evaluation. The names and characteristics of these four scenarios over this century are:

I. Scenario A1 -- the income gap between developed and developing countries closes; the world experiences rapid economic growth and low population growth; new and more efficient technologies are rapidly introduced; and the world has high per-capita energy use.

II. Scenario B1 -- the income gap between developed and developing countries

decreases but does not close; material intensities decline; the world experiences low population growth and a shift toward a service and information economy; and the world has low per-capita energy use.

III. Scenario A2 -- the income gap between developed and developing countries

does not come close to closing; the level of economic growth varies among countries and the world experiences high population growth.

IV. Scenario B2 – the income gap between developed and developing countries

does not close; the world experiences intermediate levels of economic growth and moderate population growth.

The IPCC has developed future economic growth and population growth characteristics for each of these scenarios. Using the cement demand equation (developed by this substudy and discussed above) and the IPCC data, future cement demand associated with each of the four scenarios was estimated (see Figure 1-2). While demand projections are similar until 2020, with only 30% difference between extreme scenarios, the gap widens to a factor of four by the end of this century. As points of reference before discussing these scenarios further, growth in the 1990s averaged 3% in developed countries and 55% in developing countries resulting in a composite global growth in cement demand of 37%.


8

0

2000

4000

6000

8000

10000

1990 2005 2020 2035 2050 2065 2080 2095

Scenario A1 Scenario B1Scenario A2 Scenario B2

Figure 1-2. Projected Cement Demand, Million Metric Tonnes

Across the four scenarios, by 2020 global cement demand is projected to increase 115% to 180% over 1990 cement production levels. In the scenario with 180% growth by 2020 (i.e., scenario A1), demand in developed economies grows by 13%. The remainder of the growth comes from the developing economies, which have increased their demand by 55% in the past decade and would continue to grow for the next two decades at approximately the same rate. In the scenario with 115% growth by 2020 (i.e., scenario B1), demand is lower due to lower population growth and a significant dematerialization of the economy. By 2050, three of the four scenarios have approximately equivalent cement demand. While 2050 may seem far into the future, nearly all cement plants built in the coming decade will still be operating at this point in time. Thus, the decisions the industry makes today will affect its future well beyond 2020. The scenarios represent a range of possible futures, and no scenario is necessarily more likely than another (though one can pass judgment on which assumptions are more likely to hold true in the future). A business strategy that responds to climate change should be flexible enough to be effective in whatever future materializes. Also, the strategy must be farsighted enough that it not only ensures success through 2020, but also positions the industry with the infrastructure, operating practices, and management tools to handle a variety of possible futures beyond 2020 toward 2050. Potential Future CO2 Emissions. Using the projected cement demand and current unit-based CO2 emission factors, future reference emissions were projected for each of the four scenarios (see Figure 1-3 for an example using Scenario A1). During this same time period, industrial, residential, and commercial emissions are projected to rise faster than emissions in the cement industry. Potential Emission Reduction Requirements. Using the reference emissions, which assume that no change in industry operating practice takes place, Battelle explored how much industry operating practice must change to meet a particular emissions reduction challenge. Based on our current knowledge regarding the science of the atmosphere and the IPCC assumptions for economic and population growth, Battelle’s analysis suggests that unit-based emissions reductions of 30% to 40% may be required by 2020. This level of reduction may be required if the cement industry is to make an appreciable contribution toward stabilization of atmospheric greenhouse gas concentrations (see box on next page for details). By 2050 unit-based reductions of 50% may be required. By the year


9

2100, if the world is to achieve the objective of the UNFCCC all industrial sectors would have to be on a path to reducing emissions to essentially “net zero”.9 Net-zero means that all manmade

emission sources are in balance with all natural and manmade “sinks”. This may be viewed as a startling conclusion, but current understanding of atmospheric science suggests that such dramatic changes will be required to achieve the UNFCCC goal of stabilizing atmospheric greenhouse gas concentrations. Although requiring a significant transition in the industrial system, ultimately achieving this “net zero” goal is theoretically possible by pursuing a portfolio of technology, policy, and perhaps lifestyle changes. Zero-carbon power generation technologies (e.g., renewables, nuclear, and fossil-based power with engineered sequestration), improved land-use

practices, modified formulations of industrial products, and terrestrial sequestration are some of the many options that may ultimately make a “net-zero” energy/industrial system possible through a gradual transition over many decades. Society is at the beginning of what will likely be a long-term transformation of our energy and industrial system. Kyoto-level reductions of 5 to 10%, which currently apply to developed countries (i.e., Annex I countries) are just the first step toward major reductions. UNFCCC plans include negotiations for further cuts and potential developing country participation (i.e., non-Annex I country participation) that would be implemented starting in 2013.

The Economic Dimension of the Chal lenge For the cement industry, the climate change issue carries serious financial consequences, in addition to its environmental importance. As one example, on global average basis, a carbon tax of $50 per tonne of carbon equates to an average added cost per tonne of produced cement of approximately $12. This would make CO2 one of the largest components of the manufacturing cost of cement, which is likely an untenable situation. It is also the case that through a well-managed strategy, financial benefits could accrue to the industry, particularly in the near-term. The economic dimension of climate change is explored in this section. (Solutions for addressing the challenge are discussed in subsequent sections).

0

1000

2000

3000

4000

5000

Baseline:1990

Baseline: 2000

Baseline:2010

Baseline:2020

Baseline:2050

Transport Emissions Fuel & Electricity Emissions Process Emissions

Figure 1-3. Global Cement Industry CO2 for Scenario A1 with Theoretical Assumption of No Improvement in Unit-Based

Emissions, Million Metric Tonnes


10

The CO2 Emission Reductions Challenge by 2020

No one can definitively answer what reductions will be required by 2020, particularly because it is not only a scientific and economic choice, but also a societal choice. However, it is possible to use science and economics to begin to frame the scope of the challenge.

Assumptions: The world commits to a pathway of stabilizing

atmospheric concentrations at twice pre-industrial levels. Economic and population growth occurs, increasing

the demand for cement significantly in developing countries and at a slower pace in developed countries. The cement industry meets society’s demand for

increased amounts of product. All industries follow a theoretically minimum cost

approach to reduce CO2 emissions. The world first slows the rate of growth of CO2

emissions and then begins decreasing global emissions all the while simultaneously allowing for economic growth. The fraction of CO2 emissions that the cement

industry’s contributes to total global fossil fuels and industrial CO2 emissions is never higher than it is today.

Implications for 2020: By 2020, global demand for cement will have

increased by 115 to 180% over 1990 levels. In the highest growth scenarios, the developed countries demand increases an estimated 13% with the remainder of the growth coming from developing economies. Demand in developing countries grew 55% during the 1990s. If the cement industry contributes to the stabilization

of atmospheric greenhouse gas concentrations, in accordance with the assumptions above, this would require reducing the CO2 generated per tonne of cement by 30 to 40% over 1990 levels, on average across the entire global industry. The industry would need to develop alternative

cement formulations and new technologies to prepare for future reductions that are far more challenging, which by 2050 approach 50% reductions in CO2 generated per tonne of cement over 1990 levels, on average across the industry.

In most parts of the world, CO2 is freely emitted and is not subject to any mandatory environmental controls, taxes, or voluntary control. As such, CO2 is an externality that is not reflected in the market price of energy and products. Therefore, it is not reflected in the price of energy and products; and, in general, it has not been a factor of major importance in day-to-day decision-making and business operations. Decision-making significantly changes and significant reductions occur when an “economic value” on carbon dioxide (i.e., a $/tonne) is created. This value can come about in a wide variety of ways. The basic concept is outlined below. Everyone in industry is quite familiar with the concepts of “manufacturing cost” and “market price”, and that across plants, companies and geographic regions, these costs and prices differ. There is a direct corollary when it comes to CO2. There is an “abatement cost of CO2” and a “market price for CO2”. Abatement costs are discussed next, followed by a discussion of climate change policy instruments. This section of report closes with a discussion of the “market price for CO2.” Abatement Costs. Abatement costs are different for every company and facility. They reflect the cost of reducing CO2 emissions. Typically, small emissions reductions can be obtained at fairly low capital costs and with short payback periods. As the reduction requirements become larger, the cost for each incremental tonne of emission abatement becomes progressively higher. Companies in the cement industry that best understand their costs of abatement will be able to better manage their corporate financial liability associated with climate change. Understanding these costs requires: 1) preparation of a


11

baseline CO2 emissions inventory, raw material and fuel use analysis, and inventory of the type of existing manufacturing equipment; 2) an evaluation of CO2 reduction opportunities on a facility-by-facility basis; 3) prioritization of the reduction opportunities from least to highest cost. When the data from the prioritization are plotted on a chart, it is referred to as a CO2 abatement cost curve. These curves can be prepared at the facility level and combined to yield a company-wide abatement cost curve, or in cooperation with other cement companies to assemble group or industry-wide cost curves. Figure 1-4 presents a conceptual example of an abatement cost curve. Each “bar” along the x-axis represents a set of actions that a company might take (e.g., implement efficient grinding, increase the amount of blending, retrofitting a wet plant with semi-wet equipment to improve energy efficiency and reduce emissions, etc.). Furthermore there is a cost associated with each “bar” (i.e., an abatement cost) and the action represented by the “bar” results in a specific amount of emissions reductions. Using this cost curve framework, subsequent emission reductions always cost more. This information is not only valuable for internal management of costs, but also when negotiating with governments over potential regulations as it enables the industry to understand both near-term and future CO2 prospects and their costs. Policy Instruments. While understanding corporate abatement costs is critical to a sound CO2 management strategy, companies in any industry only have an incentive to abate emissions if: (a) a government policy instrument creates an incentive for reduction; (b) the industry acts first in an attempt to preempt government policy measures; or (c) some combination of the two. As a result, the cement industry can expect national governments to employ a variety of policy instruments at both national and international levels to encourage or force emission reductions. The instruments most commonly discussed for managing emission reductions are: Voluntary and negotiated agreements, Energy efficiency standards, Product or technology prohibitions, Carbon taxes, Energy taxes, and Tradable CO2 permits/credits.

Each of these instruments has its advantages and disadvantages for policymakers and industry. As companies seek to reduce emissions and manage their financial liabilities, they should expect all these instruments to be increasingly used in different countries of the world. Voluntary and Negotiated Agreements. Voluntary and negotiated agreements can play a significant role in national and corporate greenhouse gas reduction strategies. They typically involve an agreement with the government to reduce emissions, in exchange for relief from possible future regulation. In some cases, companies or industry associations unilaterally commit to voluntary reductions in order to gain image benefits or out of fear of more costly mandatory controls.10 There has been mixed success with voluntary agreements. In the United

Figure 1-4. Conceptual Example of CO2 Abatement Cost Curve

0 10 20 30 40 50 60 70

10 20 30 40 50 60 70 80 90 100

Cumulative CO2 Abated, Thousand Metric Tonnes

CO

2 A

bate

men

t Cos

t,

$/to

nne

Abatement Actions Expon. (Abatement Actions)

Abatement Cost Curve


12

States, they have been largely ineffective thus far. In some countries, for example in Germany, they have resulted in progress and financial/regulatory relief for the cement industry. However, many voluntary agreements result in relatively small reductions, compared to the reductions that would be required to stabilize concentrations of greenhouse gases. The industry runs the risk of losing the ability to use highly flexible voluntary agreements as an emissions management tool, if policymakers or environmental NGOs believe that they will not result in significant progress. For this reason, the cement industry needs to be careful not to commit to voluntary agreements with weak reduction targets or publicly commit to voluntary emissions reduction goals and then not meet them. Energy Efficiency. Policy measures can require energy efficiency measures, i.e., specified levels of improvement in energy efficiency. It is not uncommon for such measures to be used in various economic sectors and the cement industry may increasingly face such measures. For example, Japan is developing a series of energy conservation measures obligated by law and ensured through sector-specific voluntary action plans.11 There are two basic types of energy efficiency measures: performance-based and technology-based. Performance-based measures require a certain level of energy efficiency in an industrial operation. Technology-based standards specify a single or set of best available technologies that must be used. In general, performance-based standards give companies more flexibility to manage costs and spur innovation.10 While energy efficiency policies do generate CO2 reductions, they are insufficient policy instruments to achieve emission reductions of the magnitude that will likely be required. Thus, they will be just one of the policy instruments used by governments. Product or Technology Prohibitions. Product or technology prohibitions have successfully been used to deal with other environmental problems, such as the phasing out of chlorofluorocarbons. It is conceivable that some national governments might use this as tool for managing emissions, for example, by setting a date well in the future when certain types of inefficient equipment or certain types of fuels could no longer be used. Again, while such policy instruments result in reductions of CO2, the resulting quantities are insufficient by themselves to achieve the emission reductions that will likely be required. Thus, they will be used in tandem with other policy instruments by governments. Market-based Approaches. While voluntary agreements, energy efficiency, and product/technology prohibitions are all likely to be used by some governments quite effectively to address part of the emissions reduction challenge; economists have long argued that all these instruments are “command and control approaches”10 and that it is 50 to 75% less expensive to abate emissions if “market-based approaches” are used as policy instruments.12 Carbon taxes, energy taxes, and tradable CO2 permits/credits are all market-based approaches. The boxes below discuss this further and clarify the reasons for the large variances in the literature estimates of the economic value of CO2. Almost certainly, the industry will find in the coming years that it is subject to most of these policy instruments. Each has its own financial implications. Carbon taxes (i.e., a $ per tonne tax) are quite effective at encouraging emission reductions in most sectors of the economy. However, they do have several negative aspects. For instance, the government sets the tax at a level that it believes will be required to motivate the market to reduce emissions--essentially, the government is guessing what it believes to be a fair “market price” for emissions. As a matter of practice, market complexities and incomplete information make it difficult to set the tax at a level that correctly encourages the desired amount of emission reductions. Thus, the tax may or may not achieve the desired outcome, and as a result, may need to be adjusted


13

The Economic Value of CO2 (continued)

The characteristics of each estimate are listed below: $584/tonne-C and $162/tonne-C Kyoto target Japan’s Marginal Abatement Cost (“marginal” refers to the cost of the final tonne abated to reach the Kyoto target.) Estimated by MIT The difference between the two estimates is without and with Annex I trading. (Note how much trading reduces Japan’s costs.)

$73/tonne-C Kyoto target Developed country (i.e., Annex I) market price Estimated by Battelle With trading

$30/tonne-C 1st 2% toward Kyoto target Japan market (i.e. permit) price; no trading

$17-$22/tonne-C BP Internal Market. First 5 trades Market prices for a market they’ve defined Corporate reduction targets (Note that this is a specialty market)

$14-$23/tonne-C Kyoto target US market (i.e., permit) price Global trading

$3.50/tonne-C High-end market price of public trades conducted to date, in anticipation of future Kyoto targets

$0.85/tonne-CO2 Market price Applied to new powerplant emissions above a prescribed level Trading allowed (Note that the low price reflects an immature market.)

The Economic Value of CO2

The economic value of CO2, as reported in the trade press and discussed in public policy debates, is highly variable. Explored here are the reasons why such large variations in the economic value of CO2 are reported and what questions a cement company should ask when interpreting these estimates.

Below are some estimates drawn from public domain literature and presentations: $584/tonne-C13 $162/tonne-C13 $73/tonne-C13 $17-$22/tonne-C14 $30/tonne-C15 $14-$23/tonne-C16 $3.50/tonne-C17 $0.85/tonne-CO2

18

While the estimates have a wide variation, they are surprisingly consistent when the underlying assumptions are understood.

Before interpreting any of these estimates, there are least four basic questions that need to be answered: Is the cited cost a theoretical “market price” or it is an “abatement cost”? Is the cost expressed on a “per tonne-C basis” or a “per tonne-CO2 basis”? (A frequent source of confusion is that the cost “per tonne-C” must be divided by 3.67 to yield a cost “per tonne-CO2”) With what emission reduction target or atmospheric concentration target is the cost associated? (The more difficult the target, the higher the cost.) What is the geographic area over which the target is being met, and is emissions trading an allowable mechanism for meeting the target? (Assuming trading is allowed, the broader the geographic area, the lower the cost.)

The box to the right answers these questions for each of the above estimates.


14

frequently. For companies, the tax becomes a direct operating expense that draws away profits, which makes the profits unavailable for reinvestment in the company. Energy taxes (e.g., a $ per Joule tax), are similar to carbon taxes, except that they are levied against electricity and other fuels. Because the energy content of two fuels can be similar while their carbon contents are quite different, energy taxes tend to encourage companies to save Joules” rather than “CO2” specifically. The last policy instrument explored here, and the one that seems to offer the industry the greatest opportunity to manage its CO2-related emissions liability, is CO2 permits/credits trading. In one of the most commonly discussed trading scheme (called “cap and trade”), governments decide upon an allowable level of emissions for the world, a country, or an industry within a country. The government then allocates or sells permits equivalent to that level of allowable emissions (i.e., emissions “cap”). Individual companies are then faced with two choices: they can reduce CO2 or buy a permit that gives then the right to emit. Companies will typically take whichever action is cheaper. Companies that are able to cost-effectively achieve significant emission reductions can sell excess permits. The “market price for CO2 permits” is driven by supply and demand–just like any other product. Thus, in a trading system, the free market (not the government) establishes a true “market value for CO2 emissions.” In a cap-and-trade system, the government generates a positive revenue stream if it sells rather than allocates the initial permits. It is in the interest of the cement industry to encourage national governments to direct this new revenue stream to at least two uses: 1) industry tax credits that ease the financial burden on the industry for CO2 abatement, and 2) nationally-funded pre-competitive R&D on bold, breakthrough technologies and products that will help the industry achieve long-term CO2 reductions in the future. From a sustainability perspective, it is not in the interest of the industry to have this new revenue spent by governments on activities that have little or no relation to climate change. The concept of emissions trading is viewed as unethical in some countries and by some NGOs, because they view it as buying the right to pollute. However, given the environmental benefit is the same no matter where CO2 is reduced and the cost savings achieved through trading are so great, economic and political forces will ensure that a market does develop. It will be up to individual companies to determine if they wish to participate in this market. In practice, governments, industries, and companies are in the process of defining the accounting rules and setting reduction targets; thus, the emissions markets are still immature. As a result, estimates of the future market price of CO2 proliferate in the literature. Values ranging from $0/tonne-C (tonnes of carbon) to >$200/tonne-C are not uncommon in the literature. Frequently, estimates from several sources will be cited side-by-side, often intermingling “abatement cost” and “market price” or having different bases. This adds confusion to an already complicated topic.

1.4. Summary of The Climate Change Challenge In summary: If world governments seriously attempt to stabilize atmospheric concentrations of CO2, the

cement industry will face a requirement for significant emission reductions that go well beyond those prescribed by the Kyoto Protocol.

Under the population and economic growth assumptions of four IPCC scenarios, Battelle estimated that by 2020, the industry may have to reduce its unit-based emissions by as much as 30 to 40%. By 2050 the reduction may be as much as 50%.


15

There are many policy instruments that may be used by governments to encourage emission reductions, and they will likely be applied differently in different countries.

Although there are clearly ethical concerns about emission trading that should be addressed during the policymaking process, the environmental benefits of a tonne of CO2 reduction are the same no matter where the reduction occurs. Allowing permits to be traded reduces the total cost of emissions management by allowing the lowest cost measures to occur first. Therefore, it will be used by many countries and companies.

The rules surrounding emission trading will develop very quickly, so companies should stay engaged in the policymaking process to protect their financial interests.

Given the complexity of this issue, many companies have found that engaging in emission trading simulations, which explore alternative corporate strategies for managing corporate CO2 reduction, is an invaluable learning experience*. Others have established pilot emission trading programs internal to the company.†

All companies can benefit by creating a baseline emissions inventory, energy use inventory, and equipment inventory, as well as compiling company-specific CO2 abatement cost curves. Having these tools will help companies effectively manage CO2 emissions reductions at their lowest possible cost.

* Members of the Emissions Marketing Association offer participation in these simulations around the world to help companies master this complex topic. http://www.emissions.org † BP internal trading program and Shell internal trading program.


16

2. CO2 Management: Opportunities Although significant CO2 emission reductions are a serious challenge to the cement industry, some of the possible strategies to achieve reductions may offer business opportunities. Ideally, a CO2 management strategy would meet three goals: (1) make meaningful contributions to solving a critical environmental challenge, (2) minimize corporate financial liability, and (3) create new business opportunities. This part of the document is organized in three sections: Conventional CO2 Management Approaches Advanced CO2 Management Approaches Flexible Market Instruments, Management Tools, and Policies

The discussion of conventional CO2 management approaches addresses technological and product practices that to some degree are already used in the industry, albeit with varying levels of success. Examples include: energy efficiency measures, expanded use of composite cements, and the use of alternative fuels and resources (AFR). The discussion of advanced CO2 management approaches includes actions, technologies, and alternative products that are in an early stage of technical development or acceptance. These include: carbon capture and sequestration, hybrid cement-energy facilities, and non-cement binders that potentially have a lower CO2 impact. The third section addresses tools and policies related to CO2 management. Tools and policies provide a management framework for implementing emissions reduction and help manage the financial liabilities associated with emissions reductions. With few exceptions, well-designed tools and policies increase the financial efficiency with which reductions are achieved. By themselves they do not result in emissions reductions.

2.1. Conventional CO2 Management Approaches Table 2-1 summarizes the technical potential for CO2 savings per tonne of cement by 2020 from conventional CO2 management approaches. If the full set of actions in Table 2-1 is taken, the worldwide CO2 reduction potential is approximately 30% by 2020, as measured on a per-unit-of-cement basis. For different regions of the world, potential reductions range from 20% to 50%. Technological breakthroughs have the potential to increase the reduction potential. Changing economic, public policy instruments, infrastructure, and other business considerations have the potential either to make some of these CO2 reductions difficult to fully realize or to expand the opportunities for CO2 reductions. Actions that may not be financially viable for cement companies to undertake in the absence of CO2 policies may become financially viable under even modest CO2 policies. The total reduction potential (i.e., ~30%) is approximately equivalent to the amount of reductions that would be required if the world adopted a strategy to stabilize greenhouse gas concentrations at twice pre-industrial levels (as estimated in the first section of this report). Thus, a cement industry strategy to help the world stabilize greenhouse gases must be based on a portfolio of actions that are pursued simultaneously and aggressively. As shown previously in Table 1-2, on an industry-wide average basis, emissions reductions over the past decade have been quite limited, though a number of individual companies have demonstrated that significant progress is possible (see box on page 18). More widespread


17

application of best practices, such as those described in the box, will help the industry achieve reduction goals. The remainder of this section discusses each of the improvement actions outlined in Table 2-1.

Table 2-1. Technical Emissions Reduction Potential for CO2 per tonne of cement by 2020 Improvement Area Actions Plant SubRegion/Region WorldwideProcess Emissions Blended Cements -- <1-35% 7%*

Plant Efficiency -- 5-15% 11%† Fuel Emissions

Fuel Switching <20% <1-7% 3%

Transport Transport Efficiency & Bio-based Transportation Fuels <5% <1% <1%

Electricity Generation Energy Efficiency and Low-Carbon Power Generation <5% <1% <1%

Offsets and Other Reductions AFR -- 6-16% 12%‡

Total§ All of Above -- ~20%-50% ~30%**

Reducing Process Emissions in Cement Production. Reducing process emissions hinges upon reducing the amount of clinker in cement. Substituting pozzolanic materials, such as blast furnace slag, fly ash and natural pozzolans for clinker substantially reduces process-related CO2 emissions. It represents one of the best, technically proven approaches for reducing process emissions. However, there are challenges associated with the expanded use of blended cements. Among them are: Securing a reliable and sufficient supply of substitute materials For some applications, improving the early strength of the formulations19

* A key assumption is that blast furnace slag and fly ash are the principle blending constituents. Natural pozzolans are abundant in the world; although, not always located in convenient locations. Other blending constituents also exist. For this reason, some countries will find increased availability of blending constituents, and therefore, this estimate is most likely conservative. † A key assumption underlying this estimate is that different regions of the world will increase their energy efficiency by 0.5%/yr to 2%/yr. Regions that are already highly efficient, for example Japan, are assumed to have the potential to improve at a lower rate than countries, such as the United States, which is relatively inefficient. For such improvements to be realized would take an aggressive energy efficiency initiative in some countries (e.g., the United States). ‡ This estimate assumes an aggressive effort by the industry to move toward bio-derived alternative fuels (e.g., municipal paper wastes, biomass, agricultural waste, etc.) as a substitute for fossil fuels. While this substitution will in some cases increase on-site emissions by several percent, biofuels are essentially CO2 neutral over their life-cycle, and consequently reduce global CO2 emissions. § Due to the interactive effects of actions, “Total Worldwide Emissions Reduction Potential by 2020” is less than the direct sum of individual actions. ** All the worldwide reduction potentials in this analysis are derived from a region-by-region analysis of technology, fuel mix, product composition. The results should be interpreted as a high-level, consistent analysis. Individual companies and plants will find that site-specific conditions and economic conditions enable lesser or greater reductions.


18

Case Study: Energy Efficiency and CO2 Reductions at Heidelberger Zement’s Lengfurt Plant in Germany

With CO2 emissions a priority, Heidelberger's Lengfurt plant, which has been managed by the company since 1923, has exploited ways to reduce gasses emitted into our environment. In this context Lengfurt is a world-class example operating one of the most efficient kiln-lines, in terms of heat consumption. Though the implementation of the first power plant of its kind in the German cement industry, the Organic Rankine Cycle-plant, utilizes the waste heat of clinker cooler exhaust air and allows coal to be substituted with alternative fuels. Integrating by-products such as blast furnace slag, as a substitute for clinker, cuts specific CO2 emissions dramatically. The continuous optimization of the clinker production process can achieve a contribution to environmental protection as well as the use of alternative raw materials and fuels or a substitution of clinker.

Source: Heidelberger Zement20

Moving away from prescriptive cement standards, which specify required cement compositions, and a moving toward performance-based standards that provide manufacturers with flexibility in terms of how manufacturers formulate cement to achieve required performance

Finding substitute materials at convenient locations (if this is not the case, cement companies might have to increase shipment of raw materials).

Of the substitute materials commonly used today, fly ash from coal combustion is available in the largest quantities, followed by blast furnace slag. Fly ash is available today in global quantities greater than 150 million metric tonnes*, an amount that has steadily grown over previous decades due to the increased use of coal-fired power. The available amount is estimated to grow through 2020, but at a rate slower than the historical rate†. After 2020, its availability is expected to decline for two reasons. First, in a carbon-constrained world, the utility sector will be under intense financial and regulatory pressure to minimize use of coal, which will consequently limit fly ash supply in some parts of the world. Second, as the use of low-NOx burners in the utility sector expands, the suitability of the ash for use as a cement blending agent declines. Enhanced grinding methods can increase the reactive surface area of clinker, resulting in decreased need for limestone-based clinker, which generates CO2. One specific grinding method is the Energetically Modified Cement (EMC) Technology, which enhances the performance of cement containing 50% fly ash or silica sand and 50% ordinary Portland cement. (See Substudy 7 on Innovation for details). Widespread use of this technology could increase the use of non-limestone-based cement and hence reduce CO2 emissions per unit of cement consumed. At least one large-scale facility using this technology is in the planning stages. Other techniques, such as use of superplasticizers, can also produce concrete that meets standards while using a significant percentage of fly ash or other blending agents. A portfolio of solutions to decreasing the ratio of CO2 emissions per unit of cement is likely to emerge in the market.

* Fly ash quantities were estimated by using long-term projections for coal use, assuming an average 10% ash content, and that one-third of the ash is of suitable quality and available at suitable locations for cost effective use in cement. Using this method Battelle estimated a current global ash quantity of 468 MT, of which 156MT is suitable for use in cement. Subregions estimates were also prepared. The 468 MT compares well with estimates found at http://www.coalportal.com/Mall/coalportal/general_information/index.html, http://www.wci-coal.com/pdf/p4p_4/supplies_secure.pdf, and http://www.eia.doe.gov/cneaf/coal/cia/99_special/coal99.pdf † Based on same methodology described in footnote #2.


19

Based upon production estimates of future coal-based power and steel, the availability of fly ash and blast furnace slag for use as a blending agent in cement was estimated (Table 2-2). Also included in Table 2-2 is a regional assessment of the potential for blended cements to reduce CO2. The assessment rating ranges from “not significant” to “very high”. These ratings were assigned based upon the regional availability of these particular blending agents in 2020 relative to the expected demand for cement in 2020. Other blending agents such as silica fume, rice husk ash, and others (see Substudy 7 on Innovation) may also be available in some locations, though the current and future quantities are not as easy to estimate.* The use of EMC with silica sand also offers a potential solution.

On a percentage basis, the estimated CO2 savings (per tonne of cement manufactured) from the types of blended cement examined in Table 2-2 varies regionally from nearly 0 to ~35% in the year 2020, with potential global average savings of ~7%. These estimates are lower than others have estimated (e.g., IEA 1999), because the estimates presented here are based on a projection of cement demand that grows significantly faster than fly ash availability.

Table 2-2. Estimated Availability of Fly Ash and Blast Furnace Slag in 2020

Fly Ash

(MT) Slag (MT) Total (MT)

Estimated Cement Demand

In 2020 (MT)†

Potential for CO2 Reduction

In 2020‡ USA 29 16 44 106 Very High Canada 5 3 7 11 Very High W Europe 20 27 47 239 Medium Japan 4 15 19 88 Medium Aus &NZ 2 1 4 8 Very High China 62 20 81 1154 Very Low SE Asia 17 3 20 294 Very Low Korea 3 7 10 33 High India 16 4 20 215 Very Low FSU 15 13 28 175 Low E Europe 11 4 14 79 Low Latin America

11 7 18 341 Very Low

Africa 7 2 8 288 Not Significant Middle East 3 1 5 188 Not Significant

Reducing Fuel -Related Emissions Fuel-related emissions are primarily a function of the fuel mix and energy efficiency of the equipment used in the cement manufacturing facility. Based on analysis of data from CEMBUREAU,3 Table 2-3 presents the distribution of kiln types and fuel mix for the regions of the world. The figures shown in the table are weight-averaged using the reported data on installed capacity. * One factor that this study does not take into account quantitatively is the CO2 savings that might result from the use of naturally-occurring pozzolans, such as kaolin-montmorillionite-illite clays. Their thermal activation could result in a range of new pozzolanic admixes (see SS7: Innovation). Another pozzolanic material is palm oil fuel ash, which is readily available in Malaysia (see SS7). The global and regional availability of such materials is difficult to estimate. † Refer to Appendix A for details. Demand projections are associated with scenario A1. ‡ “Ratings” assigned based on the ratio of available blending agent to cement demand. Very High =>34%, High =>26%, Medium =>18%, Low =>10%, and Very Low =>5%, Not Significant <5%.


20

Retrofitting existing plants or phasing out energy-intensive manufacturing plants (e.g., wet process plants) is one strategy for increasing the efficiency at which plants operate. The challenge is to accomplish the retrofits or closures cost effectively and at an appropriate time. Increasing the energy efficiency of the asset base should be part of a company’s routine strategy whenever acquisitions, divestitures, or plant consolidations take place. Some regions of the world have more potential for energy efficiency actions than others. For example, as shown in Table 2-3, nearly 80% of the production capacity in the Former Soviet Union (FSU) and one-third of United States’ production capacity consists of energy intensive wet kilns, but less than 10% of the production capacity in the Republic of Korea (ROK) consists of wet kilns. Thus, the potential for improvement in the existing capacity base in the ROK is less than in the FSU.

Table 2-3. Kiln Types and Fuel Mix KILN TYPE (% ) * FUEL SHARES (%)*

Region SubRegion D

ry

Sem

i-Dry

/ Wet

Wet

Vert

ical

Coa

l

Oil

Gas

HVF

O

Oth

er

(Incl

udin

g A

FR)

1. USA 65 2 33 0 58 2 13 0 26 I. North America 2. Canada 71 6 23 0 52 6 22 4 15

II. Western Europe 3. W. Europe 58 23 13 6 48 4 2 4 42 4. Japan 100 0 0 0 94 1 0 <1 3 5. Australia & NZ 24 3 72 0 58 <1 38 0 4

6. China 5 0 2 93 94 6 <1 0 0

7. SE. Asia 80 9 10 1 82 9 8 0 1 8. Rep. of Korea 93 0 7 0 87 11 0 0 2

III. Asia

9. India 50 9 25 16 96 1 1 0 2

10. FSU 12 3 78 7 7 1 68 24 <1 IV. Eastern Europe 11. Other E Europe 54 7 39 0 52 34 14 0 <1

V. Latin & South America 12. S. & L. America 67 9 23 1 20 36 24 8 12

13. Africa 66 9 24 0 29 36 29 2 5 VI. Middle East & Africa 14. Middle East 82 3 15 0 0 52 30 14 4 ∗ The percentage of kilns by type and the fuel mix were obtained from the World Cement Directory.3 Data for kiln type and fuel shares at the facility level were weighted by the size of the facility to obtain the representative mix for a country. A subset of countries representing at least 75% of the cement production in a region were then combined to obtain a representative technology and fuel shares “snapshot” for each of the 14 subregions.

By examining the equipment stocks in various regions of the world, this study estimates that the various regions can, from a technical feasibility perspective, achieve CO2 reductions ranging from 5% to 15% by 2020 (the estimated global average reduction is ~11%). These translate to efficiency improvements of 0.5% to 2% per year, depending upon the subregion. Battelle assumed that these improvements could be phased in from 2000 to 2020.


21

The Availability of Fossil Fuels

A common misconception is that the earth is running out of fossil fuels. Fossil fuels are abundant; although, in certain regions the availability of some conventional fuels (e.g., natural gas) may be limited. While prices may fluctuate considerably on a short-term basis, over the long-term fossil fuels are expected to remain competitive even in a carbon-constrained world.

Energy resource surveys indicate that the world has more than enough fossil fuel resources to supply the energy needs of the 21st century. Coal dominates the fossil fuels that are readily available using current conventional methods of extraction. Unconventional oil (including oil found in shales, tar sands, and heavy oils) and unconventional gas (including gas found in deep formations, tight seams, and clathrates) represent the bulk of the remaining energy resources. Some of these “unconventional resources” are already used today (e.g., tar sands from Canada and Brazil). With anticipated technological improvement, these unconventional sources are likely to become cost-competitive with non-fossil energy sources. In addition, unconventional energy deposits are more evenly distributed among the countries of the world than conventional fossil resources.

Even if conventional oil and gas resources prove to be limited, coal resources with last centuries. Increases in the cost of energy will be limited ultimately by the cost of transforming coal into liquids and gases--a cost that is relatively well understood.

Below are estimates of the fossil fuel resources measured in exajoules. The “conventional proved recoverable” fossil fuels are the figures commonly cited in the media. Note the size of the other categories of fossil fuels.

Oil Gas Conv. Proved Recoverable 6,300 5,400 Conv. Additional Reserves 8,800 10,000 Conv. Additional Resources 12,000 16,000 Conv. Enhanced Recovery 18,000 19,000 Unconventional 220,000 950,000

Source: Battelle 2000 and Rogner 1997.21,22

Switching from high-carbon to low-carbon content fuels is an additional approach for reducing on-site fuel-related emissions. Petroleum coke and biomass release approximately 110 kg of CO2 per GJ of fuel combusted at the point of combustion. Coal, fuel oil and natural gas release 14% less, 30% less, and 50% less than petroleum coke, respectively, for each GJ of produced energy. Therefore, from a CO2 reduction perspective, switching to a low-carbon fuel like natural gas can have benefits. For example, in Japan where coal fuels most cement plants, fuel-related CO2 could be cut substantially by shifting to natural gas as the dominant fuel. Overall, it is estimated that fuel switching could result in global average emission reductions of 3% with some regions having the technical potential to cut emissions as much as 7%. However, coal and petroleum coke provide necessary minerals needed for cement production, so use of natural gas would require addition of these minerals. In addition, some question whether use of a high quality, clean fuel like natural gas is sustainable in a process that can tolerate lower quality fuels. This is ultimately a value judgment. Is it is worth achieving lower CO2 emissions with natural gas while simultaneously increasing consumption of a non-renewable resource? In most regions of the world natural gas is abundant, contrary to a common belief natural gas resources are not likely to be depleted anytime soon. Sometimes natural gas is even considered a waste stream (for example, in the Middle East, when it is co-produced with crude oil production and is produced in quantities too large to use productively). On the other hand, it is also a high quality fuel that can be used as a chemical feedstock for many industrial processes and can be transported long distances for relatively

clean end-use. Thus, like many other issues, the appropriateness of using natural gas will be a choice to be resolved by individual companies and stakeholders.


22

The Long-Term Future of Alternative Fuels in a Carbon-Constrained World

Over the coming decade, it is quite likely that governments will, and should, give companies emission credits for burning all AFR in cement kilns.

Beyond a 2010, in a climate-constrained world, it is likely that fossil-based alternative fuels (e.g., solvents and tires) will be an increased target for: 1) elimination as fuels, 2) regulation under the same terms as fossil fuels, and 3) ineligible for offset credit.

Biomass-based fuels, waste paper, and perhaps sewage sludges due to their recent biological origin (rather than fossil origin) are more likely to retain their status as types of fuels that will be acceptable for emission offsets.

Thus, fossil-based solvents, tires, petroleum coke, and other fossil-based wastes are best utilized as an interim fuel, as they may not be a sustainable fuel in the longer term.

Another approach to lowering fuel-related CO2 emissions is to use “alternative fuels”. Coal, oil, gas are typically considered traditional fuels. “Alternative fuels” is a term that is widely used to encompass other fuels not directly derived from fossil fuel sources. Different companies use the term somewhat differently, but examples of alternative fuels often included in this category are: Waste tires Biomass Used solvents Sewage sludge Municipal solid waste Petroleum coke Other wastes.

Some alternative fuels increase onsite CO2 emissions due to their high carbon content. However, on a life-cycle basis, they may lower CO2 emissions. Two examples are provided below: Some cement kilns burn

wastes (e.g., waste tires, solvents, petroleum coke, and other fossil-based wastes) that would otherwise be incinerated elsewhere. Although CO2 emissions from burning these materials the cement kiln are the same as those that would have been emitted from the incinerator, the use of these wastes as cement kiln fuel eliminates the need for the cement kilns to consume virgin fossil fuels. If the incinerator was not using the wastes productively (e.g., for generation of electricity), their use in the cement kiln turned an unproductive use into a productive one. The net effect is a reduction of the total CO2 released to the atmosphere even though emissions at the cement plant itself may not decrease.

Combusting bio-derived fuels, such as wood wastes, waste paper, agricultural byproducts or commercially grown biomass, has nearly zero life-cycle emissions. Each of these fuels originates from biological plants. The only CO2 they release upon burning is the CO2 they “consumed” as they grew (except for CO2 released from transportation and processing). Thus, bio-derived fuels are close to net-zero CO2 fuels.

In each case, depending upon the regulatory environment in which the cement plant is operating, local or national governments may provide credits (or otherwise exclude emissions) for use of alternative fuels. However, as discussed in the box above, over the coming decade, it is likely that governments will become more restrictive as to what is eligible for a credit. Also, the waste generator may want to claim at least part of the total emission credit, depending on the contractual arrangement between the cement company and the waste generator. Based upon an evaluation of the existing regional fuel mixes, Battelle estimated CO2 reductions possible from alternative fuels. The reduction potential ranges from 6% to 16% depending upon the subregion, with a 12% worldwide average, by 2020.


23

Reducing Electric ity Generation and Transport Emissions. As outlined in Section 1 of this document, transportation and electricity emissions account for less than 10% of the total cement-related emissions. The strategies for dealing with them are fairly simple, although not always cost-effective. For transport emissions, there are three strategies: 1) increase the efficiency of raw materials transport; 2) reduce the amount of transport; or 3) use a biomass-based fuel, such as a bio-diesel, for transport. The first two strategies directly reduce emissions, but in small amounts. Using the same principle described under the alternative fuels discussion above, biomass-based fuel is near net-zero CO2 on a life-cycle basis (see box below). Emissions associated with electricity generation are decreased or eliminated using one of two strategies: 1) switching to renewable or nuclear electricity sources, which generate low or no CO2; or 2) improving plant efficiency so that less electricity is consumed. Both strategies are important. With the first strategy, to the extent that the cement industry purchases electricity from outside suppliers, controlling emissions is not in the direct control of the industry, but can be influenced by signing contracts for “green” or renewable power. The second strategy is in full control of the industry.

Combining Multiple Emission Reduction Actions A combination of actions will be required to sufficiently reduce CO2 emissions by 2020. Each of the actions described above has interactive effects with other actions. That is, they are not directly additive. To gain an understanding of the maximum technical potential, all of the actions described above were quantitatively evaluated together. In total, it is estimated that the maximum technical potential for these “conventional approaches” to CO2 emission reduction by 2020 is 29%. On a subregion basis, the reduction potential varies from 20% to 50% depending on local conditions and constraints. Figure 2-1 presents the improvement potential for all subregions.

Case Study: Use of Bio-based Transportation Fuels

To reduce the consumption of fossil-based transportation fuels, Schiedel Corporation, is phasing in the use of bio-diesel at its facilities.

Forklift trucks do much of the heavy work shifting raw materials and finished products around production sites. At Schiedel, a fleet of 400 vehicles move more than 2.5 billion tons of materials annually, consuming 40,000 liters of diesel fuel per year in the process.

Conventional diesel was replaced by a rapeseed bio-diesel. This plant-based fuel yields a wide range of ecological benefits. Its exhaust fumes are less harmful than those of conventional diesel, while its bio-degradability is a major advantage in case of leakage. Finally, it is nearly neutral in terms of CO2 emissions, since the rape consumes the same quantity of CO2 while growing that it later emits when burned.

Source: Lafarge 200023


24

Figure 2-1. CO2 Emissions Reduction Potential Using a Combination of Conventional Reduction Approaches

2.2. Advanced CO2 Management Approaches As outlined in Section 1, unit-based emission reductions of 30% by 2020 might be required and the target might increase to 50% by 2050. These targets were derived by combining our best current knowledge regarding the science of the atmosphere, mid-range assumptions for economic and population growth, and the assumption that the governments of the world move toward a strategy that would stabilize atmospheric concentrations of greenhouse gases at twice pre-industrial levels. In Section 2.1, potential CO2 reductions using conventional methods were explored and estimated to be approximately 30% by 2020. Even allowing for uncertainties in these estimates, several clear conclusions can be drawn: 1) an extremely aggressive implementation of conventional CO2 management approaches is required by 2020 to accomplish the needed progress; 2) barring an unexpected breakthrough or an extremely large shift toward the use of natural pozzolanic materials, most conventional CO2 management approaches will have their potential largely exhausted by 2020; and 3) there is risk that some of the improvements suggested in the previous section will ultimately not be feasible. Therefore, to prepare for the more significant reductions that must occur beyond 2020 and create additional CO2 reduction opportunities that can be implemented in the coming decade, the industry should explore a number of advanced CO2 management approaches. Three are discussed here, including: non-limestone binders, hybrid cement-energy facilities, and carbon capture and sequestration. Non-Limestone Based Binders As noted in Part 1, the production of clinker involves converting limestone (CaCO3) to CaO. This chemical reaction unavoidably generates CO2 as a by-product. As outlined in the preceding section, it is possible to reduce cement-related CO2 by 30% or perhaps more with some unexpected breakthroughs or using natural pozzolans as blending agents. However, an

0 % 2 0 % 4 0 % 6 0 %

USACanada

W. EuropeJapan

Australia & NZChina

SE. AsiaIndia

Rep. of KoreaFSU

Other E. EuropeS. & L. America

AfricaMiddle East

World


25

alternative to continuously trying to improve the existing cement making process is switch to an alternative binder that can substitute for clinker. That is, a binder that does not generate CO2 as an inherent part of the process chemistry. A number of novel binders have been identified and explored by scientists within and outside the industry. None have successfully penetrated the market at a large scale. As a rule-of-thumb, a new product needs to achieve a production level of greater than 250 million tonnes per year before it will begin to have a measurable positive impact (i.e., 5%) on the overall unit-based CO2 emissions of the cement industry. However, if such a binder could be identified and moved to production at this level by 2020, it would well position the industry to achieve the dramatic emissions reductions that will be required in the post-2020 era. The challenge of course, is finding a binder that cost-effectively meets the robust performance requirements that customers have come to expect from cement, and for which the raw materials are widely available around the world. Geopolymers. Geopolymers are a widely discussed binder that has received considerable attention over the past decade; however, they have not yet successfully been commercialized as a cement replacement on a large scale. While clinker is made by calcining calcium carbonate, mineral polymers with cement-like properties can be made from other inorganic compounds. Geopolymers, one form of mineral polymers made from inorganic alumino-silicate compounds, were originally developed to create non-flammable plastic material and have subsequently been used in the automobile and aeronautic industries and in certain niche cement markets (e.g., for waste encapsulation). They are produced at lower temperatures than Portland cement and do not use calcium carbonate, hence their associated CO2 emissions are suggested to be 80% lower than from Portland cement.24 While indeed geopolymers may offer substantial CO2 emission reductions, the 80% figure is almost certainly optimistic. Lone Star Cement was an early commercial pioneer of geopolymers with hundreds of successful commercial applications. Due to Lone Star’s higher cost than traditional cement, their best market successes with geopolymers came in specialty applications. In general, they found that when coupled with customer training on their use, conventional concrete crews were able to quickly develop the enhanced job skills to use geopolymers. However, like many new products they found gaining customer acceptance for new geopolymers over long-held preferences for conventional cement was difficult. Due to corporate restructuring (not specifically due to their experience with geopolymers), Lone Star phased-out geopolymers for the time being. Today they remain strong in other product lines. Other Novel Binders. While geopolymers have received the most attention as cement substitutes, there are some other alternatives. Most are still in the experimental stage of development. Two examples are Ceramicrete and polymers.

Preparation of Portland Cement Components by PVA Polymerization

The University of Illinois in the United States has been conducting research to co-dissolve nitrate salts and colloidal silica in (poly) vinyl alcohol (PVA), creating a polymer that, when dried and ground, can be calcined at 700 degrees C to form the key components of Portland cement. The product is extremely reactive, develops strength quickly during hydration, and offers the prospect of using reinforcement in concrete that usually corrodes with ordinary Portland cement.

Source: Lee et al. 199925


26

Ceramicrete, a chemically bonded ceramic, is formed by mixing magnesium oxide powder and soluble phosphate powder with water, resulting in a nonporous material with compressive strength higher than that of concrete*. Another experimental method to produce the components of cement at lower temperatures involves a PVA chemical process. These experimental methods have not been demonstrated in commercial operation and may prove both costly and difficult to produce at the large scale needed for high volumes of cement. However, through their lower energy intensities and the avoidance of limestone-based clinker, these types of materials may be suitable cement substitutes that have a lower CO2 emission profile. Consequently, they be a viable product for cement companies to manufacture in the future. However, all these materials require significant additional product research and customer acceptance testing before they could be considered viable alternatives to clinker-based cement. Therefore, pursuing development of these types of products would require a concerted R&D effort that is greater than the attention these products receive today.

Hybrid Energy-Cement Plants An interesting concept that would lower the world’s CO2 emissions is an integrated facility that produces both electricity and cement. While it is currently common for coal-fired utilities to sell a portion of their fly ash to the cement industry as a blending agent, this concept takes the idea one step further. There are different technological approaches to the integration, and two are highlighted here. In general, through the integration process, efficiencies are achieved that result in substantially less CO2 (and pollutants) being emitted in the integrated facility than would have otherwise be produced in two standalone facilities. Global New Energy Process. This technology has been demonstrated in both China and the United States†. It involves a proprietary admixture (referred to as AMC) that is mixed with the coal-fired powerplant’s fuel supply. (See Figure 2-2) The coal and admixture burn and react together inside a powerplant's existing boilers. All the fly ash and bottom ash is converted into cement clinker. A life-cycle assessment performed by First Environment26 suggests that the clinker will be produced without adding to the CO2 output of the powerplant. Thus, the process yields near-zero CO2 clinker. The manufacturer claims that the clinker exhibits enhanced early strength, bending strength, compression strength, pore ratio, and elasticity versus cement made from common silica clinker. It is claimed to always be equivalent or higher quality than conventional North American cement, Portland Types I, II and III. Independent tests by CANMET determined in small production run tests that the clinker was of the required quality for commercial sale.

* www.techtransfer.anl. gov/techtour/ceramicrete.html † http://www.gnegroup.com


27

Figure 2-2. Global New Energy Cement/Power Plant

Alstom Combined Power and Cement Process. Illinois Cement Company, Alstom Power, and American Electric Power are custom designing an integrated system for use in one of Illinois Cement’s plants. The proposed system will produce 40 MWe of electricity, of which 25 MWe will be exported to the electricity grid. In addition, the project will enable co-production of an additional 350,000 tons per year of cement production (approximately a 60% increase). This demonstration will show a cost competitive increase in reliable power production, improved efficiency, and a significant reduction in gaseous and solids emissions. This technology enables nearly 100% utilization of coal combustion solid by-products, near elimination of SO2 production, and a 5-10% decrease in CO2 emissions. The proposed co-generation process includes a specially designed fluidized bed combuster (FBC) boiler that is integrated with a cement rotary kiln. Figure 2-3 shows a schematic diagram of the combined power and cement (CPC) process. The feed materials for the process are crushed coal, limestone and additives. The outputs are electricity, cement, and clean flue gas. The FBC boiler may be operated in a temperature range of 800 to 1000oC. Crushed coal is burned in the FBC boiler supplying heat for steam generation, and preheating and calcining the limestone in the raw meal for cement production. The mixed coal residues and the calcined raw cement mix are discharged into a rotary kiln where they are further burned into cement clinker. The clinker is cooled in a conventional grate cooler. If the sulfur content of the fuel is high (>5%), a small portion (5 –10%) of the flue gases from the kiln may be withdrawn and cleaned for particulate separately. In this manner, sulfur and trace elements like mercury can be isolated into a concentrated solid stream for disposal. Otherwise, all solid waste products are essentially captured and utilized with the cement product, resulting in near zero solid discharge of waste products.27

Clinker


28

Figure 2-3. Alston Combined Power and Cement Plant

Engineered Carbon Capture and Sequestration.

Engineered CO2 capture and sequestration involves physically capturing CO2 from the flue gas of a cement plant and either selling it or injecting into a deep geologic formation where it will permanently remain. Engineered capture and sequestration could become a cost-effective option for the cement industry if one of several outcomes occurs: 1) the economic penalty for emitting CO2 rises higher than the current cost of engineered sequestration, 2) a novel business arrangement exists that allows a cement company to capture and sell the CO2 creating a partially offsetting revenue stream, or 3) a technology breakthrough occurs that substantially lowers the cost of capture and sequestration. Today Mitsubishi Heavy Industries (MHI) has a commercial carbon capture system that operates for $25/tonne-C, including capital costs. The U.S. Department of Energy has a R&D goal to drive capture costs to $10/tonne-C. These costs are based

The Combined Power & Cement Plant

Clinkerto Grinding

Flue gas to existing pre-heater

Crushed coal

Crushed raw mix

Rotary kilnClinker

air

FBHE

ESP

Back-pass

By-pass for Hg,Alkali Control

GElectricity

CFB

CalcinedRaw Mix

Figure 2-4. CO2 for Enhanced Oil Recovery

Figure 2-5. CO2 for Enhanced Coal Bed Methane Recovery


29

on capturing flue gases from coal-fired power plants, which have a CO2 flue gas concentration of 12% to 15%. Cement plants have CO2 flue gas concentrations approaching 30%. Therefore, it may be cheaper (on a per tonne basis) to capture CO2 from a cement plant’s concentrated flue gas stream than from the more dilute powerplant flue gas stream. While engineered capture and sequestration may seem like an exotic solution, if it can become a fully proven technology, it will likely be a less expensive CO2 management technology than many other options that are considered “conventional” today.

In addition to MHI, ABB-Loomis has a commercial CO2 capture technology available. However, the MHI system is the only system that was designed from the ground-up for large-scale capture. The ABB-Loomis system has been designed for smaller applications, such as capturing powerplant-generated CO2 for subsequent purification and use in food products. While there are selected food, chemical, and pharmaceutical uses for CO2, enhanced oil recovery (see Figure 2-4) and coal bed methane recovery (see Figure 2-5) are the only uses of captured CO2 that will require the volumes of CO2 that will likely be captured from utility sector and the cement sector in a decade or two. CO2 that cannot be sold would likely be injected into deep brine formations where it would permanently reside.

2.3. Flexible Market Instruments, Management Tools, & Policies

The industry also has an opportunity to develop various management tools that will enable more cost-effective CO2 management. A few of these include: Developing an emissions inventory

protocol that would enable systematic accounting of emissions across companies and regions. Standardized accounting protocols are essential for companies to measure and manage progress and “commoditize” CO2 so that credit for

Case Study: Cement Industry CO2 Inventory Protocol

A success story is the partnering of ten major cement companies to develop a standardized CO2 Inventory Protocol. Such a standardized protocol is unprecedented across all industries. The challenge now is for these companies to seek its adoption around the globe at small and large companies alike.

The Protocol was designed to meet the following criteria :

1. Be consistent, transparent, credible, and

honest; 2. Cover all relevant emission sources; 3. Be applicable at different levels (plant,

company, group, industry); 4. Avoid double-counting emissions (or failure to

count) at plant, company, group, national, and international levels;

5. Allow to distinguish between different drivers of emissions (technological improvement, internal and external growth);

6. Be compatible with IPCC guidelines; 7. Allow to report emissions in absolute as well as

specific (unit-based) terms; 8. Allow to credit the full range of CO2 abatement

potentials; 9. Not distort the markets for cement and

cementitious products and not endanger fair trading;

10. Provide a flexible tool suiting the needs of different monitoring and reporting purposes, such as: internal management of environmental performance, public corporate environmental reporting, reporting under CO2 taxation schemes, reporting under CO2 compliance schemes (voluntary or negotiated agreements, emissions trading), industry benchmarking, and product life-cycle analysis.

Source: WBCSD 200128


30

Case Study: Brazilian Rain Forest Terrestrial Sequestration Project

The Guaraqueçaba Climate Action Project seeks to restore and protect approximately 20,000 acres (8,100 hectares, ha) of partially degraded and/or deforested tropical forest within the Guaraqueçaba Environmental Protection Area in the Atlantic rain forest of southern Brazil. With a total investment of $5.4 million from the Nature Conservancy and private utility companies, the project is expected to reduce or avoid emissions equivalent to approximately 1 million tonnes of carbon over the next 40 years. At $6/tonne of CO2, these are cost-effective offsets compared to some other options.

International cement companies might find it advantageous to invest in projects such as the Guaraqueçaba Climate Action Project. It could provide a cost-effective approach to address their CO2 liability at international operating sites, while simultaneously enhancing their corporate image and making sustainable improvements.

Source: AEP 200129

CO2 reductions can be earned from governments or CO2 rights can be bought and sold. Developing a performance indicator system for CO2 management. Cement companies

should consider not only developing indicators that measure reductions achieved to date, but also “leading” indicators that provide management with a measure of how well prepared the company is for making future reductions.

Engaging in intra-company, inter-company, or international CO2 emission trading programs, which increase the economic efficiency of CO2 reductions. In the petroleum industry, companies like BP and Shell have found that setting internal CO2 reduction goals and allowing individual facilities to trade emissions amongst themselves is an effective mechanism to ensuring emission reductions are achieved across their companies in the most cost-effective way.

Buying CO2 futures/options to manage corporate financial risk.

Investing in offset projects that reduce a corporate CO2 liability while simultaneously contributing to sustainable development in unique ways. If a cement company chooses to, or is required to buy offsets, rather than buying offsets as a commodity from an emissions trading house, companies may consider investing in specific offset projects that also benefit the image of the industry and support sustainable development. This approach has been used by the electric utility sector and is directly applicable to the cement sector.

Working with policymakers and other stakeholders, the cement industry can pursue a variety of policy mechanisms that can significantly help or hinder the industry as it seeks to make progress on emission reductions. Voluntary agreements, regulations and taxation are particularly relevant to CO2 management. Voluntary Programs: Completely voluntary programs have tended to bring about little to no change over what would have occurred anyway. Further, relative to the scale of the challenge, voluntary goals are frequently quite weak. Weak goals frustrate policymakers and stakeholders, which makes them less likely to support completely voluntary programs in the future. This reduces industry’s ability to use voluntary programs as part of an effective response strategy. Industry must challenge itself to develop meaningful goals that will be respected by governments and NGOs, so that voluntary programs can be a useful tool for encouraging emissions reductions.


31

Regulations and Taxation: Either directly (e.g., in the form of a carbon or fuel tax) or indirectly through the placement of emission restrictions, regulations and taxation place a monetary value on CO2. When CO2 becomes valued, either positively or negatively, companies are then motivated to more effectively manage the situation. In the hands of policymakers, regulations and taxation can be an extremely powerful tool. However, they can also be a barrier to progress. Both industry and government should work collaboratively to define regulatory and taxation regimes that result in achievement of the environmental goal (i.e., emissions reduction), while simultaneously giving industry the maximum motivation and opportunity for success. Some examples include: The new U.K. energy tax is conditional. If industry commits to voluntary reductions deemed

sufficient by the government, up to 80% of the tax can be avoided. This provides a strong incentive for industrial action. (See box below).

Direct taxation (e.g., a carbon tax) is effective at getting companies to pay attention to emission reductions; however, if misused it can have deleterious effects on environmental progress. For example, if a company was forced into pay a 50 Euro per tonne-CO2 tax on every tonne emitted, the company must pay large sums of money (Note – costs are included in the balance sheet, and so are taxes) that might otherwise have been spent to develop innovative products and technologies aimed at reducing CO2 emissions. Therefore, industry and policymakers must work together to develop taxation schemes that avoid negative consequences. For example, tax schemes could allow companies to opt out of taxes when the funds are placed by the company into R&D on CO2 reduction projects or into capitalizing more efficient equipment. Or some tax schemes might provide industry with grace periods before taxation begins, so that they can use near-term revenues to develop solutions.

U.K. Climate Change Levy

As part of the Kyoto Protocol, the European Union agreed to cut emissions by 8% from 1990 levels. In the subsequent E.U. burden sharing, the United Kingdom agreed to reduce greenhouse gas emissions by 12.5 percent from 1990 levels by 2008-2012. Additionally, the UK has set a goal of cutting CO2 emissions by 20 percent over the same time frame (Reuters 2000). The Climate Change Levy is an energy tax, with a goal to encourage the reduction of climate change gas emissions by industry.

Policy Description

The climate change levy is charged on all energy supplied to industrial, commercial, agricultural, and service users through their utility bills. The energy supplier then registers and pays the levy to the UK Customs and Excise Agency. The UK climate change levy is intended to reduce greenhouse gas emissions, thus is not levied on renewable energy (although it is levied on nuclear, which is not counted as renewable). It is therefore more targeted than a general energy tax and varies according to the energy source, although it does not strictly take carbon intensity into account. For example, the levy on liquid petroleum gas (LPG) is £0.07/kWh, coal £0.15 kWh, and electricity £0.43/kWh (CCL Website 2001). Some sources of climate change gas emissions are exempt. A partial list includes: fuel used to generate electricity; coal used to make coke; electricity from renewable (non-hydro) sources; and gases flared or released before they are supplied to the customer. Petrol, diesel, road fuel gases, mineral oils, waste, and other renewable energy sources are not taxed. The climate change levy is expected to reduce carbon emissions by at least 5 million tonnes per year by 2010 (CCL Website 2001).

The revenues collected from the climate change levy will not go into a general fund but be returned to the businesses. This will be done in two ways: through a reduction of 0.3% in the employers


32

National Insurance contributions; and by a creating a pool of funds (£150 million) to support implementation of energy efficiency measures through technical assistance for small and medium-sized businesses, research and development on energy efficiency technologies, and a capital allowance on the purchase of specific energy efficient equipment (CCL Website 2001). Industries do not have the same ratio of employees to energy used. Therefore, this method of distributing levies to different industries impacts high-energy/low employment industries more than industries that have a large workforce but average energy use.

The UK government negotiated an 80 percent discount on the levy with industry associations from certain high-energy-use industries. This was done in exchange for the industry as a whole meeting certain energy reduction targets. Industries listed under the EU’s Integrated Pollution Prevention and Control legislation are eligible. As of February 2001, the sectors that had negotiated discount agreements were: non-ferrous metals, steel, cement, car makers, metallurgical slag grinders, semiconductors, brewers, maltsters, cathode ray tube makers, mineral wool producers, lime, printing, renderers, animal feed and composite wood-based board (Reuters 2001).

The levy is controversial and some believe that it will decrease total employment by 0.7%, reduce GDP by 1.5% and cause a 0.8% decline in productivity. Some believe that it will weaken the UK’s trading position with regard to international competitiveness and reduce the attractiveness of the UK as a site for manufacturing investment from other countries. However, the climate change levy is expected to reduce carbon emissions by at least 5 million tonnes per year by 2010 and significantly move the UK towards meeting its Kyoto agreements (CCL Website 2001). Additionally, proponents claim the levy will increase industrial efficiency and stimulate innovation.

Impact on the Cement Industry

The cement industry is highly energy intensive with a relative small workforce, so this new policy has a significant impact. The cement industry was able to negotiate an agreement with the government to meet targets. Additionally, the alternative fuels used by the industry are exempt (as they are considered waste or renewables) and the climate change gas emissions from the calcination process itself (as opposed to those generated from use of energy) are also exempt. The increased use of alternative fuels throughout the last decade helps the industry meet its targets and receive a significant reduction in the tax. According to the industry, further reductions to meet targets will require considerable development.

However, these exemptions may not remain over the long-term, depending on the success of the levy as a whole. Additionally, it is expected that other countries, especially in Europe, will begin to implement financial incentives to reduce climate change gases, including levies and taxes on energy use. However, they may not follow the UK exemptions or negotiate agreements with industries, therefore the cement industry may be more significantly impacted. The key lesson is for the cement industry to continue to monitor and participate in the development of this policy and to continue to proactive seek further emissions reductions.

References

CCL Website. 2001. Climate Change Levy Website. http://www.climate-change-levy.com/ccl.html, 3 May 2001 version. Reuters. 2000. “UK Climate Change Levy Called Too Complex.” Reuters News Service, 29 May 2000. Reuters. 2001. “UK Metals Sector Criticises Climate Change Levy. Reuters News Service, 19 February 2001. The Climate Change Levy - Impact on the UK economy - A Report by Business Strategies July 1999. Environmental Taxes: Recent Developments in Tools for Integration, European Environment Agency, November 2000


33

3. References 1. Nakicenovic, N. and R. Swart, eds. Special Report on Emissions Scenarios, Cambridge,

U.K., Cambridge University Press, 2000. 2. International Energy Agency. The Reduction of Greenhouse Gas Emissions From The

Cement Industry, Report PH3/7, Paris, France, 1999. 3. CEMBUREAU World Cement Directory, CEMBUREAU - The European Cement

Association, Brussels, Belgium, 1996. 4. CEMBUREAU Cement Production, Trade, Consumption Data: World Cement Market in

Figures 1913-1995, World Statistical Review No. 18, CEMBUREAU - The European Cement Association, Brussels, Belgium, 1998.

5. CEMBUREAU. Cement Production, Trade, Consumption Data 1994-1997, World Statistical Review Nos. 19 and 20, CEMBUREAU - The European Cement Association, Brussels, Belgium, 1999.

6. Japan Cement Association Voluntary Action Plan for Environmental Conservation in the Cement Industry, December 20, 1996.

7. IPCC, Climate Change 2001: The Scientific Basis. Intergovernmental Panel on Climate Change. Cambridge University Press. 2001

8. Aitcin, Pierre-Claude, Cements of Yesterday and Today, Concrete of Tomorrow. Cement and Concrete Research. 30:1349-1359, 2000.

9. Wigley, Richels, and Edmonds, Economic and Environmental Choices In the Stabilization of Atmospheric CO2 Concentrations. Nature 379(6562):240-243, 1996.

10. Stavins, R., Policy Instruments for Climate Change: How Can National Governments Address a Global Problem. University of Chicago Legal Forum. pp 293-329, 1997.

11. Kaya, Japan’s Response to Climate Change. Journal of Japanese Trade and Industry. July/August. Tokyo, Japan. 2001

12. Nordhaus, William D., Global Warming Economics. Science November 9; 294: 1283-1284, 2001.

13. Edmonds et al., International Emissions Trading and Global Climate Change, Pew Center on Global Climate Change, Washington, DC, 1999

14. http://www.cleanergreener.org/environment/transactions.htm 15. Global Warming Today, "Report Shows Japan Can Cut GHGs," September 26, 2001. EIN

Publishing. Alexandria, Virginia 16. Global Warming Today, May 5, 2001, EIN Publishing, Alexandria, Virginia. 17. Rosensweig et al,The Emerging International Greenhouse Gas Market, Pew Center on

Global Climate Change. Washington, DC, March 2002. 18. www.climatetrust.org 19. Marchal, Gerard. March 2001. “Decreasing Pollution”. World Cement. 20. Heidelberger Zement. 2001. Heidelberger Case Study. Heidelberg, Germany. 21. Battelle. 2000. Global Energy Technology Strategy: Addressing Climate Change. Richland,

Washington, United States.


34

22. Rogner H. H. 1997. An Assessment of World Hydrocarbon Resources. Annual Review Energy Environment 22:217-62.

23. LaFarge. 2000. “Germany: Replacing diesel with a bio-fuel”. http://www.lafarge.com. 24. Davidovits. 1994. http://www.geopolymer.org 25. Lee, S. J., E. A. Benson, and W. A. Kriven. 1999. "Preparation of Portland Cement

Components by Poly(viyl alcohol) Solution Polymerization." Journal of American Ceramic Society. pp. 2049-55.

26. First Environment. 2000. http://www.firstenvironment.com 27. Alstom. 2001. Public Project Abstract. Clean Coal Power Program. U.S. Department of

Energy. Washington, DC, United States. 28. WBCSD. July 10, 2001. CO2 Emission Monitoring and Reporting Protocol for the Cement

Industry. Version 1.5. Geneva, Switzerland. 29. AEP. 2001. Brazil Rain Forest Project.

http://www.aep.com/environmental/stewardship/brazilrainforest/default.htm


A-1

Appendix A: Understanding the Relationship Between Cement Demand, Economic Growth, and Population Growth

Historical Cement Demand Historical data for cement consumption (net of production, imports and exports) was obtained for the following fourteen subregions in the World: 1. USA 2. Canada 3. Western Europe 4. Japan 5. Australia & New Zealand 6. Former Soviet Union (FSU hereafter) 7. Eastern Europe 8. Africa 9. Latin & South America (Latin/South America hereafter) 10. Middle East 11. China and North Korea (China hereafter) 12. South Korea (Korea hereafter) 13. India 14. South & East Asia (SE Asia hereafter)* This data was compiled from Cembureau.3,4 Since continuous annual data was only available from 1947 onward, it was chosen as the cutoff point for the analysis. The raw data show a nearly uniform increase in cement consumption over the last 50 years, except for FSU and Eastern Europe, which have transitioning economies and show a falloff in cement consumption in the 1990’s. Also notable is sharply increasing cement demand (threefold increase in the last decade) in China. South East Asia, India, Korea and Latin/South America are other subregions that show appreciable growth in cement demand over the past few decades. The next step was to identify what factors are correlated to historical cement demand. Once these factors are identified and their correlation to cement demand understood, it becomes possible to make projections of future cement demand. Two obvious candidates for predictor variables are population and gross domestic product or GDP. GDP and population values for the 14 subregions were compared with cement demand since 1947, where data was available, or for a sub-interval of at least 20 years between [1947, 1997]. To ensure a consistent comparison across the different subregions, the GDP values were

* South & East Asia (SE Asia) is Asia exclusive of China, North Korea, South Korea and India.


A-2

adjusted for purchasing power parity (PPP*). When the cement data in per capita terms is evaluated, a consistent pattern emerges. In “developed” economies (US, Canada, Japan, Australia & New Zealand and Western Europe), the cement demand ‘flattens’ out when per capita GDP is approximately US$8000 (expressed in 1990 dollars). This is consistent with the literature.8 Representative plots for Japan, Western Europe, USA and Australia & New Zealand are shown in Figures A-1 through A-4.

Figure A-1. Per Capita Cement Demand vs

Per Capita GDP for Japan Figure A-2. Per Capita Demand vs.

Per Capita GDP for Western Europe

In China, Korea, India, Latin/South America, and other developing subregions, where per capita GDP has not yet reached US$8000, the per capita cement demand is a linearly increasing function of the per capita GDP. Representative plots for Latin/South America, China, India and Korea are shown in Figures A-5 through A-8.

* PPP is the parity between two currencies at a rate of exchange that will give each currency exactly the same purchasing power in its own economy. It is a scalar that when applied to the prevalent exchange rate makes it possible to “purchase” the same quantity of goods and services in each country. This is the appropriate measure to compare income across diverse economies.

0

100

200

300

400

500

600

0 2000 4000 6000 8000 10000 12000 14000

GDP Per Capita (90US$)

Cem

ent D

eman

d P

er C

apita

(ton

nes)

0

200

400

600

800

0 2000 4000 6000 8000 10000 12000 14000 16000


Cem

ent D

eman

d P

er C

apita

(ton

nes)

0

100

200

300

400

500

8000 10000 12000 14000 16000 18000 20000


Cem

ent D

eman

d P

er C

apita

(ton

nes)

Figure A-3. Per Capita Cement Demand vs. Per Capita GDP for the USA.

0

100

200

300

400

500

6000 7000 8000 9000 10000 11000 12000 13000 14000 15000


Cem

ent D

eman

d P

er C

apita

(ton

nes)

Figure A-4. Per Capita Cement Demand vs. Per Capita GDP for Australia and New

Zealand.


A-3

Based on this remarkably consistent observation across all world subregions, it was postulated that cement demand is proportional to the GDP at lower income levels (< US$8000, deflated to 1990), while at higher income levels, it is probably proportional to the population. That is, it was postulated that cement demand could be represented by the following function form:

γγ

γγ

XXBXAXndCementDema

++= −

−

Where, A = α*GDP (demand proportional to GDP at low incomes),

B=β*population (demand proportional to population at high incomes), X is the per capita GDP (scaled to US$8000), and γ is a shape parameter for the function.

From the above equation, it can be readily seen that at low incomes (X is small), the relationship reduces to simply A (=α*GDP), and at high X, it reduces to B (=β*population). In order to test the above functional form, α and β were estimated for each subregion based on historical values for cement demand, GDP and population. For obvious reasons, α is estimated when per capita GDP is below US$8000, and β is estimated once per capita incomes exceed

Figure A-5. Per Capita Cement Demand vs. Per Capita GDP for Latin America

0

50

100

150

200

250

0 1000 2000 3000 4000 5000


Cem

ent D

eman

d Pe

r Cap

ita (t

onne

s)

0

50

100

150

200

250

300

0 200 400 600 800 1000 1200 1400 1600


Cem

ent D

eman

d P

er C

apita

(ton

nes)

Figure A-6. Per Capita Cement Demand vs. Per Capita GDP for China

Figure A-7. Per Capita Cement Demand vs. Per Capita GDP for India

0

20

40

60

80

0 200 400 600 800 1000 1200 1400


Cem

ent D

eman

d P

er C

apita

(ton

nes)

0

200

400

600

800

1000

1200

0 1000 2000 3000 4000 5000 6000 7000 8000


Cem

ent D

eman

d Pe

r Cap

ita (t

onne

s)

Figure A-8. Per Capita Cement Demand vs. Per Capita GDP for Korea.


A-4

that threshold. In developing subregions, where per-capita incomes are less than US$8000, β values are assigned based on values in developed parts of the world. After α and β were determined in this way, historical GDP and population data were used to predict historical cement demand and compared against the actual numbers. Excellent fit and r2 values generally in excess of 0.95 were obtained for all subregions for r=3. A comparison of the actual cement demand per capita and the predicted cement demand per capita for selected subregions is shown in Figure A-9.

Projecting Future Cement Demand

Beyond a decade or so, future human social, economic, and technological development cannot be predicted in any deterministic sense. In looking at the future over long time horizons it is necessary to examine a number of plausible future scenarios. To support the development of these scenarios, population growth and economic assumptions were used from the Special Report on Emissions Scenarios (SRES), which was developed under the auspices of the Intergovernmental Panel on Climate Change.7,1 The SRES scenarios data sets used and a few of their key characteristics are:

I. Scenario A1 -- the income gap between developed and developing countries greatly decreases; very rapid economic growth; low population growth; the rapid introduction of new and more efficient technologies; high per-capita energy use.

II. Scenario B1 -- the income gap between developed and developing countries greatly

decreases; reductions in material intensities; low population growth; a shift toward a service and information economy; low per-capita energy use.

III. Scenario A2 -- the income gap between developed and developing countries does not

close; differing levels of economic growth; high population growth.

IV. Scenario B2 – the income gap between developed and developing countries does not close; intermediate levels of economic growth; moderate population growth.

Each of the four scenarios used in the substudy include population and GDP projections for the fourteen world subregions. Thus, using this scenario-specific population and GDP projections

0

100

200

300

400

500

600

700

800

900

1960 1965 1970 1975 1980 1985 1990

W Europe Korea India Japan CPAW Europe Korea India Japan CPA

Figure A-9. Actual (Solid) vs. Predicted (Dashed) Per Capita Cement Demand for Selected Subregions


A-5

0

2000

4000

6000

8000

10000

1990 2005 2020 2035 2050 2065 2080 2095

Scenario A1 Scenario B1Scenario A2 Scenario B2

Figure A-10. Projected Cement Demand, Million Metric Tonnes

coupled with the correlations discussed in this Appendix, future cement demand for each of the four scenarios used in this substudy can be estimated.

The four families of SRES scenarios have specific population and income levels associated with them. Cement demand into the future was estimated by using future population and income projections into the predictive equation for cement demand. The worldwide demand until 2095 is shown Figure A-10. The global demand projections for the 4 scenarios highlight the nature of the challenge for the industry: while the demand projections are closely bunched together until about 2020 or so (about 30% difference between the extreme scenarios), the gap

widens to a factor of four by the end of the next century*. Thus, it is imperative that whatever strategy the industry chooses to meet its 2020 goals must be sufficient to handle the longer-term growth in cement demand. In order to understand the spatial distribution of the demand, it is necessary to look at the subregion distribution of cement demand over the next few decades (see Tables A-1 to A-4). In all four scenarios, Asia is the subregion with both the highest demand and the fastest growth rate, followed by Africa and the Middle East, where demand increase quite rapidly after 2020. Latin/South America and Eastern Europe show small increases in cement demand over the next half-century, while Western Europe and North America exhibit relatively flat cement demand. These trends are keeping with the historical relationship between per capita incomes, population and cement demand. The subregions that have rapidly growing economies and/or populations are predicted to show proportionally large increases in the demand for cement, while relatively prosperous subregions with slower population growth rates are forecast to show much lower growth rates in the demand for cement. There may also be cultural and societal factors driving the cement demand in different parts of the world- for example, multi-family housing which is popular in areas with high population densities (and relatively lower incomes) are much more cement and concrete intense than single family homes that may be found in with lower population densities and/or higher income levels. It is notable that cement demand is lowest in Scenario B1, which reflects an environmentally conscious world with low material intensities, and is relatively similar in the other three

* In the B1 scenario, the per capita cement demand (β) is linearly decreased to one-half of it’s 1990 value by 2095, in keeping with the reduced material consumption nature of the scenario.


A-6

scenarios. The “1” series scenarios do exhibit higher growth rates in the developing subregions of the world, which is consistent with high rates of technological and economic convergence. The A1 scenario, which features a rapidly closing income gap between developed and developing countries, rapid economic growth, low population growth, the rapid introduction of new and more efficient technologies and high per-capita energy use was chosen as the basis for further analysis. The cement demand under this scenario is mid-range among the future trajectories under the four scenarios. Additionally, it also features high technology growth and convergence, which make it suitable for studying the effect of technology options and technology-based strategies for the cement industry.

Table A-1. Characteristics of Scenario A1 GDP 90$GDP (ppp)

Region 1990 2005 2020 2035 2050 2065 2080 2095 Units A1 USA 5524 8458 12066 16809 22231 29524 38953 50576 B97US$ A1 Canada 613 897 1142 1623 2122 2866 3806 5083 B97US$ A1 WEUR 6190 9182 12071 15998 20217 25358 31448 38116 B97US$ A1 Japan 2393 2776 3485 4296 5265 6482 7960 9639 B97US$ A1 A&NZ 323 453 619 847 1093 1428 1813 2309 B97US$ A1 FSU 1758 1400 2319 3936 6888 10650 15578 21936 B97US$ A1 China 1577 3944 8727 17245 27048 43644 61454 77030 B97US$ A1 MidEast 672 1081 2551 5314 10834 17169 24198 30404 B97US$ A1 Africa 1062 1553 3762 8710 17727 29066 50277 76416 B97US$ A1 LatAmerica 1911 2922 6060 11709 22628 33623 44983 54705 B97US$ A1 SEAsia 976 1717 3734 8085 13482 21203 32292 43582 B97US$ A1 EEUR 425 552 1171 2312 4183 5802 7586 9615 B97US$ A1 Korea 310 741 1707 2911 3501 4302 5027 5559 B97US$ A1 India 1230 2237 5020 10685 17790 28991 48038 69302 B97US$ Population Total

Region 1990 2005 2020 2035 2050 2065 2080 2095 Units A1 USA 249 292 328 362 385 406 432 458 millions A1 Canada 29 34 35 39 40 43 45 48 millions A1 WEUR 409 470 484 501 499 487 477 462 millions A1 Japan 129 131 136 135 133 128 124 121 millions A1 A&NZ 21 22 23 24 23 22 21 20 millions A1 FSU 287 298 308 312 306 293 276 258 millions A1 China 1210 1478 1549 1575 1477 1313 1122 916 millions A1 MidEast 129 195 284 363 435 484 504 485 millions A1 Africa 654 926 1286 1581 1827 1957 1958 1815 millions A1 LatAmerica 440 547 653 728 767 762 724 654 millions A1 SEAsia 654 862 1011 1127 1176 1144 1050 909 millions A1 EEUR 122 124 125 123 116 108 99 91 millions A1 Korea 43 48 50 48 44 42 41 38 millions A1 India 851 1087 1325 1481 1551 1520 1400 1206 millions Per Capita GDP (thousands of 90US$)

Region 1990 2005 2020 2035 2050 2065 2080 2095 Units A1 USA 22.18 29.00 36.82 46.46 57.77 72.72 90.14 110.44 x1000US$


A-7

Table A-1. Characteristics of Scenario A1 A1 Canada 21.15 26.23 32.82 41.62 52.48 67.32 85.17 106.65 x1000US$ A1 WEUR 15.13 19.53 24.93 31.93 40.48 52.04 65.95 82.55 x1000US$ A1 Japan 18.57 21.26 25.57 31.79 39.71 50.69 63.97 79.95 x1000US$ A1 A&NZ 15.21 20.18 26.80 35.98 47.92 64.89 86.58 114.08 x1000US$ A1 FSU 6.13 4.69 7.52 12.61 22.49 36.39 56.55 85.14 x1000US$ A1 China 1.30 2.67 5.64 10.95 18.31 33.24 54.79 84.06 x1000US$ A1 MidEast 5.22 5.54 9.00 14.65 24.91 35.47 48.05 62.68 x1000US$ A1 Africa 1.62 1.68 2.93 5.51 9.70 14.85 25.67 42.11 x1000US$ A1 LatAmerica 4.35 5.34 9.28 16.08 29.51 44.13 62.13 83.61 x1000US$ A1 SEAsia 1.49 1.99 3.69 7.18 11.46 18.54 30.75 47.96 x1000US$ A1 EEUR 3.48 4.44 9.37 18.84 35.93 53.77 76.74 106.13 x1000US$ A1 Korea 7.23 15.42 34.31 60.04 79.83 101.54 123.85 146.56 x1000US$ A1 India 1.45 2.06 3.79 7.21 11.47 19.07 34.31 57.44 x1000US$ Intensity of Cement Usage 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Predicted Cement Consumption

Region 1990 2005 2020 2035 2050 2065 2080 2095 Units A1 USA 81 95 106 117 124 131 139 147 MT A1 Canada 10 11 11 12 12 13 14 14 MT A1 WEUR 212 238 239 242 237 229 222 214 MT A1 Japan 85 85 88 87 84 80 78 75 MT A1 A&NZ 8 8 8 8 8 8 7 7 MT A1 FSU 140 113 175 210 202 187 173 161 MT A1 China 223 565 1154 1380 1137 887 720 577 MT A1 MidEast 59 95 188 253 289 312 320 305 MT A1 Africa 77 113 288 701 1172 1324 1282 1154 MT A1 LatAmerica 104 168 341 453 484 478 452 407 MT A1 SEAsia 71 127 294 622 784 767 679 575 MT A1 EEUR 33 44 79 82 75 68 62 56 MT A1 Korea 33 37 33 31 28 27 25 24 MT A1 India 40 77 215 573 853 937 875 752 MT

Total Demand 1,174 1,776

3,221

4,771

5,488

5,448

5,048

4,469 MT


A-8

Table A-2. Characteristics of Scenario B1 GDP 90$GDP (ppp)

Region 1990 2005 2020 2035 2050 2065 2080 2095 Units B1 USA 5524 8501 12356 15913 19427 22196 25092 29121 B97US$ B1 Canada 613 868 1281 1707 2178 2547 2943 3497 B97US$ B1 WEUR 6190 9161 12354 14890 17073 18468 19618 22242 B97US$ B1 Japan 2393 2754 3416 3863 4291 4670 5034 5601 B97US$ B1 A&NZ 323 488 741 994 1261 1496 1712 2012 B97US$ B1 FSU 1758 1401 1952 2932 4045 5751 8294 11620 B97US$ B1 China 1577 3920 7520 13540 20260 30972 44968 63810 B97US$ B1 MidEast 672 1068 2198 4237 7271 11113 15953 21239 B97US$ B1 Africa 1062 1500 3207 7023 13625 22453 36922 62113 B97US$ B1 LatAmerica 1911 2966 5661 10319 19059 29856 43555 59535 B97US$ B1 SEAsia 976 1722 3163 6253 10904 16219 25346 38340 B97US$ B1 EEUR 425 551 968 1531 2219 3041 3845 4838 B97US$ B1 Korea 310 750 1404 2221 2856 3309 3671 4044 B97US$ B1 India 1230 2242 4075 7743 12983 18794 27851 44010 B97US$ Population Total

Region 1990 2005 2020 2035 2050 2065 2080 2095 Units B1 USA 249 292 328 362 385 406 432 458 millions B1 Canada 29 34 35 39 40 43 45 48 millions B1 WEUR 409 470 484 501 499 487 477 462 millions B1 Japan 129 131 136 135 133 128 124 121 millions B1 A&NZ 21 22 23 24 23 22 21 20 millions B1 FSU 287 298 308 312 306 293 276 258 millions B1 China 1210 1478 1549 1575 1477 1313 1122 916 millions B1 MidEast 129 195 284 363 435 484 504 485 millions B1 Africa 654 926 1286 1581 1827 1957 1958 1815 millions B1 LatAmerica 440 547 653 728 767 762 724 654 millions B1 SEAsia 654 862 1011 1127 1176 1144 1050 909 millions B1 EEUR 122 124 125 123 116 108 99 91 millions B1 Korea 43 48 50 48 44 42 41 38 millions B1 India 851 1087 1325 1481 1551 1520 1400 1206 millions Per Capita GDP (thousands of 90US$) Region 1990 2005 2020 2035 2050 2065 2080 2095 Units B1 USA 22.18 29.15 37.71 43.98 50.48 54.67 58.07 63.59 x1000US$ B1 Canada 21.15 25.38 36.81 43.77 53.86 59.84 65.85 73.37 x1000US$ B1 WEUR 15.13 19.49 25.51 29.72 34.19 37.90 41.14 48.17 x1000US$ B1 Japan 18.57 21.09 25.06 28.59 32.37 36.52 40.46 46.45 x1000US$ B1 A&NZ 15.21 21.75 32.10 42.22 55.29 67.98 81.79 99.40 x1000US$ B1 FSU 6.13 4.70 6.33 9.39 13.21 19.65 30.11 45.10 x1000US$ B1 China 1.30 2.65 4.86 8.60 13.72 23.59 40.09 69.63 x1000US$ B1 MidEast 5.22 5.47 7.75 11.68 16.72 22.96 31.68 43.78 x1000US$ B1 Africa 1.62 1.62 2.49 4.44 7.46 11.47 18.85 34.23 x1000US$ B1 LatAmerica 4.35 5.42 8.67 14.17 24.85 39.19 60.16 90.99 x1000US$ B1 SEAsia 1.49 2.00 3.13 5.55 9.27 14.18 24.14 42.19 x1000US$


A-9

Table A-2. Characteristics of Scenario B1 B1 EEUR 3.48 4.43 7.74 12.48 19.06 28.19 38.90 53.40 x1000US$ B1 Korea 7.23 15.62 28.22 45.81 65.12 78.10 90.44 106.63 x1000US$ B1 India 1.45 2.06 3.08 5.23 8.37 12.37 19.89 36.48 x1000US$ Intensity of Cement Usage 1.000 0.929 0.857 0.786 0.714 0.643 0.571 0.500 Predicted Cement Consumption Region 1990 2005 2020 2035 2050 2065 2080 2095 Units B1 USA 81 88 91 92 89 84 80 74 MT B1 Canada 10 10 9 9 9 8 8 7 MT B1 WEUR 212 221 204 191 171 149 129 109 MT B1 Japan 85 79 76 68 61 52 45 38 MT B1 A&NZ 8 8 7 7 6 5 4 4 MT B1 FSU 140 105 133 156 148 126 102 82 MT B1 China 223 522 888 1089 881 608 423 290 MT B1 MidEast 59 87 151 199 215 208 187 155 MT B1 Africa 77 101 207 442 738 838 749 583 MT B1 LatAmerica 104 159 280 350 346 308 258 203 MT B1 SEAsia 71 118 209 395 530 498 395 289 MT B1 EEUR 33 41 62 65 56 45 36 29 MT B1 Korea 33 34 29 25 20 17 15 12 MT B1 India 40 72 137 300 496 554 495 377 MT Total Demand 1,174 1,644 2,483 3,388 3,766 3,501 2,925 2,251 MT


A-10

Table A-3. Characteristics of Scenario A2 GDP 90$GDP (ppp)

Region 1990 2005 2020 2035 2050 2065 2080 2095 Units A2 USA 5523 8541 11119 14444 17410 21330 27760 36274 B97US$ A2 Canada 613 817 1064 1420 1764 2225 3013 4096 B97US$ A2 WEUR 6189 9142 11089 13650 15549 17880 22129 27726 B97US$ A2 Japan 2391 2803 3204 3838 4344 5024 6299 8012 B97US$ A2 A&NZ 323 454 548 662 744 846 1035 1278 B97US$ A2 FSU 1758 1413 1757 2571 3356 4438 6279 9405 B97US$ A2 China 1577 4027 6636 10500 14196 18778 26004 34856 B97US$ A2 MidEast 672 1102 2076 3907 6269 9460 14192 21484 B97US$ A2 Africa 1062 1548 2733 4836 7289 10350 14641 19519 B97US$ A2 LatAmerica 1912 2971 5046 8561 12497 17641 27704 43409 B97US$ A2 SEAsia 975 1708 2613 4192 5827 7767 10760 14164 B97US$ A2 EEUR 425 553 850 1276 1588 1973 2686 3771 B97US$ A2 Korea 310 739 1128 1556 1774 2033 2371 2648 B97US$ A2 India 1228 2230 3385 5351 7352 9690 13156 17134 B97US$ Population Total

Region 1990 2005 2020 2035 2050 2065 2080 2095 Units A2 USA 249 296 338 379 418 466 528 602 millions A2 Canada 29 31 36 40 44 49 56 64 millions A2 WEUR 409 471 495 515 525 538 565 602 millions A2 Japan 129 133 137 139 140 142 146 154 millions A2 A&NZ 21 23 23 24 24 24 25 26 millions A2 FSU 287 304 325 349 379 418 464 513 millions A2 China 1210 1530 1778 2054 2321 2620 2936 3237 millions A2 MidEast 129 206 313 449 610 778 930 1051 millions A2 Africa 654 952 1356 1774 2173 2496 2686 2739 millions A2 LatAmerica 440 573 729 902 1080 1262 1449 1636 millions A2 SEAsia 654 871 1126 1367 1583 1751 1858 1893 millions A2 EEUR 122 126 131 135 140 148 159 172 millions A2 Korea 43 49 55 59 60 62 61 59 millions A2 India 851 1099 1349 1592 1799 1956 2042 2062 millions Per Capita GDP (thousands of 90US$) Region 1990 2005 2020 2035 2050 2065 2080 2095 Units USA 22.18 28.81 32.89 38.06 41.62 45.74 52.62 60.24 x1000US$ Canada 21.15 26.05 29.76 35.36 39.85 45.09 53.97 64.28 x1000US$ WEUR 15.13 19.39 22.39 26.50 29.61 33.22 39.19 46.08 x1000US$ Japan 18.55 21.10 23.33 27.56 31.10 35.50 43.03 52.06 x1000US$ A&NZ 15.21 20.05 23.41 27.89 31.23 35.08 41.46 48.69 x1000US$ FSU 6.13 4.64 5.41 7.36 8.86 10.62 13.53 18.35 x1000US$ China 1.30 2.63 3.73 5.11 6.12 7.17 8.86 10.77 x1000US$ MidEast 5.21 5.36 6.63 8.69 10.28 12.16 15.26 20.44 x1000US$ Africa 1.62 1.63 2.02 2.73 3.35 4.15 5.45 7.13 x1000US$ LatAmerica 4.35 5.18 6.92 9.49 11.57 13.98 19.12 26.53 x1000US$ SEAsia 1.49 1.96 2.32 3.07 3.68 4.44 5.79 7.48 x1000US$


A-11

Table A-3. Characteristics of Scenario A2 EEUR 3.48 4.39 6.51 9.48 11.37 13.30 16.93 21.91 x1000US$ Korea 7.22 15.07 20.50 26.35 29.41 32.83 38.96 45.09 x1000US$ India 1.44 2.03 2.51 3.36 4.09 4.96 6.44 8.31 x1000US$ Intensity of Cement Usage 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Predicted Cement Consumption Region 1990 2005 2020 2035 2050 2065 2080 2095 Units A2 USA 81 96 110 123 135 151 170 194 MT A2 Canada 10 10 11 13 14 15 17 19 MT A2 WEUR 212 239 247 252 255 259 269 284 MT A2 Japan 85 87 89 90 90 90 93 97 MT A2 A&NZ 8 8 9 9 9 9 9 9 MT A2 FSU 140 114 141 196 235 274 314 344 MT A2 China 223 577 945 1429 1818 2209 2593 2842 MT A2 MidEast 59 97 176 293 418 543 647 712 MT A2 Africa 77 112 202 367 568 825 1179 1504 MT A2 LatAmerica 104 169 300 478 627 770 913 1034 MT A2 SEAsia 70 126 195 323 459 623 863 1073 MT A2 EEUR 33 44 67 86 93 100 107 114 MT A2 Korea 33 38 40 41 41 41 40 38 MT A2 India 40 77 124 218 326 468 694 918 MT Total Demand 1,174 1,795 2,656 3,918 5,086 6,377 7,905 9,183 MT


A-12

Table A-4. Characteristics of Scenario B2 GDP 90$GDP (ppp)

Region 1990 2005 2020 2035 2050 2065 2080 2095 Units B2 USA 5523 8500 11362 13567 15660 17584 19824 22450 B97US$ B2 Canada 613 868 1183 1464 1772 2045 2383 2788 B97US$ B2 WEUR 6189 9161 11350 12661 13708 14539 15416 17063 B97US$ B2 Japan 2391 2754 3135 3266 3415 3647 3947 4314 B97US$ B2 A&NZ 323 488 681 844 1011 1176 1343 1540 B97US$ B2 FSU 1758 1389 1775 2709 3886 5654 7349 8891 B97US$ B2 China 1577 3901 8339 13951 19287 23621 29802 36553 B97US$ B2 MidEast 672 1062 1676 2884 4555 5959 7252 7900 B97US$ B2 Africa 1062 1473 2381 4762 9213 15160 21741 27309 B97US$ B2 LatAmerica 1912 2983 4445 7325 11164 15626 19232 21335 B97US$ B2 SEAsia 975 1721 3555 6404 10027 13779 17923 21906 B97US$ B2 EEUR 425 546 879 1423 2212 3004 3449 3832 B97US$ B2 Korea 310 751 1456 1926 2123 2213 2255 2277 B97US$ B2 India 1228 2241 4429 7785 11950 16248 20927 26234 B97US$ Population Total

Region 1990 2005 2020 2035 2050 2065 2080 2095 Units B2 USA 249 288 317 338 349 350 350 349 millions B2 Canada 29 33 37 40 42 42 42 42 millions B2 WEUR 409 462 469 464 445 416 387 373 millions B2 Japan 129 127 124 115 105 96 88 80 millions B2 A&NZ 21 24 27 29 31 32 32 32 millions B2 FSU 287 292 295 293 284 275 266 261 millions B2 China 1210 1459 1614 1685 1674 1624 1572 1543 millions B2 MidEast 129 191 260 320 371 397 423 435 millions B2 Africa 654 876 1187 1504 1766 1943 2120 2208 millions B2 LatAmerica 440 557 664 749 807 836 865 879 millions B2 SEAsia 654 862 1062 1226 1346 1402 1459 1481 Millions B2 EEUR 122 121 119 113 105 98 91 88 Millions B2 Korea 43 49 52 53 51 50 48 46 Millions B2 India 851 1087 1272 1428 1529 1566 1603 1613 Millions Per Capita GDP (thousands of 90US$) Region 1990 2005 2020 2035 2050 2065 2080 2095 Units B2 USA 22.18 29.47 35.83 40.11 44.83 50.29 56.67 64.25 x1000US$ B2 Canada 21.15 26.66 32.28 36.63 41.87 48.29 56.25 65.87 x1000US$ B2 WEUR 15.13 19.85 24.18 27.29 30.79 34.91 39.81 45.70 x1000US$ B2 Japan 18.55 21.60 25.31 28.40 32.54 37.94 44.84 53.61 x1000US$ B2 A&NZ 15.21 20.51 25.35 28.78 32.59 37.01 42.25 48.51 x1000US$ B2 FSU 6.13 4.76 6.01 9.24 13.70 20.53 27.60 34.03 x1000US$ B2 China 1.30 2.67 5.17 8.28 11.52 14.55 18.96 23.69 x1000US$ B2 MidEast 5.21 5.55 6.45 9.01 12.28 15.00 17.13 18.15 x1000US$ B2 Africa 1.62 1.68 2.01 3.17 5.22 7.80 10.25 12.37 x1000US$ B2 LatAmerica 4.35 5.36 6.70 9.77 13.83 18.68 22.22 24.27 x1000US$ B2 SEAsia 1.49 2.00 3.35 5.22 7.45 9.82 12.29 14.79 x1000US$ B2 EEUR 3.48 4.51 7.40 12.60 21.15 30.70 37.90 43.68 x1000US$


A-13

Table A-4. Characteristics of Scenario B2 B2 Korea 7.22 15.47 28.05 36.36 41.40 44.60 47.21 49.57 x1000US$ B2 India 1.44 2.06 3.48 5.45 7.82 10.37 13.05 16.27 x1000US$ Intensity of Cement Usage 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Predicted Cement Consumption Region 1990 2005 2020 2035 2050 2065 2080 2095 Units B2 USA 81 94 103 110 113 113 113 112 MT B2 Canada 10 10 12 12 13 13 13 13 MT B2 WEUR 212 233 232 227 215 200 184 176 MT B2 Japan 85 83 80 74 67 61 56 51 MT B2 A&NZ 8 9 10 11 11 11 11 11 MT B2 FSU 140 112 142 185 192 183 173 168 MT B2 China 223 559 1132 1476 1455 1334 1198 1111 MT B2 MidEast 59 93 143 212 259 277 292 298 MT B2 Africa 77 107 175 368 743 1130 1381 1484 MT B2 LatAmerica 104 171 264 404 492 526 547 556 MT B2 SEAsia 70 127 277 516 761 903 980 1002 MT B2 EEUR 33 44 67 76 69 63 58 56 MT B2 Korea 33 37 35 35 33 32 31 30 MT B2 India 40 77 183 390 643 819 925 977 MT Total Demand 1,174 1,758 2,855 4,095 5,067 5,666 5,963 6,045 MT


B-14

Appendix B Case Studies of German Industry CO2 Emission Reduction This appendix presents two intersecting case studies that illustrate the process of defining and achieving German industry commitments for CO2 emission reductions at national, industry sector, company, and facility levels. “Effects of Eco-tax and CO2 Policy on Two Selected Industry Sectors in Germany”:

Case study developed by Ökopol GmbH. “Reduction Potentials of CO2 Emissions in Accordance with the German Industry’s

Commitment 2000”: Case study developed by Heidelberg Cement.


B-15

Effects of Eco-tax and CO2 Policy on Two Selected Industry Sectors in Germany Final report by Ökopol GmbH, Hamburg July 2001

Background of This Study Started in February 2000, the World Business Council for Sustainable Development has launched the "Sustainable Cement Project", an initiative which aims at defining how the cement industry can become more sustainable in the future.

Within the main study on this issue which is led by Battelle (USA), a number of sub-studies will be performed, one of them dealing with the possible impact of cement production on climate change, and the related topics of CO2 minimisation policy and environmental taxation. While the specific questions concerning the cement industry will be examined by Heidelberger Zement (Germany), Ökopol was asked by Battelle to perform some parallel research in two other industrial sectors, in order to demonstrate how the challenges of climate protection are dealt with in their respective contexts. The steel industry and the chemical industry were selected for deeper analysis with a focus on the political process in Germany.

The first part of this report describes the specific circumstances of the agreements between the German national government and the two sectors at the association level, and with the role and contribution of other stakeholders like research institutes, non-governmental organisations, the general public. The process is described on the basis of a literature survey and numerous interviews (mostly held by telephone). In the second part of the study research results for the two sectors focusing on the implementation of the respective policies at the company level are described.

1. Introduction

1.1 The Kyoto-process During the 1992 United Nations Conference on the Environment and Development held in Rio de Janeiro, an inventory of obligations was developed which aims at preventing disturbances of the world's climatic system. The convention obliges the industrial nations (among others) to reduce their emissions of greenhouse gases to 1990 levels by the year 2000. Moreover, all nations are obliged to produce and publish national greenhouse gas inventories, as well as implementing national climate protection measures. The convention was signed by over 150 countries in Rio de Janeiro and came into force after being ratified by the minimum of 50 nations (in September 1994, 80 nations had ratified the convention). From March 3rd till April 7th 1995 the first conference of signatories took place in Berlin, where 170 nations including the European Union were represented. They agreed, among other things, upon a mandate to negotiate stricter obligations on restricting and reducing greenhouse gas emissions with deadlines in 2005, 2010 and 2020 (the Berlin Mandate).

At the third conference of signatories in Kyoto held in December 1997, the so called „Kyoto protocol" was ratified by most of the signatories, in which for the first time legally binding


B-16

restrictions and obligations for reduction are mentioned. According to this protocol, the industrialized countries are obliged to reduce their absolute emissions of greenhouse gases by 5% (relative to 1990) until 2008 to 2012. Within the Kyoto protocol, greenhouse gases are defined as C02 and the six trace gases methane, N20, HFC, CF6, C2F6 and SF6.

1.2 Breakdown of Kyoto Aim to German Government When the overall Kyoto aim of 5% reduction was shared between the ratifying states, the European Union (EU) (like other industrialized states) was obliged to reduce its emissions by 8%, whereas other countries were allowed to maintain or even to increase their emissions (see Fig. B-1).

Inside the European Union the aim of Kyoto was negotiated at the Council of Ministers, and benchmarks were laid down for the individual EU Member States. In this “Burden Sharing" Germany was obliged to reduce its emissions by 21%. Additionally the German government started a national initiative by stating officially to reduce emissions by 25% in absolute figures until the year 2005.

On behalf of the German government, the negotiations at EU level and with the industry associations in Germany were led by the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (Bundesministerium fur Umwelt, Naturschutz and Reaktorsicherheit, BMU) and the

Federal Ministry of Economy and Technology (Bundesministerium fur Wirtschaft and Technologie, BMWi).

2. Breakdown of German aims to association level

2.1 Emission of greenhouse gases in the German industry Between 1990 and 1994 Germany was able to reduce its greenhouse gas emissions by 11 in absolute figures. The monitoring and all measures were focussed on C02 emissions so far which contribute approximately 85% to the overall greenhouse gas emissions from Germany expressed in C02 equivalents (CH4 7,1%; N20 6,4%; others < 1%).

Figure B-1. Breakdown of Kyoto Aim to European Member States


B-17

Industry as a whole, including electricity generation, contributes 59,7% to the overall C02 emissions in Germany, whereas traffic is responsible for 19,9% and private households for 20,4% (data from 1994, UBA) (see Fig B-2).

Within industry, the C02 emissions are mainly related to energy supply and consumption, while direct C02 emissions from production processes make up for only 4,7% of the overall emissions from industry. Consequently, the main goal is to increase the energy efficiency wherever possible, and nearly all of the efforts are dedicated to this purpose.

2.2 Measures of the German Government and Selfbinding Declarations In the context of the climate convention, German trade and industry committed themselves in two voluntary agreements:

a) Self-binding declaration of 1995 and 1996: In 1995 the German trade and industry published a self-binding declaration in which they offered to reduce their CO, emissions by up to -20% until 2005. An obligatory monitoring was not provisioned in the declaration.

Because it received heavy criticism from independent institutes and other stakeholders, the 1995 declaration was revised in 1996 and a reduction by - 20 until 2005 was fixed. This 1996 declaration was informally accepted by the German government in an official press release. Since the 1996 declaration, an independent monitoring is obligatory.

b) Self-binding declaration of October 2000: In October 2000 a new negotiated agreement was signed by the German trade and industry with an increased CO, reduction aim of -28% until 2005. Additionally a 35% reduction target which includes the six relevant green house gases was set for the year 2012. In contrast to the self-binding declaration from 1996 this agreement is a signed contract between the German government and the German trade and industry.

German trade and industry were represented in the negotiations by the Federation of German Industries (Bundesverband der Industrie, BDI) and three associations from the power supply sector (Bundesverband der Gas- and Wasserwirtschaft BGW, Vereinigung Deutscher Elektrizitatswerke VDEW, Verband der industriellen Energie- and Kraftwirtschaft

Vlh). BDI is an umbrella organisation from which 14 member associations took part in the process in 1996. According to BDI, all main energy consuming industry sectors were involved. The German government was represented in the negotiations by an interministerial working

Figure B-2. Breakdown of German Emission Reduction Aim to Association Level


B-18

group of the Ministry of Environment, Nature Conservation and Nuclear Safety (BMU) and the Ministry of Economy and Technology (BMWi).

In order to prepare the 1996 declaration, BDI established a working group on energy efficiency ("AK-CO, Rahmenbedingungen", today “Klimarelevante Wirtschaftspolitik") in which representives of several BDI-members and the above-mentioned associations from the energy sector participated. The same working group also developed the concept for monitoring of the fulfilment of reduction targets.

The BDI declarations of 1996 and 2000 were supplemented by voluntary obligations of the three above-mentioned associations from the power supply sector (VIK, BGW, VIDE) plus a fourth association, VKU which represents the municipal energy supply sector. The petroleum industry are member of BDI and thus incorporated as well. The BDI declaration of 1996 is a compilation of 14 individual declarations of individual BDI member associations (BDI has a total of 35 member organisations).

Table B-1. Participating industry sectors within the BDI listed in descending order of their energy consumption in PetaJoule in 1998

Industry Sector Energy Consumption [PJ] Coverage Of Energy

Consumption In Sector [%]

chemical industry 766 99

steel industry 734 88

non-ferrous metals industry 218 86

pulp & paper industry 205 85-90

glass and mineral industry 105 74

cement industry 101 97

textile industry 60 -95

brickworks industry 38 90

limestone industry 34 95

sugar industry 27 100

potassium industry 19 99

ceramic tiles and panels industry 8,3 65

refractory/fireproofing industry 4,6 60

petroleum industry power generation > 90 Data from Monitoring Report 1997-1998 by RWI In the declaration of 2000 three more BDI members took part, giving a total of 17 sector organizations.


B-19

In each of the sectors, the members of the respective associations account for between 60 and 100% of the companies' total energy consumption of the specific sectors. In the four most energy-intensive sectors (energy consumption higher than 200 PJ/a) the coverage lies between 85 and 99%. In total the signing associations represent approximately 70% of final industrial energy consumption in Germany, and they cover the field of public and industrial power generation ( BGW for gas, VDEW for electricity, MWV for petroleum) almost completely. Additionally a relevant fraction of the energy suppliers who provide energy to the residential and commercial sector are involved via the VKU (see Fig. B-3).

Figure B-3. Climate Protection Declaration by German Industry and Trade (Update 1998)

The fulfillment of the sub-declarations of the individual associations is controlled in two ways: Firstly the associations have to submit a report about their progress to the monitoring institution every year and the results are declared to the interministerial working group of the German government. Secondly, meetings of association representatives with the German BMU and BMWi are held biannually in which the efforts of emission reduction are discussed with respect


B-20

to the German national reduction aim. No penalty instrument is obvious in this “confession-process".

2.3 Monitoring by RWI The monitoring concept was developed in the BDI working group on energy efficiency. The Rheinisch Westfalisches Institut fur Wirtschaftsforschung (RWI) was commissioned to carry out the monitoring. The costs of monitoring are equally shared between the German trade and industry and the German government. The aim is to collect data and present them in an annual report in a form so that they can be related to the individual reduction aims.

Monitoring is based on three main features:

1. The targets of the sector associations given in the sub declarations (see Fig. B-3). These reduction promises are mostly formulated as specific values in metric tonnes of CO, / kg or in kJ/kg of the specific product produced, supplemented in some cases by commitments to reduce the absolute emissions (in tonnes of CO, reduction). The year 1990 is predominantly used as the base year, although a few associations in the non-metallic minerals industry still refer to 1987. In some cases the coverage of Eastern German emissions are difficult or only based on estimations as the respective emission figures are not available for the year 1990. In the field of power generation and supply the VKU and VDEW gave an absolute reduction promise in tonnes of CO, whereas MWV and BGW refer to specific values in kg CO, / kWh, or litres of oil per square metre of residential accommodation respectively. The VIK as the umbrella association of the industrial power and energy users made a qualitative obligation to avoid double counting of energy supply and consumption in the industry. The activities of the VIK are described in more detail later in this text.

2. The actual state of emissions and target fulfillment

The current state of emissions is based on the reports of the associations and on statistical data from the Federal Statistical Office. Values given are adjusted by the RWI in order to compensate for external factors which cannot be influenced by the involved companies, such as weather conditions, changes in the sectoral and overall economy, or legal and institutional framework conditions. This compensation is done on the basis of a mathematical model. An example of the comprehensive results for the third monitoring report is shown in Figure B-4.

3. The associations submit in their reports an illustrative list of measures taken by their member companies which should account for the overall progress towards CO, reduction. These examples should help to verify the statistical reduction figures, to increase the transparency of the process, and to give a decent basis for information in the field of energy transformation and consumption. This is the basis to monitor if behaviour in industry has actually changed after the self-binding declarations.


B-21

Figure B-4. State of Fulfillment of the Sub-declarations in the Different Sectors in 1998

The total quantities of C02 emitted by industry are calculated from the consumption of fossil fuels for energy generation and from electricity purchased by companies of a sector. The energy consumption is converted to C02 emissions by standaradised emission factors according to the general German mixture of primary energy sources according to the Federal Statistical Office.

The annual report includes each of the progress reports of the individual associations, one chapter illustrating the degree of fulfillment of the respective declaration in a standardized format for each sector based on the progress reports and a conclusion for the overall reduction aim which is expressed as reduction in tons of C02. The success reports and parts of the monitoring report are available on the internet via RWI.

2.4 Drivers, Barriers and Motivations Among Directly Involved Parties Originally the BDI working group on energy efficiency was founded before 1995 but did not bring about any substantial results (UBA, pers. comm.). The topic of making energy use more efficient was discussed controversially and no consensus could be found in the working group. In 1995 the interest in this process was enhanced when the German government began to draft an ordinance on usage of heating energy and eco-tax* (BDI, pers. comm.). The chemical industry association (Verband der chemischen Industrie - VCI) was pushing the process most strongly among all BDI members (BDI pers. comm.). Among BDI members, this sector is one of the two largest consumer of energy next to the steel industry. Other associations were following the initiative of the VCI so that the declaration of 1995 could be signed by 14 of the 35 members of

* The concept of Eco-tax involves an increased taxation on energy while costs of pension schemes and thus indirect labour costs are reduced.


B-22

the BDI. The declaration was finished just before the conference of signatories in 1995 in The Hague (BMWi pers. comm.).

After the declaration was published, a number of NGOs and research institutes which are active in the field of climate protection policy criticized the declaration heavily because industry did not formulate defined targets of CO, reduction in a given timeframe, and because a monitoring process was not defined. After its revision in 1996, the German government accepted the declaration inofficially by a press release.

As the declaration was triggered by industries` wish to prevent upcoming legal initiatives, the motivation for companies to commit themselves can be seen in a two-fold way: First of all the initiative can save money directly by reducing energy consumption and thus saving process costs, and secondly the relative savings have to be recognized by the government when follow-up costs of a legal initiative are compared with the investment costs of money for new, more energy-efficient techniques.

Representatives of the German government state that industry had to fulfill the obligation of CO, reduction to account for the financial advantages which they would have from the reduction of indirect labour costs due to introduction of the German eco-tax. Furthermore, the BDI declaration played an important role before the German eco-tax concept could be accepted by the European Commission: Since energy-intensive industry sectors were excepted from the German eco-tax scheme, there was some debate about distortion of competition between the different industry sectors which needed to be settled before the European Commission would accept the German ideas (BMU).

Whereas in the 1995 declaration the content of the declaration was discussed and prepared mainly inside the BDI working group and the declaration was then negotiated between BDI and the German government, the 2000 declaration was negotiated and signed in two main meetings where all involved associations were present. By this procedure, all involved sectors were taken on board directly and there was no need for additional negotiations between BDI and the sector associations concerning their individual contributions to the overall target (BMWi pers. comm.). Thus the sector associations were involved as active players, rather than just recipients of results negotiated elsewhere.

The discussion of emission trading is another important topic for the German industry but no uniform opinion can be found among the different associations. Aspects of emission trading were discussed in the BDI working group after the upcoming of the EU Green Paper IP/00/232 on emission trading. The BMWi states that the issue of emission trading did not have an influence on the 2000 self-binding declaration. According to the UBA, the declaration of the year 2000 was pushed by the German industry in order to position themselves in the EU discussion about an energy tax in order to promote the concept of selfbinding declarations in this field.

According to the RWI nearly all measures which were implemented for CO, reduction within the companies were economically feasible or even profitable. Many organisations criticise that apart from such measures no additional effects on CO, reduction were initiated by the self-binding declaration process. In addition, companies which are involved in the process might have the advantage of better reputation in the public.

A lack of transparency of the monitoring process is often criticized because the examples of energy reduction do not fully account for the statistical figures calculated from the data given by the Federal Statistical Office and the sector associations. The RWI states that the calculation of


B-23

the specific CO, reduction related to a specific technical measure mentioned in the success reports is often very complex and impossible to be verified in detail.

The quality of the monitoring itself depends on the manpower dedicated to this purpose by companies and / or associations. Non-fulfillment of the obligations on each level is also a topic of debate because sanctions or penalties are not a feature within the programme. BMU conclude on their website that, „alongside these measures, energy consumption must be made more expensive, through the introduction of a CO, or energy tax - this is absolutely necessary, in order to promote less energy-intensive patterns of production and consumption".

3. Involvement of Third Parties (Public, Institutes, NGOs) During the negotiations between the German government and the industry associations, non-governmental environmental organisations were not directly involved. However, a small number of scientists from two research institutes ("Fraunhofer Institut for Systemtechnik and Innovationsforschung, Karlsruhe" and "RWI - Rheinisch-Westfalisches Institut for Wirtschaftsforschung, Essen”) participated during the negotiations or in subsequent workshops held at industry sector level.

Nevertheless, German government officials state that the NGOs' reactions and criticism had a strong influence on the 1996 amendment to the 1995 declaration, as well as during the preparation of the agreement negotiated in 2000.

Several independent organisations which are active in the field of climate protection founded a task force on climate (AG Klima) in which they discuss and coordinate their positions and activities. The task force is coordinated by "Forum Umwelt and Entwicklung" of which relevant members are BUND (Bund for Umwelt- and Naturschutz Deutschland), DNR (Deutscher Naturschutzring), German Watch, Naturschutzbund Deutschland e.V. (NABU), WWF Germany (World Wildlife Fund) and the Wuppertal Institute.

In the public debate, the mentioned organisations and institutes are acting independently. A majority among them has some doubts whether self-binding declarations and voluntary agreements are the most adequate strategy to minimise the emissions of greenhouse gases. In their view, parallel legislation like e.g. the German Ordinance on Utilization of Heat in the Building Sector (Warmenutzungsverordnung - WNVO) is believed to be significantly more effective than voluntary measures.

Furthermore, the environmental NGOs have formulated some doubt whether the German industry's "significant efforts to reduce their C02 emissions" are anything else than the result of normal modernisation measures which would be realised for economic reasons anyhow. In consequence, many NGOs criticise that

- the government has renounced legally binding measures by accepting vague promises which are considered to be symbolic rather than real;

- the government will not be prepared in case that industry should not fulfill or even unilaterally renounce its obligations, meaning that the self-binding declaration might be abused to achieve a delay of several years;

- there is no open debate about the most effective instruments; - it is not justified to summarise C02 minimisation effects in East Germany from the years

1990-95 ("wall-falI-profits") with the reduction achievements under the voluntary agreement;


B-24

- companies and sectors who are not organised in the large associations are exempted from climate protection obligations without justification;

- no sanction mechanisms have been agreed upon in case that the German industry does not fulfill the reduction targets;

- sector-specific targets are difficult to verify, especially in the light of social or economic fluctuations, changes of product spectrum etc.

- "double-counting" is expected to occur between actors inside and outside the selfbinding declaration as well as for companies who are members to more than one association (e.g. energy generation and chemical industry).

Similar to their principal doubts about the voluntary agreement, the NGOs are sceptical about the monitoring because normal technological progress is not compensated for, targets are not dynamic, primary data used for monitoring will mostly be internal and thus not accessible for external verification, and monitoring strategies are not properly adjusted to sector-specific situations.

As a recent trend, NGO criticism is calming down, partly because there have been some improvements concerning the agreements themselves and also the monitoring programmes. At the same time, the focus of lobbying activities is shifted because it is realised that some other countries are even more hesitant to seriously engage in climate protection policy and measures.

However, the idea of implementing stronger binding instruments is still being followed, and emission trading is one subject which is now being examined more closely by the NGOs.

4. Detailed investigation on association and company level

4.1 Chemical industry

Negotiating Process Within the Chemical Industry The chemical industry association (Verband der chemischen Industrie - VCI) together with the VDEW and VIK established a continuos discussion process with the German government in 1990/91 on the idea of an environmental agreement on climate change problems (EEA 1997 and BDI pers. comm.). In a later stage, other parties including the BDI and its members were brought in. In 1995 the overall control of the development and negotiations was given to BDI. The chemical industry sector was the second largest consumer of energy among the BDI-members and had the highest energy consumption in 1998 (see Table B-1).

Among the 1700 members of the VCI, seven of the biggest companies initiated a working group on energy efficiency and climate policy. The companies attending the working group account for more than 60% of the overall energy consumption within the chemical industry. Companies in the working group are: BASF, BSL Olefinverbund GmbH Merseburg, Degussa Huls, SKW Trostberg AG, SKW Stickstoffwerke, Bayer AG, Wacker Chemie and Schering. The content of the sub-declarations referring to the BDI-declarations from 1996 and 2000 which formulate reduction targets for the years 2005 and 2012 respectively were mainly negotiated in this working group and can be summarized as follows:

Sub-declaration from 1997 for 1996-BDI-declaration: The VCI offered to reduce its specific C02-emission due to energy production by 30% (energy index / production index) until 2005


B-25

with 1990 as the base year. Additionally, an obligation to reduce CO, emission on an absolute basis by 30% was offered.

Sub declaration from 2001 for 2000-BDI-declaration: In this declaration the absolute reduction aim includes the greenhouse gas N20 additionally to CO, for the first time (N20 emission calculated in C02-equivalents). An absolute reduction of 45-50 C02-equivalents is proposed until the year 2012 (base year 1990). The specific CO, emission (energy index / production index) shall be reduced by 35 - 40%.

The absolute reduction aims are not part of the BDI obligation but are a voluntary action of the VCI which must be seen in the light of its leading position within the BDI-process.

Description of the Chemical industry and I ts Cl imate Relevant Emissions Within the chemical industry approximately 80% of the energy consumption is related to the production of base chemicals. Of this, the production of primary chemicals* is the most energy consuming activity(VIK 1998). The production process of chemical substances is based on several single process steps which are not always supplied by one central energy plant. Due to this rather complex arrangement a detailed picture of energy- and mass flows is often difficult to obtain and specific reduction targets are therefore related to the production index rather than to tonnes of chemical products (VIK 1998).

The goal of the sub-declaration from 1997 (30% specific and absolute C02 reduction until 2005) was reached by the chemical industry in 1999. The reductions were almost exclusively caused by measures undertaken by the 7 members of the working group (Ifeu 2000). According to VCI special efforts and measures of companies within the chemical sector have made this early fulfilment possible. However, independent organisations state that the early fulfilling is more or less caused by the breakdown or modernisation of production facilities in the former GDR "wall-fall-prof its"). In 1995 the chemical industry had already reached an absolute reduction of 25.8% (VCI 2000).

From the six relevant greenhouse gases C02, N20, CH4, HFCs, PFCs and SF, the VCI states that only C02, N20, HFCs and SF, are relevant for the chemical industry. Regarding the emissions within the chemical industry only C02 and N20 are relevant, as HFC and SF, are incorporated in products and emissions will occur at the location of usage. Based on a report initiated by the German UBA (UBA 1999, 29841256) it was concluded that the main part of greenhouse gases apart from C02 is emitted outside the chemical industry at the place of use of the chemicals. VCI claims that product reliability for the respective products is accounted for by a close information exchange with the users on this issue with a focus on emissions during recycling procedures.

The N20 emission within the chemical industry is mainly related to the production of adipinic and nitric acid. The N20 emission of the chemical industry was 23,000 t in 1998 (VCI brochure). As the equivalence factor of N20 is 310 (U BA) this corresponds to an emission of approximately 7 mill. t C02. A total avoidance of these emissions would result in an overall reduction of 10% which corresponds almost fully to the gap between targets for specific (excluding N20) and absolute (including N20) emission reduction for 2012.

* primary chemicals are chlorine, nitrogen, oxygen, soda, aluminiumoxide, ammonia, acetylen, aromatic and aliphatic hydrocarbons and hydrogen or hydrogen containing gases for synthesis


B-26

Considering the current status the main focus of the chemical industry will be a reduction of C02 emissions by approximately 5% and an almost complete N20 emission reduction within the 13 years time frame from 1999 to 2012. At least one company states to have reduced N20 emission to a level of almost zero already.

The VIK representing energy consuming companies throughout German industry sectors rather than being representative of any particular industry. According to its statutes, the purpose of the VIK sub-declaration is to initiate undertakings, such as cooperation in cogeneration ventures (KKWW), and the dissemination of information. According to this aim the VIK brought up a cross-sectoral concept in which innovative techniques and companies in each sector were identified and workshops were undertaken together with other companies where the ideas were promoted to initiate an effect of multiplication. This concept is the basis of the “qualitative obligation" which was promised by VIK instead of quantitative reduction aims. As most of the large chemical companies are also members of VIK, this industry sector was one of the main target groups of the VIK-concept.

Specific measures aiming at CO, reduction can be categorised in:

development of new production processes e.g. introduction of catalysts to enable milder reaction conditions which run at e.g. lower temperatures and give higher yields,

optimizing processes of energy production and distribution e.g. by implementation of the energy plants with district heating or by constructive changes preventing heat losses from source to consumer,

optimizing energy consumption e.g. by efficient insulation or by integrated energy analysis. Additional programs (which are not specific for the chemical industry) are to save energy for lighting, office heating etc.

Special Aspects of Monitoring Within the Chemical Industry Due to the heterogeneity of products within the chemical industry the specific CO, emission is given as the quotient of energy index and production index. The data basis is evaluated by the Federal Statistical Office (Statistisches Bundesamt), which evaluates data in form of questionnaires in four-yearly intervals. Data in between are approximated by extrapolation.

The consumption of oil, gas and coal which are used as educts in chemical synthesis is calculated from the product output of the chemical industry (RWI). This amount of oil, gas and coal is not considered to turn into CO, emissions and therefore not included in the calculation. This correction is done on the basis of data from VCI. Internal usage of production waste for energy production within one company will therefore lead to an increase in energy efficiency in the statistics. Difficulties might remain if organic waste (especially production waste) is incinerated externally for energy production (co-incineration) and positive credit is claimed for by either the producer or the co-incineration company. RWI states that this positive effect will affect the fuel consumer as long as this waste is stated to be a CO, neutral fuel (pers. Comm. RWI). Avoidance of waste would therefore lead to an overall negative effect in the CO, calculation (no effect at chemical plant, higher CO, emission at energy plant)

In their self binding declaration of 1997 the VCI states that positive effects of chemical products (e.g. insulation foams) on climate are not quantified in the calculation to prevent double


B-27

counting. Similarly, negative effects of products e.g. releases of greenhouse gases other than CO, are not considered either.

The introduction of N20 in the monitoring procedure will bring up new difficulties as data for the base year 1990 do not exist. According to RWI the data for these gases will be reported from 2005 on but the consolidation procedure has not been laid down yet.

For C02 balance the data of the base year 1990 was partly estimated by the VCI because data for East Germany were only available for the first half of the year.

The individual measures reported in the progress reports of the VCI only account for 40% of the emission reductions calculated statistically. Therefore, the monitoring process has continuously been criticised by third parties because the reductions claimed are not made transparent by the measures taken.

Driving Forces and Barriers Inside the Sector The process of reducing emissions which are relevant to climate according to the Kyoto process was pushed by the chemical industry. The initiation must be seen in the light of the upcoming eco-tax in Germany. The main reason for initiating this process was to prevent legal initiatives in this field or to get a derogation from the eco-tax. This was an especially important issue for this sector due to its high energy consumption (BDI, pers. comm). NGOs and institutes working in this field claim that all measures taken in the chemical and other sectors would have been done anyway due to the resulting cost savings. This is confirmed by interview results among the chemical industry (Ifeu 2000). Several measures of companies of the chemical sector, aiming at a reduction of energy consumption, had been undertaken even before the self-binding declaration was in force because of their economic feasibility.

A positive effect of the declaration can be seen in the fact that more people within the industry became aware of the climate relevant emissions. However, this positive outcome must be compared to the outcome of a German legal initiative of eco-taxation that would have included the chemical industry. NGOs state that this would have had a much more positive impact on climate within the industry. Additionally, the eco-tax might have been stricter if the self-binding declaration had not existed.

Representatives of the VCI working group state that in general the measures taken were economically feasible. Nearly all measures which were not economically feasible have only been implemented because of obligations set by local authorities. Within the chemical industry some companies claim that they have established a better discussion on climate relevant issues, or even introduced an environmental management system. So investment decisions which are relevant for this field are more often discussed with respect to energy consumption or climate relevance. The self-binding declaration is said to facilitate the integration of energy related investments in the normal investment cycles of the companies, and thus to be more cost efficient than legal regulations. Also innovations in the field of management systems and technical processes were triggered by the declaration as it was stated by some companies (IFEU 2000).

In their sub-declaration the VCI states that taxes on fuel and raw material would contradict the aim of sustainable development because market forces would be hindered. More precisely, VCI formulates among others two prerequisites for accepting the self-binding declaration:


B-28

No additional taxes for the industry Liberalisation of the internal European market for energy.

4.2 Steel industry

Negotiating Process Within the Steel Sector In the Wirtschaftsvereinigung Stahl (German Steel Federation), 144 companies are organised accounting for 88% of the total production volume of steel in Germany.

In its self-binding declaration of 1995/96, the Federation offered to lower its specific CO, emissions by 20% with reference to 1987 as the base year. They furthermore declared that they would lower their absolute CO, emissions by 25-30 per cent.

With reference to the year 1990, which is normally used as a base year in other sectors, this reduction will be equivalent to 16-17 per cent reduction of the specific emissions per metric tonne of steel produced, or 21-27 per cent in absolute terms.*

Under the new negotiated agreement signed in 2000 by the German trade and industry, the Steel Federation obliged themselves to reduce their specific CO, emissions by 22% until 2012, without setting a new target for reduction of their absolute CO, emissions.

Description of the Steel Industry and Its Climate Relevant Emissions Almost equal in energy consumption to the chemical industry, the steel industry is the second largest energy consumer of all producing sectors in Germany. In 1990, 38.4 million metric tonnes of crude steel were produced in Germany. Since then, the production volume increased by an average of 490,000 metric tonnes per year to arrive at 42.1 million tonnes in 1999.

Approximately 80% of the crude steel are further processed to rolled steel, the remainder is used for pipes, tubes, etc.

In order to reduce the C02 emissions from steel production, two main strategies are followed, one being the substitution of several old and smaller blast furnaces by modern and larger installations with improved energy efficiency, the other one being the substitution of C02-intensive energy sources by other fuels (e.g. coal dust instead of coke, but also waste-derived fuels). Numerous additional measures at individual installations include the use of waste heat for steam generation, better control of energy losses via flares, general process optimisation by improved process control etc.

In theory, using steel arc furnaces (SAF) instead of blast furnaces also leads to reduced C02 emissions. However it is not expected that the contribution of SAF to German steel production will significantly grow beyond the present 30% because there is not enough scrap available, and only primary steel from blast furnaces does achieve the high qualities which are required for many applications of steel in modern products.

Between 1990 and 1999, significant improvements in energy efficiency have in fact been achieved, with the result that the C02 emissions per metric tonne of crude steel could be

* All percentages used hereafter in this chapter refer to 1990 as the base year.


B-29

reduced from 1.591 Mg C02 to 1.372M9 C02, while the emissions per metric tonne of [Walzfertigstahl] sank from 2.089M9 C0

2 to 1.71 Mg C02.

The absolute C02 emissions could be reduced in the same period from 76 million Mg to 70 million Mg.

Regarding the specific C02 emissions, it is expected that the reduction target of 22% by the year 2012 will be achieved or even exceeded, whereas the absolute reduction target of 2127% of the total C02 emissions from the steel sector will probably not be reached. (For this reason, the Steel Federation have not renewed their declaration to reduce their absolute C02 emissions in the self-binding declaration which was signed in 2000.)

Driving Forces and Barriers Inside the Sector The German steel industry similar to other sectors does only participate in the process under the condition that no legal or fiscal measures and no obligatory energy audits will be implemented by the government.

Until today there have been no agreements within the sector concerning which company will be responsible for achieving which part of the general reduction target.

Already after the two "oil crises" of 1974 and 1979, a number of studies and investigations have been performed in which the energy-saving potentials of the steel industry had been analysed. Most of these potentials have not been realised yet because they have no direct economic benefit at the company level. The economic competition in this sector is so hard that some energy-saving measures have even been abandoned after they had already been installed, because they were not cost-efficient.

In other words, all agreements between the Steel Federation and its member companies on targets and timeframes will be waste paper if economic pressure stands against them. Keeping this background in mind, it is questionable whether voluntary agreements are an adequate strategy in a sector where there is only little degree of freedom for "undertaking major efforts to reduce the emissions of greenhouse gases".

5. International Aspects With respect to the European discussion on emission trading, the Steel Federation as well as the chemical industry hold the position that such negotiations should only take place at the government level, while it should be left up to individual states how they will achieve their targets with adequate instruments at the national level, taking into account the achievements which have already been realised in individual sectors. The fundamental ideas of emission trading in Europe is laid down in a green paper (COM(2000)87 final) for discussion prior to legislation activities. In contrast to the industry associations an emission trade on company level is proposed. Therefore the self binding declaration of 2000 is also used as an argument to prevent implementation of this idea in legislation. In particular, VCI states that emission trading would bring main drawbacks when introducing new chemical products and would therefore stop or slow down innovations (VCI 2 2000).

Similarly, the Steel Federation is strictly opposed to the idea of an emission trading system between the energy-intensive sectors of European industry, because in their view


B-30

- such a system would unjustifiably discriminate the products of the steel industry versus products of the chemical, aluminium and non-ferrous industries,

- different national situations in terms of energy mix, energy taxes, product spectrum and production processes would lead to market distortions,

- the fixation of an absolute limit to C02emissions would hinder future developments of the steel sector.

Concerning the discussion on joint implementation, there can be no doubt that German companies have the potential to achieve major C02 reductions in Eastern Europe, but also in Asia and other continents.

The Steel Federation highlights the fact that the export of one blast furnace to China has already led to a C02 reduction potential of 418,000 Mg C02/a, which in their view should be allocated to the German steel industry. Such calculations, however, are difficult to verify, and in their monitoring report the RWI states that, in the case of China, there is no sufficient database concerning details of process, raw materials and reduction agents used, and in the light of the growing steel production capacity of China it is unlikely that another blast furnace will be closed down, meaning that CO, emissions from Chinese steel production will increase rather than decrease.

References COM(2000)87 final: Green Paper on greenhouse gas emissions trading within the EU

EEA 1997, Environmental Agreements: Environmental Effectiveness, Environmental Issues series 3

IFEU 2000 EA Studie des VCI

VCI 2000, Responsible Care, Daten der chemischen Industrie zu Sicherheit, Gesundheit and Umweltschutz, Publication of VCI

VCI 2000b, Flexible Instrumente fur den Klimaschutz, www.vci.de

VIK 1998, Praxisleitfaden zur Forderung der rationelle Energieverwendung in der Industrie, Verlag Energieberatung GmbH, Essen.


B-31

Reduction Potentials of CO2 Emissions in Accordance with the German Industry’s Commitment 2000 A case study prepared by German cement producer Heidelberger Zement, looking at actions taken for

sustainable development at the Lengfurt plant.


B-32

Executive Summary This Cross-Cutting-Case-Study demonstrates the implementation of major concerns of the World Business Council for Sustainable Development study “Toward a Sustainable Cement Industry”, and decisively contributes to the sub-studies. The cement industry can extract value from by-products and wastes of other industries. This touches on the concept of Industrial Ecology, Climate Change Mitigation, Environmental Performance and contributes as well towards Public Policy Instruments and Innovations. This case study focuses on the explanation of the legislative framework, regulations and approaches towards gaseous emissions, especially CO2, in accordance with the Kyoto protocol in Germany. It also demonstrates Heidelberger Zement's efforts, which have contributed to increased environmental awareness. The study also shows how the plant at Lengfurt put thoughts, ideas and awareness into clear actions to encourage a sustainable development. With CO2 emissions a priority, Heidelberger's Lengfurt plant, which has been managed by the company since 1923, has exploited ways to reduce gasses emitted into our environment. In this context Lengfurt is a world-class example operating one of the most efficient kiln-lines, in terms of heat consumption. Though the implementation of the first power plant of its kind in the German cement industry, the Organic Rankine Cycle-plant, utilizes the waste heat of clinker cooler exhaust air and allows coal to be substituted with alternative fuels. Integrating by-products such as blast furnace slag, as a substitute for clinker, cuts specific CO2 emissions dramatically. The continuous optimization of the clinker production process can achieve a contribution to environmental protection as well as the use of alternative raw materials and fuels or a substitution of clinker. This especially is true for CO2-emissions. But the broad application of technologies and use of waste materials improves other gaseous emissions, as well. The NOx-emission level, for example, could be decreased decisively by using the redundant materials from photo production with SNCR (Selective Non-Catalytic Reduction) technology.

1 CO2-emission reduction in Germany Germany, in its role as a highly industrialized nation, has become aware of the importance of environmental protection. In accordance with the Kyoto Protocol, signed in 1997, Germany is one of the first countries to commit itself to the reduction of greenhouse gases. Against this background, the Federal Government and leading associations of the German industry have signed an agreement on environment protection. This initiative is supported by the German cement industry.


B-33

1.1 German industry’s commitment for CO2 –emission reduction The German industry endorses its support for a precautionary climatic protection policy and acts accordingly to that principle, meaning, the industry makes great efforts to use resources as efficiently as possible to minimize the utilization of environmental wealth. The commitment to environment protection plays an important role. The commitments are unprecedented due to the 'world scale' of the task ahead. After negotiations with the Federal Ministry for the Environment and Industry, the German industry has, under the control of the Federal Association of the German Industry (BDI), continued its commitment to environment protection until the period 2008/2012. In this agreement, the German industry has committed to increase the reduction of CO2 emissions from 20 to 28 p.c. until 2005, referring to the basic value of the year 1990, and additionally promised its commitment to reduce emissions of greenhouse gases by 35 p.c. from 1990 until 2008/2012 (see Table B-1). Due to this extended commitment, the industry is expected to reduce its greenhouse gas emissions by further 20 mio. t/a until the year 2012. As a countermove to this, the Federal Government abstains from additional administrative and fiscal obligations.

1.2 German Cement Industry’s Commitment For CO2-Emission Reduction

To support this agreement, the German cement industry has also further developed its commitment to environment protection. Referring to the basis value of the year 1990, the German cement industry will lower its specific energy-related CO2 emissions by 28 p.c. until the target period of 2008/2012. In total the German cement industry will consequently reduce specific CO2 emissions of the cement manufacturing process by 16 p.c. The German cement industry remains committed since 1995, in which it agreed to decrease its specific fuel energy consumption by 20 p.c. from 1987 until 2005. The cement industry is obligated to fulfil this promise.

The following commitments are stipulated between the partners:

Table B-2. Commitment of German Cement Industry in Accordance with Kyoto Protocol Commitment of Cement Industry Commitment of German Government

Reduction of energy-related CO2 emissions by 28%

No additional laws and regulations concerning CO2 No energy audit No competitive disadvantage for German

industry by environmental taxes Consideration of German industries’

preliminary success by introduction of EU energy tax Introduction of flexible mechanism as emission

trading


B-34

It is important to point out that the usage of alternative fuels, as waste materials from communal or industrial origin in the cement manufacturing process, substitutes fossil fuels such as hard and lignite coal, oil and natural gas. These alternative fuels are not only used as energy but also a raw material for the process. The advantages can be summarized as follows: Waste materials with a considerable combustion value are used to substitute fossil fuels and

save energy and natural resources It is considered CO2 emitted from the use of alternative fuels in the cement industry as

having zero net effect on the climate, compared with the use of fossil fuels. Alternative fuel also recycles materials, which would normally go to incinerators and landfills.

Alternative fuels also contribute to substitute raw materials through non-ignitable components such as ashes. This new raw material will not contribute to raw material-born CO2 emissions because no decarbonisation reactions occur.

Because of these definite advantages, the Carbon dioxide emissions derived by the combustion of alternative fuels are excluded in calculations of CO2 emissions caused by cement industry. This is not executed for other gaseous emissions (SO2, NOX, etc…)

Figure B-5. Reduction of CO2 and Other emissions by Fuel Substitution

The described advantages towards a successful fulfillment of the cement industry’s commitment to reduce CO2 emissions are further improved by the opportunities to substitute clinker by by-products of other industries used as cement raw materials, which also have hydraulic abilities. Materials showing hydraulic abilities, and which are assumed in the standards, are e.g. fly ash and blast furnace slag. Other additives are the so-called fillers, as pure limestone meal or shale, which are used to adopt the quality to the specific client needs. To conclude, the abilities of alternative fuels and raw materials must be mentioned that the usage suffers by a definite drawback. The industry’s desire to use alternative fuels are restricted by legal regulations, which reduce the emission limits for e.g. dust, SO2, NOx and heavy metals correlating the fossil fuel substitution. To be accurate, if no alternative fuels are introduced in the process, the limits of these gaseous emissions are higher, and if a given plant is operating close to the emission limit, it is not able to reduce CO2-emissions by using alternative fuels. In general, the cement industry identified the following potentials to reduce CO2 emissions:

+ >CO2SO2NOx

Wastes

CO2SO2NOx

CO2SO2NOx

Wastesas

substitutes

Fossil fuels Fossil fuels

WasteDisposal

plant

Cementplant

Waste usage inCement plant

+ >CO2SO2NOx

Wastes

CO2SO2NOx

CO2SO2NOx

Wastesas

substitutes

Fossil fuels Fossil fuels

WasteDisposal

plant

Cementplant

Waste usage inCement plant


B-35

Figure B-6. CO2 Reduction Potential in Cement Industry

Examples of the execution of these approaches are demonstrated with the case study Heidelberger’s Lengfurt plant.

2 Heidelberger Zement’s Environmental Awareness, Thoughts and Actions

“Partnership and ecological responsibility” – this is the central business principle of Heidelberger Zement. To secure our sustained development – including the environment – we follow clear guidelines. Production process, facilities and products must conform to environmental guidelines. These thoughts for environmental responsibility are acknowledged since 1990, Heidelberger Zement signing the “Charter for Sustainable Development” of the International Chamber of Commerce (ICC). The company helped initiate the voluntary commitment of the German cement industry to reduce CO2. Beyond that and because we also produce building chemicals, in 1991 we adopted “Responsible Care” as well, an important environmental initiative of the chemical industry. In March 2000, Heidelberger Zement joined the world renowned World Business Council for Sustainable Development (WBCSD) and is active in the “Forum Sustainability”, recently founded by the Federal Association of the German Industry.

We have committed ourselves to the goal of sustainable development; therefore we are economical with natural resources. We give a special priority to saving energy and substituting native rock and fuels with recycled waste materials, while maintaining high product quality and environmental awareness. We are committed to installing the best available technology, wherever appropriate and economically feasible. We emphasize a holistic ecological approach and determine all environmental aspects of production at each location and evaluate their effects on the environment.

Heidelberger has instigated the environmental management standard, ISO 14001 in all German, Scandinavian and British plants.

of raw-mealcomponents

of fossilfuels

of clinker of cementcomponents

Decrease bysubstitution

Recuperation

of thermalenergy

of electricalenergy

Decrease by reductionof energy consumption

Emission reductionof CO2

Strong interaction

Generation


B-36

This International Standard encourages the following developments: Implement, maintain and improve an environmental management system Assure itself of its conformance with its stated environmental policy Demonstrate such conformance to others Seek certification/registration of its environmental management system by an external

organization Make a self-determination and self-declaration of conformance with this International

Standard

3. Lengfurt plant For this case study the Lengfurt plant has been chosen, as one of six Heidelberger Zement cement plants in Germany. It is a standard plant regarding the active approaches of environmental concerns.

The plant has transport access to the river Main, and was founded in 1899 before joining the HZ-Group in 1923. Producing an annual capacity of 1.3 mio. tons cement respectively 1.1 mio. tons clinker, Lengfurt is one of the largest production sites in owned by Heidelberger Zement with a market, covering Bavaria, Thuringia and parts of Baden as national markets as well as international markets, being delivered via river transportation.

The key data of Lengfurt is:

Total site area: 300 ha Quarry area: 70 ha and directly

connected to plant site

Manpower: 178

A view of the plant site and the quarry is presented on the following picture


B-37

3.1 Production process Raw material is hauled with blasting on three levels, covering 70 meters height and transported to the sound protected crusher. Conveyor belts carry the material to homogenising silos. This equipment is necessary to achieve a very homogenized raw material to ensure a constant quality on a high level and represents a material storage bin as well.

This material is forwarded to the grinding department to prepare the material for the following transformation into clinker by the burning process. While the wet material is ground, hot kiln exhaust gases are introduced to the mills for drying reasons and demonstrate the perfect bondage of energy saving and process needs.

The ground, dry material is handed over to a further homogenization facility thereafter and the so-called raw-meal is perfectly conditioned for the introduction to the kiln line.

The Lengfurt kiln-line consists of a double-string four stage cyclone preheater, a rotary kiln and a grate cooler (figure 4) for recuperation of energy. A so-called by-pass is installed to achieve stable clinker production. This layout ranks with the best systems available with respect to low energy consumption.

Raw meal is introduced to the uppermost cyclones of the preheater and receives the energy of the hot kiln exhaust gases, which, pass on the way to the kiln. The raw meal received so much energy that a big share of the energy intensive decarbonisation reaction is executed before entering the rotary kiln at a temperature of 1,000°C.

Inside the rotary kiln the most important reactions take place at material temperatures as high as 1,450°C.

The burning process is finished at the kiln outlet; the hot clinker (1,450°C) enters the grate cooler and is cooled to 100°C by ambient air. The air cools the clinker and receives the heat energy. Some of this hot air (as hot as 1,000°C) is used as preheated combustion air for the kiln. Therefore the high temperature of the air substitutes fuels, which otherwise would be needed to heat up the combustion air. Cooling the clinker requires more air than usable for combustion reasons and in Lengfurt plant the surplus is used as well. A cogeneration plant using hot exhaust gases and generating electrical energy is applied and unique in Germany in cement plants. This “ORC-plant” is described in detail in the following chapters.

Taking account of all efforts to save energy, reduce consumption and increase the opportunities to reuse energy produced, a thermal efficiency of 80% is achieved in the Lengfurt plant.

The average heat consumption per ton clinker of 3.13 GJ is on the low side compared to other kilns of this type. The heat consumption has dramatically decreased in the last 30 years:


B-38

Figure B-7. Specific Heat Energy Consumption per Ton of Clinker, Lengfurt Plant

With additional gypsum, furnace slag and other materials in dependency of the cement-type produced, the clinker is ground to cement. Packed as bag cement or as bulk in trucks or river vessels the cement is transported to the market.

Environmental care is not only applied in the aforementioned fields of energy saving and consumption reduction. Environmental actions are adopted in all areas of operation and environmental impacts. The quarry is gradually restored to nature, which forms an important reservoir for different kinds of animals and plants not seen in any other area.

Dust from the cement making process is carefully managed. To avoid dust emissions, large electric precipitator-filters and over 100 fabric filters are installed to keep the dust under control.

The noise level of the various aggregates is reduced by insulation as shown on the quarry crusher.

The gaseous emissions are constantly measured and are restricted to limit values by the according regulation. Beyond that, measures are applied for further reductions e.g. for the reduction of nitrogen oxides. An SNCR-plant (Selective Non-Catalytic Reduction) transforms nitrogen oxide to pure nitrogen and oxygen.

An extract of some environmental milestones since 1970 is given below:

1970 Installation of the new generation high efficient kiln-line 1982 Substitution of coal by waste tires 1986 Substitution of coal by waste oil 1989 Installation of new generation ESPs for a further decrease of dust emissions 1990 Installation of a roller press entailing consequent electrical power savings 1994 Installation of a NOx-reducing SNCR plant 1995 Installation of a plant for the usage of used sand from foundry 1996 Relocation of the quarry crusher to reduce transportation

2,7

2,8

2,9

3

3,1

3,2

3,3

3,4

3,5

3,6

3,7

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

GJ/

t


B-39

1997 Substitution of coal by plastics 1999 Installation of a co-generation plant ORC, to use waste excess heat

Some topics mentioned will be described more in detail: Usage of alternative fuels and waste raw materials Co-generation ORC-plant Usage of alternative cement additives NOx reduction by SNCR-plant

3.2 Usage of Alternative Fuels and Waste Raw Materials By-products of one industry serve as valuable productive agents for another industry

The Lengfurt plant provides a rated capacity of 1.1 Million tons of clinker per year.

As described in the chapter called “Production Process” the production of clinker needs raw materials in a certain mixture to guarantee the quality of the intermediate clinker and cement product.

The major components of the raw materials, limestone and clay, can be mined from the plant-owned and maintained quarry. Some important components are not sufficiently contained naturally in this raw mix and have to be added, using sources beyond the plant. In this respect silicates and aluminum oxides are used to enrich the raw mix for the required quality. These corrective materials can either be natural deposits or substitutes. These substitutes are by-products or wastes derived by other industry branches.

In order to save natural deposits, the following substitutes are used:

Limestone splinter derived by gas treatment plants Pyrite cinder, derived by iron and steel plants Steel-inlays in waste tires Paper residue derived from paper industry, a product containing high percentages of

calcium Used sand from foundry, high percentage of silicates Dust of pore concrete from concrete industry Lime slurry derived from industrial sewage-works Alternative raw meal

The substitution of original raw materials by alternative raw materials adds up to 91,400 t during the year 2000. The distribution of the different raw materials is presented in Diagram 1:

Assuming a loss on ignition of 90% on paper residue and 0% on the

Total 91.400 t Fluorite

Used sand offoundryDust of poreconcretePaper residue

Alternative rawmeal

Diagram 1 Waste Raw Materials Used in 2000


B-40

other materials, as well as a raw meal/clinker factor of 1.6, the substitute adds up to 5.5% raw meal equivalent. Since the additives do not contribute to CO2-emission by decarbonisation, the substitution contributes to a decrease.

The following scheme demonstrates the different feeding points of fuels and materials in the kiln system:

Figure B-8. Feeding Points, Kiln Lengfurt Plant

Since many years alternative fuels are used to substitute the primary fossil fuels as coal. In 1982 waste tires were introduced and 1986 the implementation of waste oil was actioned. Since 1997 waste plastics, next to other wastes are fed to the burning process. Taking these efforts into account, Lengfurt plant already substitutes 50% heating energy by alternative fuels and

targets 60% for the future. Diagram 2 demonstrates the usage of alternative fuels.

Even if the opportunities for introduction and usage of alternative fuels and raw materials are broad, product quality is still the most important criteria in clinker and cement manufacturing. The impact on clinker quality through the implementation of different fuels must be investigated before the usage is approvable. Each fuel has

a certain percentage of non-ignitable residues (ashes). These ashes form an integral part of the clinker; therefore the ash chemistry must be considered in raw mix calculation. The same is

Raw meal incl. IronoxideFluoritDust of pore-concreteRecyclingsand

Used sand of foundryAlternative raw meal

NOx reduction liquides

Waste tires

Paper residuePlastics

PetcokeWaste oil

Raw meal incl. IronoxideFluoritDust of pore-concreteRecyclingsand

Used sand of foundryAlternative raw meal

NOx reduction liquides

Waste tires

Paper residuePlastics

PetcokeWaste oil

Total 37.363 t

Waste oilWaste tiresPlastics

Diagram 2 Alternative Fuels Used in 2000


B-41

true for alternative raw materials. Figure B-9 demonstrates the variety of alternative fuels and raw materials in Lengfurt plant:

Figure B-9. Chemical Composition in Respect of Clinker Production

2.3 Co-generation ORC-plant (Organic Rankine Cycle Process) As mentioned earlier, waste heat in the clinker burning process is utilized in many locations. The waste heat from the kiln gas is used for tempering the raw meal to partly decarbonized meal. The gas leaving the cyclone preheater, is still at temperature levels as high as 350°C. It covers enough energy to dry raw material-, and coal.

Because of the low moisture content of the raw materials there is no relevant possibility of thermal utilization of the exhaust gases from the clinker cooler. The energy loss at the Lengfurt works was therefore exceptionally high when compared with the other works belonging to Heidelberger Zement AG.

Nowadays this plant realizes the generation of electrical energy by utilizing this otherwise lost energy.

In 1997 Heidelberger Zement decided to implement this process in an industrial scale pilot plant and to test it thoroughly. The project had the following objectives:

Generation of approximately 1.1 MW net electrical power

Used sand of foundry

Cement Clinker

PlasticsHard - coal

Waste tires

Paper -residueSubstitute

kiln meal

%

Recyclingsand

Ironoxide

Dust of pore concrete

Fluorite

Used sand of foundry

Cement Clinker

PlasticsHard - coal

Waste tires

Paper -residueAlternative

raw meal

%

Recyclingsand

Ironoxide

Dust of pore concrete

Fluorite


B-42

Securing a step forward in the understanding of this technology through design and operation of the plant

Reducing of the power dependent CO2 emissions by about 7000 tpy through reduced purchase of power from the power grid

The Organic Rankine Cycle Process for generation power from low-temperature waste heat in cement plants can now be regarded as a technically feasible alternative to power generating plants using steam. Its particular advantages lie in the simple operation, the compact structure, and the high levels of efficiency, which can be achieved with heat sources below 275°C. The initial results available from the Lengfurt plant indicate that 1.1 MW (net) electrical power can be generated with a given mode of operation of the clinker cooler with a waste heat output of the clinker cooler exhaust air of 14 MW and an exhaust air temperature of 300°C. The set up is demonstrated by the following flow sheet:

Figure B-10. Waste Heat Boiler

FigureB-11. Flow Sheet of ORC-Plant

Baatz / Böhm3/6/01 Nr.1VOR_OCR.PPT

Rotary kiln

Chimney

ESP

Exhaust air

Clinker cooler

(150.000 m³/h; 275°C)

Air fan

Baatz / Böhm 3/6/01 Nr.1 VOR_OCR.PPT

Waste heat boiler Heat recovery

Clinkercooler Waste heat source

ORC-PlantPower generation

Air condenser Recoolin g

Exhaust Air Thermal oil circuit Pentane -Circuit Cooling circuit

Abluft


B-43

Based on plant statistics a mean power demand of 4231 KW is necessary for clinker production. By co-generation of electrical power the power demand is decreased by 25.4% to 3156 KW.

Including all production steps up to cement, the proportion of self-supply reaches 12.3% (up to clinker even 26%).

According to an assumed utilization degree of the ORC-plant of 98% the self-supply reaches 12.0% (clinker 25.4%).

Based on the “Monitoring Bericht 1998”, an average CO2 emission level of 1.07 tCO2/MWh is reached by power generation in German power plants.

This, related to the power demand and the production of clinker, calculates to a CO2-emission amount of 30,000 tCO2 per year. By self-supply this amount can be reduced by 7,620 tCO2 per year.

3.4 Substitution of clinker in cement by by-products Clinker, gypsum, and in dependency of the cement type, in addition with other materials, are ground to cement with a defined fineness.

European standards categorize cements into several classes depending on clinker content and addition of other materials. Class CEM I contains nearly pure portland clinker (95 - 100%). CEM II cements contain 65 - 94% portland clinker. CEM III can contain between 35 to 80% of additive materials.

Cement types further are defined by their strength after 28 days.

The environmental impact of the different cements might be described with the “integral productivity factor”, which includes not only the prior productivity factors as specific quality aspects as a product but also all factors related to environmental care.

Earlier investigations concluded that it is possible to produce cements with a low clinker content and a high content of recycled materials with latent hydraulic or pozzolanic abilities, showing the same properties as a cement consisting of purely clinker and gypsum. It might be generalized cement types with a higher percentage of additives as fly ash, slag, fillers and other by-products achieve higher integral productivity factors since the natural raw meal contribution is smaller and therefore decarbonisation, overall, reduced.

In Lengfurt plant cement types are produced with up to 70% additives.

Figure B-12. ORC Building


B-44

Assuming the sum of Carbon dioxide reduction by reduced raw material, correlating reductions by saved fuels for the production of the surplus in clinker and the necessary electricity, it is reasonable that important potentials for CO2 reductions are available using blended cements.

Blended cements have environmental advantages compared to traditional CEM I cements. The principle advantages are lower consumption of natural resources (limestone and fuels), lower energy consumption, and lower emissions from processing.

3.5 NOx emission reduction by usage of wastes of photo production As mentioned before CO2 is not the only gaseous emission, Lengfurt looks for decrease potential. To reduce nitrogen oxides by using wastes of photo production a SNCR plant (Selective Non Catalytic Reduction-plant) was built in 1997. The creation of NOx molecules is decisively dependent on high temperature and overstochiometric combustion conditions. Both are true for the main burner flame, reaching flame temperature in the center of more than 2000°C.

Selective non-catalytic reduction involves injecting NH2-X compounds into the exhaust gas to reduce NO to N2. The reaction has an optimum in a temperature window of 800-1000°C, and sufficient retention time must be provided for the injected agents to react with NO.

In Lengfurt ammoniac solutions as NH3-agents are used, being itself waste products of photo production and film processing. The NH3-agents and are fed via nozzles to the preheater strings in a certain temperature profile and in presence of an oxidizing atmosphere.

Exploiting these conditions NOx molecules are separated and split into pure oxygen and nitrogen.

Feeding points of ammoniac solutions are demonstrated in Figure B-8.

Substudy 8, final: Climate Change - The Cement …wbcsdcement.org/pdf/battelle/final_report8.pdf(...

Documents

Transcript of Substudy 8, final: Climate Change - The Cement …wbcsdcement.org/pdf/battelle/final_report8.pdf(...