Cement Production and the EU ETS: How to make a win

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Cement Production and the EU ETS How to make a
win win
The Cement Sustainability Initiative
Bruno VanderborghtVice President Climate
ProtectionCoP 11 / MoP 1, Montreal, 05 December
2005
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EU ETS Core Objective
Objective Reduce CO2 emissions at lowest cost
Means Allocation of initial emission allowances
Reduction of emissions and Creation of excess
tradable allowances Internalization of cost
Price indication
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EU ETS, Cement Concrete
ETS is important for success of cement
industry Cement industry is important for success
of ETS
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What has the ETS achieved till now ?
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Has this also caused CO2 emission reductions ?

• Very few emission reductions, not proportional to
  the effort and cost of this most important policy
  instrument.
• Why not ?
• Which improvements to ETD / NAPs are needed to
  realize reductions in the cement industry ?

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Reduction options, necessary conditions ETS
Reduction option
Necessary condition
ETD NAP 2005-07
Reduce clinker content in cement
Allowance Allocation cement performance based
Allocation based on absolute historic emission
from clinker production

Substitute fossil fuel by waste
Holistic view Recognition of overall reductions
Narrow view No recognition of reductions outside
ETS

Energy efficiency improvement
Long term view
3 5 years view

Investments
Long term view Equal treatment of new existing
installations
New installations punished with less allowances
than incumbents

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Has will ETS cause CO2 emission reductions ?

• Very few reductions
• Because of inadequate incentives for the four
  main reduction drivers in the industry

• Consequences
• Uncertain business environment
• Deferral of decisions
• Additional costs, but no reductions
• Loose Loose situation

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How to improve for 2008-12 and post 2012 ?

• Equal treatment of existing and new installations
• Long-term predictability
• Integration in a global framework
• Cement Performance Based Allocation

• Cement industry could be pilot industry for
  Performance Based Allocation (absolute Cap
  Trade)

2008 -12

• Longer time horizon
• True Cement Performance Based System
• Credits for indirect savings
• Integration with other trading systems outside EU

Post 2012
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Conclusion

• Yes to Emissions Trading
• Integration in business and price signals two
  necessary but insufficient conditions
• Current NAPs do not give the right signals to
  initiate significant decrease of CO2 emissions
  from cement industry
• Improvements needed for the medium term (2008
  12)
• Equal treatment
• Cement Performance Based Allocation
• Cement as a pilot
• Further improvements needed for the long term
  (2008 12)
• Integration in a global system
• Longer time horizon
• True Cement Performance Based System
• Credits for indirect savings