A new report from Chatham House* argues that significant changes in how cement and concrete are produced and used are urgently needed if we are to achieve deep cuts in emissions in line with the Paris Agreement on climate change.
Making Concrete Change: Innovation in Low-carbon Cement and Concrete focuses on the potential for breakthrough innovations in lower carbon and novel cements. The report argues that new procurement models, sustained funding for R&D and digital transformation could drive faster-than-expected change in the sector.
Cement is responsible for roughly 8% of global CO2 emissions and is used to make concrete – one of the most consumed substances in the world. Although the sector has made some progress reducing its emissions, any progress made has been more than matched by increasing demand. Worryingly, global cement production is predicted to increase from 4 to over 5 billion tonnes by 2050 as cities continue to rapidly expand and government and businesses worldwide invest in major new infrastructure projects.
Johanna Lehne, one of the report’s authors, said:
“If we are to achieve the Paris climate goal of keeping global warming to well below two degrees, there can be no sectoral exceptions. Regulation of the industrial sectors has so far been light but as confidence grows around decarbonization of power and mobility, cement companies should expect that regulatory frameworks for reducing emissions will come under greater scrutiny from investors, civil society and policy-makers.”
However, reducing cement sector emissions is more challenging than it is for other sectors. More than 50% of emissions are inherently linked to the cement production process. Emissions cannot be reduced simply by changing fuels or increasing the efficiency of plants and instead require the transformation of cement itself either by blending it with alternative materials or by developing novel low-carbon cements.
The report finds that:
The development and deployment of lower carbon cements needs to be stepped up.
A unique analysis of 4,500 patents identified by Chatham House and CambridgeIP reveals that while there has been lots of R&D, only some of the products analysed have been commercialised and none have been applied at scale. The following facts indicate the scale of the challenge:
· R&D investment by cement companies as a percentage of sales is low: 1.2% vs. 1.95% for construction and 4.3% for oil and gas producers. The sector suffers from a ‘low-tech’ image, making it difficult to recruit new talent and to attract venture capital.
· Most novel cements are stuck in the research, pilot and demonstration stages. Only 3 of the 9 types of novel cements analysed have been commercialised.
· Europe and the US are falling behind China on cement research and development. Almost 60% of the patents analysed are owned by Chinese companies and academic institutions
Today, new types of cement are rarely as cheap as traditional cement, and they face a number of barriers. Alternative materials are often not available at the scale required, consumers are reluctant to use novel building materials and the sector is dominated by a handful of producers who are cautious about pioneering new products that challenge their existing business models.
There are however near-term opportunities to overcome these challenges. Cement companies can commit to sustained investment in R&D and demonstration for low-carbon products and explore novel financing mechanisms to stimulate innovation capacity. Governments can grow the market for low-carbon cements by restructuring their procurement processes and developing regulations to target not just operational but also embodied carbon.
Jen Austin, Policy Director of We Mean Business, which works with influential businesses to take action on climate change, explains:
“Companies across the sector recognise their future competitiveness relies on embracing this challenge of reducing emissions across the cement sector, and are looking to Science Based Targets and other measures to help them get there. The good news is that many new products, processes and breakthrough technologies needed to transform the sector are already available. Scaling-up and putting this innovation to work means ensuring sustainable cement becomes the-go-to option. Governments have an important role to play through steps like using public procurement to help drive demand and accelerate this change.”
Disruptive trends in the broader construction sector could unlock new opportunities to reduce emissions more quickly.
There are many readily-available opportunities further down the value chain to reduce concrete demand, sometimes by more than 50%, by taking a new approach to design, improving the efficiency with which concrete is used on construction sites and increasing the share of concrete that is reused and recycled after a building is dismantled. Advances in digital technology will play a key role in scaling these opportunities by enhancing collaboration, disseminating best practices and reducing asymmetries in access to relevant information at different points along the value chain.
Felix Preston, one of the report’s authors, said:
“Unprecedented data availability combined with machine learning could be a game changer for cement and concrete. By finding the right solution for any building, anywhere, digital innovation will unlock new opportunities for deep decarbonisation. And by putting better information in the hands of consumers, it could transform the markets for low carbon products. Enhanced connectivity, 3D printing and online marketplaces for recycled materials are already transforming the wider construction sector.
There are significant opportunities for companies that align their strategies with decarbonisation, and growing risks for those that are unable to do so.
As a recent report by CDP revealed, investors are increasingly expecting cement companies to be transparent about their exposure to climate change risk and how they manage these. Cement companies are also facing growing challenges from local communities: concerns over environmental impacts of limestone mining have led to quarry closures in the Netherlands and have halted new quarry developments in Switzerland.
These trends are forcing cement companies to re-examine their business models. The largest firms are already looking to offer a growing range of services, from speciality cements to intricate delivery services tailored to complex projects. A shift towards a more service-oriented business model might offer new possibilities for value creation during a period in which market conditions have been challenging and financial performance has been mixed.
Carole Ferguson, Head of Investor Research at CDP commented:
“Cement companies are reducing their emissions in two key ways: by using more alternative fuels and deploying alternative materials. Shifting away from fossil fuels, and using less carbon-intensive materials, will help these companies decarbonise in the short to medium-term, but this is not enough for the sector to be in line with two degrees as outlined in the Paris Agreement. It is very encouraging to see that companies are investing in R&D, especially in China which is such an important cement-producing market, but we need to see much more innovation and investment from the cement industry globally.”
To read the full paper, click here.
* Chatham House, the Royal Institute of International Affairs, is an independent policy institute based in London
