cement appendices

Industrial Decarbonisation &Energy Efficiency Roadmapsto 2050

MARCH 2015

This report has been prepared for theDepartment of Energy and Climate Change andthe Department of Business, Innovation and Skills

Cement Appendices

INDUSTRIAL DECARBONISATION AND ENERGY EFFICIENCY ROADMAPS TO 2050 – CEMENT

Appendices Page ii

APPENDIX A Methodology .......................................................................................................................... 1

1. Evidence gathering ................................................................................................ 2

2. Literature Review ................................................................................................... 3

3. Criteria for including literature .............................................................................. 5

4. Technical Literature Review .................................................................................. 7

5. Social and Business Literature Review ................................................................ 9

6. Interviews ............................................................................................................... 9

7. Information Gathering Workshop ....................................................................... 15

8. Pathways .............................................................................................................. 15

9. Pathways Development and Analysis ................................................................. 16

10. Pathways Modelling ............................................................................................. 18

11. Options ................................................................................................................. 22

12. Next Steps ............................................................................................................ 23

APPENDIX B FULL Social and Business FINDINGS .......................................................................................26

1. SWOT Outcomes .................................................................................................. 26

2. Market Structure ................................................................................................... 27

3. Assessing Enablers and Barriers ....................................................................... 29

4. Detailed analysis of enablers and barriers ......................................................... 31

APPENDIX C Technology options register ...................................................................................................84

APPENDIX D Additional pathways analysis ................................................................................................90

1. Option Deployment for Pathways under Different Scenarios ........................... 90

INDUSTRIAL DECARBONISATION AND ENERGY EFFICIENCY ROADMAP TO2050 – CEMENT

APPENDIX A - METHODOLOGY


Appendix A - Methodology Page 1 of 91

APPENDIX A METHODOLOGY

The overall methodology used in this project to develop a decarbonisation roadmap for the cement sectorconsists of four stages:

(1) Evidence gathering and processing based on literature, interviews and workshops(2) Modelling of draft pathways, including scenario testing and sensitivity analysis;(3) Testing and developing final pathways(4) Creating a sector Vision for 2050 with main conclusions and recommendation of Next Steps

This methodology is illustrated in Figure 1 and summarised in the report. A detailed description is given inthis Appendix.

An important aspect of the methodology has been Stakeholder Engagement to ensure that all implicatedparties have been invited to participate and contribute. We have worked closely with the Minerals ProductAssociation (MPA) to identify and invite the right people from the sector. In addition we have worked with theDepartment of Energy and Climate Change (DECC) and the Department for Business Innovation and Skills(BIS) to identify appropriate academic and other stakeholders, such as financial industry personnel, toparticipate and contribute.

Figure 1 Roadmap Methodology



1. Evidence gathering

Evidence gathering focused on technical and social and business evidence, and aimed to acquireinformation about:

· Decarbonisation options (i.e. technologies)· Enablers and barriers to decarbonisation and energy efficiency· Background to the sector· Current state and future changes within the sector· Business environment and markets· Potential next steps

This evidence was required either to answer the principal questions directly, or to inform the development ofpathways and the sector Vision for 2050. The evidence was developed from the literature review, interviewsand information gathering workshops. By using these different sources of information, the evidence gatheredcould be triangulated to improve the overall research. Themes that were identified during the literaturereview could subsequently be used as a focus or a starting point during the interviews and workshops. Thedata from the literature could be subjected to sensitivity testing by comparing it with information from theinterviews and the workshops. In a similar way, information gaps during the interviews and workshops couldbe populated using literature data.

The different sources of evidence were used to develop a consolidated list of enablers and barriers fordecarbonisation, and a register of technical options for the cement sector. This information was subsequentlyused to inform the development of a set of pathways to illustrate the decarbonisation potential of cementindustry in the UK.

The evidence gathering process was supported by high levels of engagement with a wide range ofstakeholders, including industry members, trade association representatives, academics and members ofDECC and BIS.

The evidence gathering exercise was subject to inherent limitations based upon the scale of activities andsample sizes that could be conducted within the time and resources available. The literature review was notintended to be exhaustive and aimed to capture key documentation that applied to the UK. The fourcompanies interviewed represented all of the carbon emissions produced in the UK Portland cement sector(emission from the UK production of Aluminate cements is out of scope of this project) and captured UKdecision makers and technical specialists in the cement sector. These interviews were conducted to providegreater depth and insight to the issues faced by companies. However, because many of the companiesin the UK are globally owned, it was difficult to involve senior staff at a global corporate level. This alsoapplied to workshop attendees.

The identification of relevant information and data was approached from a global and UK viewpoint. Theglobal outlook examined dominating technologies and process types, global production and CO2 emissions(in the EU27) and the global outlook to 2050, including the implications for cement producers andconsumers, and production and demand uncertainties. The UK outlook examined the sector structure, recenthistory and context including consumption, demand patterns and emissions, the business environment,organisational and decision-making structures and the impacts of UK policy and regulation. The major UKcement producers and their key sites, dominant technologies and processes were also reviewed.



Long term and shorter term implementation options were considered. options examined were classified intoeleven categories in order to group similar technology options: energy efficiency, waste heat recovery(including its use for electricity generation), cementitious substitution, fuel switching, incremental efficiencyimprovements, carbon capture, alternative cements, alternative kiln designs, advanced grinding technology,recycling and oxygen enrichment.

2. Literature Review

A literature review was undertaken on the cement sector. Its aim was to help to identify options, enablersand barriers for implementing decarbonisation throughout the sector. It seeks to answer the PrincipalQuestions, determine the enablers and barriers for implementing decarbonisation and identify what are thenecessary conditions for companies to invest and consider carbon management as a strategic issue todetermine appropriate technical options for the sector.

The literature review covered over 39 documents. This was not a thorough literature review or RapidEvidence Assessment (REA) but a desktop research exercise deemed sufficient by the project team1 in itsbreadth and depth to capture the evidence required for the purpose of this project. Based on the table ofcontents and a quick assessment (10 to 30 minutes per document), criteria were defined to identify whichdocuments were to be used for the detailed analysis and information gathering (see Error! Referencesource not found. of Error! Reference source not found.). Where literature was deemed significant and ofgood quality, it was read and results were gathered on the principal questions.

The review has drawn on a range of literature (published after 2005, with minor exceptions), that examinesenergy efficiency and decarbonisation of the sector and also wider reviews, studies and reports deemedrelevant to energy-intensive industries overall. sector-based and academic literature was also added. Thedocuments are listed in Section 6 of the main report.

The literature review was conducted in the following phases:

· Broad literature review and information/data collection· Detailed literature analysis on technical points of note· Identification of decarbonisation options and associated enablers/barriers· Information on adoption rate, applicability, improvement potential, ease of implementation, capex,

Return on Investment (ROI) and the saving potential for all options where available;· Construction of decarbonisation options list for short- (2015-2020), medium- (2020-2030) and long-

term (2030-2050)· Provision of information on strengths, weaknesses, opportunities, threats, enablers and barriers.

This information was used in the information gathering workshop as a starting point for discussion. Itprovided evidence to support the development of a consolidated list of enablers and barriers fordecarbonisation and, subsequently, to inform the list of the possible technological options andpathways that would lead to decarbonisation

1 DECC, BIS and the consultants of PB and DNV GL.



DetailsMain focus (all inthe cementsector)

Energy efficiency improvementsCO2 and decarbonisationFuel switching

Secondary focus Enablers, barriers, policyCarbon capture utilisation and storage (CCUS)

Excluded Carbon offsettingNon-CO2 emissionsTechnologies not applicable to the UK cement manufacturing sectorProduct switching (from cement to other materials)

Table 1: Scope of review

The most relevant documents for the technical and the social and business review included:

· Cement Sustainability Initiative, Development of state of the Art-Techniques in cementManufacturing: Trying to Look Ahead (CSI/ECRA-Technology Papers), 2009.

· MPA, cement GHG Reduction Strategy, 2013.· MPA, The UK cement Industry aims to reduce greenhouse gases by 81% by 2050, 2013.· The European cement Association, The role of CEMENT in the 2050 Low Carbon Economy, 2013.· Global CCS Institute, Deployment of CCS in the cement Industry, 2013.· Ricardo AEA, Decarbonisation of heat in industry: A review of the research evidence – Report for

DECC, 2013.· International Energy Agency & World Business Council for Sustainable Development, cement

Technology Roadmap 2009.· MPA, Novel cements: low energy, low carbon cements.· Cembureau, cements for a low-carbon Europe, 2013.· World Business Council for Sustainable Development, the cement Sustainability Initiative – Climate

Actions, 2008.· House of Commons, Written evidence submitted by the Mineral Products Association (HOT07).· The Boston Consulting Group, Assessment of the Impact of the 2013-2020 ETS Proposal on the

European cement Industry, 2008.· The Boston Consulting Group, The cement sector: A Strategic Contributor to Europe's Future, post-

2011.· DECC, The Future of Heating, 2013· CIVITAS, Are our decarbonisation targets self-defeating?, 2012· Centre for Low Carbon Futures, Technology Innovation for Energy Intensive Industry in the United

Kingdom. 2011.· IEAGHG, Deployment of CCS in the cement Industry, 2013.



3. Criteria for including literature

As described earlier, the literature review followed a quick assessment process. General criteria used forincluding/excluding literature are shown in Table 2.

Considerations Final criteria

Literature value Preference was given to official and peer-reviewed publications, like academic papers orgovernmental publications. Industrial informationby MPA and industry consortiums from Europewere also taken as a reference points (greyliterature). The grey literature was used as inputto the workshops.

Preference was given to officialpublications. Various industrialinformation reports were providedby MPA.

Time period tobe covered

Given the fact that the European Energy Directive(end 2012) is a recent factor in the energy-relatedpolitical landscape, preference was given toinformation which was (very) recently published.Some valuable, but older, information wasincluded, as technology penetration is conductedat different speeds throughout the cement sector

No constraint was set on the date ofthe publication, but olderinformation was given a lowerquality rating, due to it not reflectingthe current landscape.

Geographicalarea

Preference was given to the UK industry, with abroader look to Europe, as the technologycompetition in this area is the most prominent.

No geographical exclusion criteriawere used, but information on theUK cement sector was given ahigher quality rating, due to itshigher relevance.

sector specifics Given the specific nature of the UK cementsector, some technologies could be discarded, asthere are no plants using them.

Technologies not relevant orpotentially applicable to UK cementsector, were excluded

Language As the majority of information is in English, nospecial attention was given to publications inother languages.

The search was limited to papers inEnglish, but where easily obtainablequalitative information was found inother languages, this was included2.

Table 2: High level selection criteria

The reports used for this literature review, provided by MPA and found during the internet search includedacademic reports, international bodies studies, magazine articles and private sector studies. The quality,relevance and objectivity of each document was analysed by reading the abstract (where present), followedby a skim-read of the document.

Each document was given a score on different aspects of relevance:

· Category: is the content of the document focusing on technology, enablers/barriers or policy-related aspects

· Affiliation: what is the source of the document: academia, governance or is it sector-based· Financial-technical evaluation criteria present (YES/NO)· Overall quality of the document (+/++/+++)· Relevance for the UK cement sector (0/+/++/+++)· Information on technological aspects (0/+/++/+++)· Information on enablers and barriers: (0/+/++/+++)· Information on policy/legislation: (0/+/++/+++)

2 Some valuable references are in German.



· Document relevant for developing scenarios: (0/+/++/+++)

Based on all these aspects, the document was given a relevance classification: “high”, “medium high”,“medium low” or “low”.

The approach to selecting and categorising literature is depicted in Table 3.

Table 3: Diagram of the selecting and categorising process

All documents categorised as “high” and “medium high” were read in detail, assessed and then included inthe literature review process. The documents categorised as “medium low” and “low” were read andassessed in part and only included if a significant reason for inclusion was found.

Energy saving measures (if present) were listed from each document included in the review process and thislist was used to construct a decarbonisation options list for short (2015-2020), medium (2020-2030) andlong-term (2030-2050) timelines.

NOTE: Additional and specific information/data was added to the overall review process from e.g.stakeholder input datasheets and as a result of following citation trails, expert knowledge and furthertargeted searches and recommendations.

Method of analysing literature

The following method was used to go through the selected literature:

1. Reading and noting of the abstract (or summary) followed by review of the document in detail toextract any relevant information on sector description/outlook and information/data on energysavings and decarbonisation measures.

2. Relevant information (if appropriate) was extracted from other sources (or referred to) and documentcitation trails (if appropriate) were checked for further relevant information/data.

3. Incorporation of the documents into the literature review and collating of the most relevantinformation/data on energy saving and decarbonisation measures.

4. Energy savings, where possible, were preferably extracted as a percentage, or as a specific energysaving per relevant unit.

Definition of scope and boundaries

Academic literature(sciencedirect) Grey literature Websites &

magazines

Retained papers being categorized

Selection of best papers Selection of best info selection

Technologyfocussed

Drivers &barriers

HIGH MEDIUMHIGH

MEDIUMLOW

LOW



5. For financial savings, the amounts were kept in their original currency and reference year.

4. Technical Literature Review

Identifying literature

The primary aim of the literature review has been to gather evidence on technical potential and options(under different timelines) in order to inform on the opportunities and challenges associated with thedecarbonisation of energy use and improved energy efficiency for the cement sector in the UK.

In parallel to the review process, a number of key academics were identified to participate and provideperspectives on current research and to provide additional input and feedback. This was to ensure that theappropriate literature and research had been identified, screened and included.

Research questions

The evidence review addressed the following research questions:

TECHNICAL POTENTIAL: What existing research is there on the technical potential for improving theenergy efficiency and lowering the carbon footprint of the cement Industry to 2050? What generic andspecific technical measures exist and what is their potential?

TECHNOLOGY COSTS: What research is available on the costs of these technical measures, and whatdoes it tell us?

DRIVERS/ENABLERS: What does research tell us about the drivers/enablers for organisations in thecement sector to decarbonise their energy use? What are the perceived benefits for industrialorganisations to decarbonise their heat use?

BARRIERS: What does research tell us about the barriers for organisations limiting effective decarbonisationof their energy use?

PRINCIPAL QUESTIONS: Check for other links to issues raised by Principal Questions.

SWOT analysis: Check for any information using terms strengths, weaknesses, threats and opportunities.

Information provided by DECC and TAs

One document was put forward by DECC, with relevance to the literature search:

1. Ricardo AEA, Decarbonisation of heat in industry: A review of the research evidence, UKDepartment of Energy and Climate Change, 27 August 2013.

The Mineral Products Association (MPA) promotes cement across all sectors and government ensuring thatboth the industry and its products remain competitive, innovative and are not unnecessarily ordisproportionally hindered by new regulation, standards or legislative changes. They act as the industry’sfocal point, playing the principal role in communication between their members and government, theEuropean Union and other external interest groups and trade bodies. MPA offer advice, analysis andinformation to all parties. They actively stimulate innovation, R&D and further development of the industry.MPA has produced a greenhouse gas reduction strategy for the UK cement industry; this document projectsCO2 emissions forward to 2050 under two scenarios, identifying key technologies and actions necessary toachieve these decarbonisations. The MPA strategy provided input to this study, along with a comparatoragainst which the study outputs could be gauged.



Information found by the consortium during technical literature review

A number of additional documents were identified during the course of the literature review. Thesedocuments were identified through Internet search engines and through the cement sector team.

A complete reference list is available in Section 6 of the main report.



5. Social and Business Literature Review

In addition to the work and process described in the technical literature review, the social and businessliterature review key points and additions are:

· We reviewed over 25 documents to create a broad overview of the sector SWOT and identification ofenablers and barriers to energy efficiency improvement and decarbonisation, and identification ofmain uncertainties in generic and business environment;

· Literature reviewed: included documents from Trade associations, companies, DECC and BIS.Specific search terms were used which were agreed with DECC to identify the key enablers andbarriers;

· We used a systematic and structured approach to the literature review. The criteria for assessing therelevance of the literature were defined to determine whether they address the key principalquestions. The literature identified was analysed using a quick assessment process to identify themost relevant information on SWOT, enablers and barriers to decarbonisation; and

· Based a brief assessment we presented the results in a table as below. The analysis resulted inidentification of documents to be used for detailed analysis and information gathering. Whereliterature was deemed significant and of good quality (three stars or above), the literature was readand reviewed and results were gathered on the principal question areas.

Year

Relevance

Quality

Characteristics

SWO

T,Enablersand

Barriers

Uncertainties

futuretrends

options

pathways

Title 1 +++ ++ 0 ++++ ++ 0 ++++… ++ +++ ++ 0 +++ + +… + ++ + 0 ++++ ++ 0Title 10 ++ ++++ +++ ++ +++ +++ ++

Table 4: Literature review assessment process (0= very low, ++++ very high)

The outcome of the literature review was a comprehensive list of strengths, weaknesses, opportunities,threats, enablers and barriers which were used in the Information Gathering Workshop as a starting point fordiscussion and voted on to check which ones were most material.

6. Interviews

The information gathering stage of the project also involved a series of interviews. These aimed to obtainfurther details on the cement industry and to gain a deeper understanding of the Principal Questions,including how companies make investment decisions, how advanced technologies are financed, thecompanies’ strategic priorities and where climate change sits within this.

There are only four operational Portland cement manufacturing companies in the UK at present. As such itwas proposed that all four be interviewed along with the MPA. We identified the proposed interviewees inliaison with the MPA, the four companies themselves, DECC and BIS, meeting the criteria defined in themethodology. All of the companies agreed to be interviewed. The interviews were held with:

· Mineral Products Association· CEMEX· Lafarge Tarmac



· Hanson· Hope Construction Materials

The manufacturing companies interviewed together represent 100% of the sector emissions from Portlandcement manufactured in the UK although it should be noted that the UK also receives imports of cement;some of the importers do not have any UK manufacturing capability.

Comments collated via the MPA, the workshop and subsequent email correspondence was also used aspart of the evidence gathering process to supplement the interviews.

Interviewees were interviewed using the “Interview Protocol” template, developed in liaison with DECC andBIS. The Interview Protocol was used to ensure consistency across interviews, to ensure that the interviewscould be used to fill gaps in the literature review, identify key success stories of decarbonisation, and extractthe key social and business barriers of moving to low-carbon technologies. The “Interview Protocol” can befound further in this Section. It was agreed that no quotes will be directly attributed to those interviewed, withthe exception of the MPA.

Assumptions

1. Results from the desk research social and business and technology review are available andpartially well covered. Well covered parts were not addressed during the interview. Available results:

a. option register overviewb. sector and Subsector characteristicsc. sector SWOT analysisd. Main trends and enablerse. Some on hurdles and barriers for change and/or energy or decarbonisation

2. Preparation of interviews included analysis of website and annual report for business strategy andany energy and emission reduction strategy information. This reduced the need to get some extraclarification on business strategy.

3. The technical team reviewed any gaps in data or information (e.g. specifically related to thatcompany data) that were appropriate to obtain during the interview process);

4. We understood interviewee’s role prior to conducting the interview and we checked this during theinterview if needed.

5. Energy and decarbonisation strategy not available/clear for most organisations;. All interviews wereconducted by very experienced interviewers, with their own proficient way to deal with issues aroundopenness, issues of consent, encouraging openness, and follow-up.

Interview Template

We identified the proposed interviewees in liaison with MPA, DECC and BIS in order to give a goodcoverage of the sector.

Interview Protocol

Preparation

1. Interviewee identificationInterviewees are identified in liaison with the Department of Energy and Climate Change (DECC) and theDepartment for Business, Skills and Innovation in order to achieve good coverage of each sector. The stepstaken to identify relevant candidates are:



· Identify the number of subsectors using SIC codes listed in the ITT or another appropriate subsectordivision;

· Where possible subsectors were grouped based on similarities in products or production techniquesto reduce the number of subsectors; and

· Identify which subsectors and/or organisations were most significant using the following criteria:o Size (e.g. by revenue and/or emissions)o Innovation level of companieso Whether headquartered in UKo Level of supply chain integration

· Select candidates best positioned to represent the views of the breadth of subsectors2. Interview Preparation

The focus of each interview is to be informed by research of the key issues and challenges, successes andopportunities faced by each sector and an understanding of the specific knowledge held by the interviewee.The research incorporates:

· Social business literature review· The findings of the technical review and decarbonisation options identified· Review of company websites, annual reports and other materials relating business and emissions

reduction strategies· Assessment of the role of the interviewee and extensiveness of their knowledge· Review of website, ONS data, IBIS data and annual reports information related to business and

energy and emissions reduction strategies.· Development of the options register

Interview Format

1. IntroductionsInterviewer sets out the project context and interview agenda.

2. GoalsInterviewer introduces the goals of the project as follows:1. To determine the current state, ambitions/plans, successes and problems/challenges of each of the

interviewee’s organisation and/or sector with regard to energy use, energy reduction and carbonreduction:

a. Identify and analyse examples of the implementation of energy and carbon reductionprojects to deliver insight in the problems and barriers at a company level

b. Develop an understanding of the decision-making processes

c. Develop an understanding of the relationship between energy/carbon strategy and businessstrategy.

2. To develop insight into the energy and carbon reduction options available to the organisations/sectorand their potential:

a. As currently deployed by organisations

b. As an option to be deployed in the future



3. Understanding of the main drivers and barriers for change in general and with regard to energy andcarbon reduction in the sector

4. To develop insight into the specific characteristics (strengths, weaknesses, opportunities andthreats) of subsectors (where required).

3. Existing and future strategy for energy and carbon reductionInterviewer to engage the interviewee on the focus of their organisations energy and carbon strategyusing the following questions:1. What is your organisations strategy for energy and carbon reduction? (If the strategy is clear,

summarise and ask for confirmation). Cover the following sub-questions:

a What are the main elements of the strategy?

b How far in advance are you planning the company’s energy efficiency strategy?

c In your opinion, what are the enablers and/or challenges for the strategy?

i) Please specify why:

1. Constrained finance for funding for investments internally or externally

2. Etc…

2. Do you consider your organisation as a leader (innovator/early adopter) or as a follower (early, latemajority) on energy and carbon reduction? Cover the following sub-questions:

a. Can you give one or more example(s) of actions undertaken by members of your organisationthat fit with the stated market position?

b. Do you expect the organisation’s position with regard to energy and carbon reduction tochange?

c. Please state why your organisation is/ is not a leader.

3. What energy and carbon projects have you implemented the last five years and why? What energyand carbon projects have you not implemented the last five years and why?

Guidance for interviewer: use the prepared options register (prepared by technical lead and sectorteam) to identify energy and carbon reduction options. For parts of the list that are not covered,challenge the interviewee to identify options that could be valuable. With front runners placeemphasise on more innovative options.

4. How important is energy and carbon reduction for your organisation? Please address how thecarbon and energy strategy fits into wider business strategy and the extent to which it is embedded.

4. Stories (interviewees not self-identified as leaders)Interviewer to lead discussion of a story or example related to an energy or carbon reduction project thatwent well and another that did not.

5. Stories: Questions for leaders (only for self-identified leaders)Interviewer to lead discussion of a story or example related to an energy or carbon reduction projectusing the questions below:1. What energy and carbon reduction options have been implemented, why, when and where?



2. Can you tell the story of a project from the initial idea generation until now? Ensure this covers howideas were generated (i.e. the step before any appraisal of options takes place):

a. What was the timeline, sequence of events?

b. Cover: idea generation, feasibility study (technological, financial, and organisation), decisionmaking, board presentation, and implementation

c. What was your process for making a case for an investment and who was involved?Consider: key factors during decision making, required payback, main perceived/actualrisks, influence of alternative options for investment, financial and non-financial factors.

d. What were the critical moments (breakthroughs, barriers)?

3. What was the original position of the main stakeholders to the energy carbon project? Did theirattitudes towards the subject change? How?

4. Why do you consider this story as a success or an area for improvement?

5. What are the main conclusions you can draw from this story - positive and negative?

a. Lessons for future action?

b. Main drivers and barriers for energy and carbon reduction in your company?

c. Lessons for the way of organising energy and carbon reduction options within youcompany?

d. Conclusions regarding potential reduction targets on short-, medium- and long-term?

e. How well did the carbon reduction option work in practice, in relation to the anticipatedperformance?

6. Can any reports/presentations on this innovation be supplied?

6. Business Environment: value chain and capacity for innovationInterviewer to ask the following questions:1. What do you consider to be the main drivers for energy and carbon reduction in the sector?

a. What are main characteristics of the main parts of the production process? Following thestructure of the options register:

i. Ask specific questions on any elements not covered in the desk research

ii. Ask specific questions on the characteristics of the subsector (input, process,output, energy use, value chain, competitive forces)

b. What do you perceive as the strengths and weaknesses of your value chain?

c. What have been the main changes in the value chain over last 10 years?

d. What innovations do you expect to see in the value chain in the coming 10/20/30 years?

e. What are possible game changers for the value chain/ sector?

2. Main innovators/early adopters in the sector:



a. Who influences action (whom or what are they listening to? Why?):

i. Organisations and people within organisations (role/function)?

ii. Within or outside the sector (other sectors, academics, non-governmentorganisations, politicians etc.)?

3. Questions on the dimensions of innovations3 . These questions will be on a multiple choice list(answer categories strongly disagree, disagree, neither agree or not agree, agree, strongly agree4).After filling the list, ask for clarifications and examples that underpin answers in the following areas:

a. Technical: networks with other companies, academics, knowledge of competitive andemerging technologies, participation in R&D, pilots, experiments

b. Human Capital: improvement projects, multi-disciplinary teams, training oninnovation/change/improvement

c. Organisation: horizontal communication lines, clear goals/responsibilities, customer focus

d. Management: clear performance criteria for projects, structural follow up of mainimprovement projects in management meeting, clear status information on projects

4. (optional) Please set out a characteristic story of a (successful) sector and subsector thatimplemented a change/innovation related to energy or carbon reduction. This question should beasked if consortia/sector teams feel a need to get a better overview of success stories. The questionis relevant because in most business environments managers are influenced most by their peers.

7. Drivers and barriers for sector changeInterviewer to lead a summary discussion of the main drivers and barriers for sector change (general andor specific for energy and carbon reduction) using the following questions:1. What do you consider the main drivers for change in the sector?

a. Please state specific drivers in the following fields: social, policy, technical regulatory factors

b. Interviewer to review the pre-prepared list of main driver and check seek further detail fromthe interviewee

2. What do you consider the main barriers for change in the sector?

a. Please state specific barriers in the following fields: social, policy, technical regulatoryfactors

b. Interviewer to review the pre-prepared list of main barriers and seek further detail from theinterviewee

Function of Interview Template and Protocol:

The Interview Template was designed to collect, build upon and collaborate specific answers to PrincipalQuestions which are not covered by results of desk research. The general timeline of one interview isillustrated below:

3 Questions are asked to get a better (and broad overview of space/possibilities for change (not only including investments but also thechange that potential of option will materialise.4 This way of working is chosen to be able to just cover the field quickly and get a quick first idea what they consider the importantaspects so we can spend as much time as possible on this. We normally don’t use the survey results to collect quantitative answers tothese.



Intro 5-10 minutesCurrent state and plans energy and decarbonisation 20-30 minutesStories of energy/decarbonisation 30-45 minutesBusiness environment and innovation power 15-20 minutesEnablers and barriers for sector change (to test workshop questionnaire) If time left

Table 5: General interview timeline

7. Information Gathering Workshop

The information gathering stage of the project also involved Workshop 1, the ‘Information GatheringWorkshop’.

We worked with MPA, DECC and BIS to identify the most relevant attendees for the workshop. The researchwork already undertaken as part of the literature review and interviews were used to inform the content of theworkshop.

The workshop was divided into two key activities. The first activity focused on reviewing all potentialtechnological options for decarbonisation and identifying adoption rate, applicability, improvement potential,ease of implementation, CAPEX, ROI, saving potential and timeline for the different options. This was donethrough two breakout sessions, one focused on collecting more data and the other focused on the timelineunder different scenarios. The second activity involved splitting participants into five groups to discuss andvote on the enablers and barriers. Participants were also asked if they had any other enablers and barriers tobe included. The aim of this section of the workshop was to prioritise the enablers and barriers and begin toconsider how to overcome them (so that this could feed into later work on the options register, pathways andNext Steps).

We recognise that the voting process was based on initial reactions and that everyone voting may not havethe expertise required on specific technical solutions to decarbonisation. In order to counter this limitation,MPA provided a validation of the options data after the first workshop.

The outcome of the Information Gathering Workshop (and all information gathering stages of the project)was a consolidated list of enablers and barriers, and a more complete list of possible technological optionswith a suitable timeline for their implementation.

8. Pathways

A pathway is a combination of different decarbonisation options, deployed under the assumed constraints ofeach scenario that would achieve a decarbonisation level that falls into one of the following decarbonisationbands:

· 20-40% CO2 Reduction;· 40-60% CO2 Reduction; and· 60-80% CO2 Reduction.

In addition, two purely technology-driven pathways were developed: a Business as Usual (BAU) pathwayand a Max Tech (Max Tech) pathway. The BAU pathway consisted of the continued roll-out of technologiesthat are presently being deployed across the sector. The Max Tech pathways - Max Tech 1 and Max Tech 2- included a technology or technology combination that would achieve the maximum CO2 reduction possiblewithin the sector, given constraints of deployment rates and interaction. Two Max Tech pathways were



developed because two potential avenues for reaching the maximum decarbonisation of the sector exist andit is presently not possible to determine which would be more likely. The pathways have not been optimisedto achieve a certain decarbonisation level.

9. Pathways Development and Analysis

Overview

Pathways were developed in an iterative manual process in order to facilitate the exploration of uncertainrelationships that would be difficult to express analytically. This process started with the data collected in theevidence gathering phase. This data was then challenged and enriched through discussions with the sectorteam and in the first workshop.

Logic reasoning (largely driven by option interaction and scenario constraints), sector knowledge andtechnical expertise were applied when selecting options for the different pathways under each scenario. Forexample, incremental options with lower costs and higher levels of technical readiness were selected for thelower decarbonisation bands, whereas more technically and financially challenging options were selected forthe higher decarbonisation bands in order to reach the desired levels of decarbonisation. These pathwayswere challenged by the sector team, modelled and assessed under the three scenarios and finallychallenged by the Stakeholders participating in the second workshop. This feedback was then taken intoaccount and final pathways were developed. All quantitative data and references were detailed in the optionsregister and relevant worksheets of the model.

It is important to keep in mind that the pathways results are the outcome of a model. As with all models, theaccuracy of the results is based on the quality of the input data. There are uncertainties associated with theinput data and the output should therefore be seen as indicative and used to support the Vision and NextSteps, not necessarily to drive it. Also the model was a simplification of reality, and there are likely to beother conditions which are not modelled.

The analysis only produced results (pathways) which were iterative inputs of the model operator, without anyoptimisation.

Process

1. The gathered evidence (from literature review, sector team discussions, stakeholder feedback andjudgement) was consolidated into a condensed list of options.

2. Timing and readiness of options was developed by the sector team and during the first workshop,based on evidence from literature, sector knowledge and technical expertise.

3. BAU and Max Tech options were chosen and rolled out to the maximum level and rate allowableunder the current trends scenario.

4. Options were added to the BAU pathway or reduced or taken out of the Max Tech pathway untileach intermediary pathway band was reached.

5. Technical constraints and interactions across the list of options were taken into account whenselecting options and roll-out.

6. The roll-out was adjusted to account for the output of the social and business research as well ascurrent investment cycles.

7. Pathways were modelled under the current trends scenario, accounting for changes in productionand the carbon emissions of the electricity grid.

8. The results were reviewed and modifications made to the deployment, applicability and reductionpotential for any options that appeared to be giving an unexpected or unusual result.



9. Further changes to option choices were made as required through iterations of points 4-8.10. Revised pathways under current trends were produced for presentation at the second workshop.11. Feedback on pathways was used to make any further necessary adjustments to the pathways under

current trends.12. The final pathways developed under current trends were used as a basis for the development of

pathways under challenging world and collaborative growth scenarios.13. Deployment of each option under challenging world and collaborative growth was adjusted according

to the constraints of each scenario, including the removal of options that would not be likely underchallenging world and the deployment of additional options that would become feasible undercollaborative growth.

14. Roll-out for each option was adjusted within the technical and scenario constraints in order to reacheach pathway band where possible. Note that not all pathway bands are possible under somescenarios.

The options are listed in Appendix C.

Deployment of options

For each pathway, options were selected and deployed over time according to their readiness level, timingconstraints, and those most likely to allow the pathway band to be achieved. This process occurrediteratively, involving the sector team, Trade Association and other Stakeholders (who contributed via thesecond workshop). The sector Lead provided an expert view on whether the options identified in eachpathway produced a feasible pathway.

As described within the pathways section of the report, the technologies included within each bandedpathway under each scenario may differ in order to meet the pathway band under each scenario.

The selection and deployment of options accounted for evidence from the social and business research, forexample which options could be deployed without any changes to policy and where the roll-out of optionsmay be slowed or curtailed by identified barriers or accelerated by enablers.

Option Interaction

There were a number of possible ways in which options could interact with each other. These interactiontypes, and how they were dealt with in the development of pathways, are described below:

· One option excludes another: This is taken into account by the user in the roll-out inputs in the optionSelector by ensuring that no exclusive options are rolled out to a conflicting level in the same timeperiod. For example, ‘fuel switching to biomass’ and ‘fuel switching to natural gas’ are options that aremutually exclusive. It can therefore be seen that as ‘fuel switching to biomass’ deploys to 75%, ‘fuelswitching to natural gas’ reduces to 25% accordingly.

· One option depends upon another being adopted: This is taken into account by the user in the roll-out section of the option Selector by ensuring that if any option requires a precursor that this precursor isrolled out to the appropriate level.

· Options are independent and act in parallel: The “Minimum Interaction” pathway curve assumes thatall options are independent and their effect on energy or emissions are therefore incremental.

· Options improve a common energy or emission stream and act in series: The “maximuminteraction” pathway curve assumes that the saving from each option reduces the remaining energy oremissions for downstream options to act upon.



Due to the choice of top down modelling methodology, the distinction between type 3 and type 4 interactionswas not possible on an option-by-option basis. The pathways curves therefore included a “maximuminteraction” and a “minimum interaction” curve. The actual pathway curve would lie between these twoextremes.

Evidence not used in Pathways Modelling

Specific energy use of processes was considered constant in the modelling, whereas they are actuallydependent on the load factor (production level) of the equipment. Increasing the production level of existingequipment often increases efficiency (in terms of kWh/tonne cement or Mt CO2/tonne cement), which shouldbe taken into account when calculating emissions. However, a full bottom-up model would be needed, whichwas beyond the scope of this work.

The options were modelled with a fixed CO2 and fuel saving as input values. As technologies mature, it islikely that these values would increase. This was not taken into account in the model, as the uncertainty ofthe extent of that development is high.

The adoption rates and applicability rates were used to inform deployment, but without a full bottom-upmodel implemented on a site-by-site basis, it was difficult to link these parameters directly to investmentcycles.

10. Pathways Modelling

Scenarios

Modelling pathways starts with the development of scenarios. A scenario is a specific set of conditionsexternal to the sector that would directly or indirectly affect the ability of the sector to decarbonise. Anexample of a condition in a scenario was the emissions factor of the electricity grid. Where appropriate,conditions were described qualitatively through annual trends. The scenarios analysis also includedqualitative descriptions of exogenous drivers which were difficult to quantify, or for which analyticalrelationships to quantitative factors were indefinable.

For each pathway, the following three scenarios were tested: current trends, challenging world andcollaborative growth. Scenario parameters are shown in Table 6 below. These scenarios are based onliterature review, interviews and stakeholder input at workshops and sector meetings.

Current Trends

The current trends scenario projected moderate UK and global growth with UK producers maintainingcurrent production levels but where increase in demand is met by increase in imports. Alongside this,international policies on climate change were assumed to develop, gradually but effectively driving downemissions.

New low-carbon generation technologies were assumed to progressively decarbonise the electricity grid to100 g/kWh by 2030.

Cement production was assumed to stay constant during the entire period from 2015 to 2050 at a nominallevel of 10 Mt/yr.



Challenging World

The challenging world scenario was characterised by lower global growth rates than those currently beingexperienced. Climate change was assumed to have a lower profile than at present, so that there would beless effective action to reduce emissions.


Cement production was assumed to decline by 0.5% annually during the entire period from 2015 to 2050due to reduced demand from the construction sector coupled with more intense competition from imports.

Collaborative Growth

The collaborative growth scenario was represented by higher levels of global growth than those currentlybeing experienced and concerted action to reduce carbon emissions.


Cement production was assumed to increase by 0.5 due to increased demand from the construction sector.



Challenging world(cement production to decline by 0.5%

annually)

Current trends(No increase in cement production)

collaborative growth(cement production increased by 0.5%

annually)

International consensus National self-interest Modest Consistent, coordinated efforts

International economiccontext

More limited growth, some unstablemarkets, weakening of international tradein commodities

Slow growth in EU, stronger in world,relatively stable markets

Stronger growth in EU, stable markets,strong international trade.

Resource availability andprices

Strong competition, High VolatilityHigh price trends.

Competitive pressure on resources. Somevolatile pricesCentral price trends.

Competitive pressure on resources. SomeVolatile pricesCentral price trends.

International agreementson climate change

No new agreements. Compliance withsome agreements delayed

Slow progress on new agreements onemission reductions, all existingagreements adhered to.

Stronger worldwide agreements onemission reductions, consistent targets forall countries

General TechnicalInnovation Slow innovation and limited application

Modest innovation, incidentalbreakthroughs

Concerted efforts lead to broad range ofearly breakthroughs onNano, bio, green and ICT technologies.

Attitude of end consumersto sustainability and

energy efficiency

Consumer interest in green products onlyif price competitive. Limited interest inenergy efficiency.

Limited consumer demand for greenproducts, efficiency efforts limited toeconomically viable improvements

Consumer willing to pay extra forsustainable, low carbon products. Strongefforts to energy efficiency even where notcost effective.

Collaboration betweensectors and organisations

Minimal joint effort, opportunistic,defensive

Only incidental, opportunistic, short termcooperation

Well supported shared and symbioticrelationships

Demographics (worldoutlook)

Declining slowly in the westHigher growth elsewhere

Declining slowly in the westModest growth elsewhere

Stable in the westSlowing growth elsewhere



Challenging world(cement production to decline by 0.5%

annually)

Current trends(No increase in cement production)

collaborative growth(cement production increased by 0.5%

annually)

World energy demand andsupply outlook

Significant growth in demand with strongcompetition for resources. Highdependence on imported fossil fuels

Balanced but demand growth dependenton supplies of fossil fuels from new fields.

Growing demands balanced by stronggrowth in supply of renewable energy,slowly declining importance of fossil fuels.

UK Economic outlook Weaker OBR growth assumption. Current OBR growth assumption (0%) High OBR growth assumptions

Carbon intensity ofelectricity

Weakest trend of electricity carbonintensity reduction200g/kWh at 2030

Stronger trend of electricity carbonintensity reduction100g/kWh at 2030

Rapid decline in electricity carbon intensity50g/kWh at 2030

Price of electricityCould be higher or lower than existingones

Central prices Likely to be higher

Fossil Fuel Higher and volatile fuel pricesUEP high UEP central UEP central

Carbon Prices UEP low carbon price UEP central carbon price UEP high carbon prices

CCS availability Technology develops slowly, onlybecoming established by 2040

Technology does not become establisheduntil 2030

Technology becomes proven andeconomic by 2020

Low carbon processtechnology

New technology viability delayed by 10years

New technology economically viable asexpected New technology viability achieved early

Table 6: Summary of scenario context and specific assumptions applicable to the scenarios



11. Options

Classification and Readiness of Options

The options were divided into two groups reflecting their techno-commercial readiness.

· Short term options· Long term options

Short term options are characterised by being available for implementation either immediately or from 2020onwards and typically offer smaller incremental CO2 savings. They include generic energy efficiency optionsincluding electricity generation from waste heat as well as the use of alternative raw materials or increaseduse of biomass fuels.

Long term options, in contrast, are currently at early stages of development and so are unlikely to beimplemented prior to around 2030. They include breakthrough technologies such as carbon capture andadvanced kiln technologies.

Options Processing

The options register shown in Appendix C was developed jointly by the technical and social and businessresearch teams. This was achieved by obtaining the list of potential options from interviews, literature, askingparticipants at the information gathering workshop which options they would consider to be viable, andthrough receiving detailed information packs from members of MPA. The technical team drafted the first listof options. However, each option had strengths, weaknesses, enablers, and barriers which needed to betaken into account to develop and refine the options register to feed into the model.

A comprehensive list of enablers and barriers identified from the literature review was refined andtriangulated with the information gathering workshop and interviews. To find the most relevant enablers andbarriers for incorporating into the options register and pathways, enablers and barriers that were notsupported by the information gathering workshop and interviews were removed from the list.

The impact of social and business research was captured in the options register, under the individualtechnologies (where possible) and in the subsequent pathways selected.

We have used the decision tree below to determine whether the social and business findings should impactupon the options and pathways. The pathways represent a selection of options, and this determines whenand to what extent the options become active.



Figure 2 Social and Business pathways Impact Tree

12. Next Steps

The output of the pathway development and social and business research included identification of barriersto and enablers for:

· Implementation of the pathways; and· Decarbonisation and energy efficiency in the cement sector more generally.

To draw conclusions, the analysis of barriers and enablers is taken further by describing a list of possiblenext steps to be implemented by a combination of industry, government and other organisations. Theseactions can take the form of strategic conclusions which are high-level and/or longer term, or more specific,discrete activities which can lead to tangible benefits.

The development of conclusions and next steps has considered the following:

· Actions from other cement decarbonisation projects· Necessary changes in future markets, product features, business environment to enable the different

pathways· The outputs of workshops held as part of this project covering decarbonisation pathways and next

steps· Actions that help maximise the success of a pathway under a range of scenarios· options within the pathways that are necessary for success, e.g. if a particular technology option is

necessary for the success of a number of pathways, or an option has a very high decarbonisationpotential, actions to implement this option are included

· Policy and regulations that could contribute to the removal of barriers and/or enhancement ofenablers

The possible next steps can be divided into three main groups: strategy, opportunity and analysis, and toolsand resources, as illustrated in Table 7.

1. High impact (i.e. scalable enough in UK tomake a difference for decarbonisation)?

2. Technologically possible?

3. Strong possibility that the business or socialbarrier is surmountable?

YES(to all 3 questions)

Keep as optionto feed into pathways

NO

option considered for removaland discussed by sector

team and experts



Market and strategy Opportunity and analysis Tools and resources asenablers

Leadership, strategy, structure,organisation, communication,promotion, PR

Innovation, research anddevelopment

Policy and regulation

International competition andmarkets

On site deployment oftechnology

Finance

Company decision making andstrategy

Energy supply and infrastructure People management and skills

Value chain opportunities

Table 7: Next steps


APPENDIX B – FULL SOCIAL AND BUSINESS FINDINGS


Appendix B – Full Social and Business Findings Page 26 of 91

APPENDIX B FULL SOCIAL AND BUSINESS FINDINGS

1. SWOT Outcomes

The info-graphic below highlights the top strengths, weaknesses, opportunities and threats in relation todecarbonising the cement sector in the UK.

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

UK cement Industry iswell established andhas steadily improvedits energy efficiencyand environmentalperformance

cement making is acapital-intensive industry

cement is an attractiveoption for green buildings

Competition frominternationalcompetitors

Vertical-integratedmanufacturing facilities

UK industries areparticularly vulnerable tooffshoring of production

Sector has a strongpipeline of smallerinnovation projects waitingto be implemented

High price of energy

cement/concretereabsorbs a highlysignificant amount ofCO2 during its life andend-of-life

Sector is historicallyweak at obtaining fundingfor innovation fromgovernment

Collaboration to developdemonstration projects

Uneven playing field/carbon leakage

cement Industry is wellplaced to make gooduse of alternative fuelsand waste by-products

Technology lock-in

If additional alternativefinancing mechanismswere available moreadvanced technologieswith longer paybacks (5-8years) would beimplemented

Regulatory uncertainty

Energy intensive

Lack of alternativefinancing availablethreatens the ability ofcement sector todeploy technologieswith longer paybacktimes

Table 8: SWOT analysis for cement sector



2. Market Structure

sector Industry Definition Market share of majorcompanies (2012) Key external drivers

Portland cement There are only four companies that produce Portlandcement in the UK. Portland cement is the world’s mostcommonly used type of cement and is used to makeconcrete and mortar as well as other buildingmaterials. It is produced by heating materials such aslimestone in a kiln to form what is called clinker,grinding the clinker, and adding small amounts ofother materials.

1. CEMEX 21%2. Hanson 19%3. Larfarge 37%4. Tarmac 10%

NB: In 2013 Lafarge SA and AngloAmerican formed a joint ventureLafarge Tarmac. As a result, part ofthe business was sold to form a newUK competitor – Hope ConstructionMaterials – but up to date marketdata is not currently available.

NB: As of 2012 approximately 12% ofUK cement was imported byindependent importers.

· Demand from construction of builtenvironment and infrastructure projects



sect

or

Rev

enue

(£M

)

Prof

it(£

M)

Wag

es(£

M)

Ann

ual

Gro

wth

Prod

uctio

nVo

lum

e(M

t)

Expo

rts

(£M

)

Impo

rts

/D

eman

d(%

)

Rev

enue

/em

ploy

ee(£

”000

)

Wag

es/

Rev

enue

(%)

Empl

oyee

sTo

tal

Empl

oyee

s/

esta

blis

hme

nt

Ave

rage

wag

e(£

”000

)

Shar

eof

the

econ

omy

(%)

Num

bero

fco

mpa

nies

Portlandcement

431(2012)

Unknown 70(2012)

3%(2012– 13)

8.6(2013)

Unknown 12(2012)

166.8 16.2 2583(2014)

646 27,100 0.01 4



3. Assessing Enablers and Barriers

The first stage in our analysis was to assess the strength of the evidence for the identification of the enablersand barriers. This was based on the source and strength of evidence and whether the findings werevalidated via more than one information source. If the strength of the evidence was deemed high or mediumhigh, then for the social and business research the enabler and/or barrier was included and information wasused to support the answer to the principal question ‘What are the main business enablers and barriers todecarbonisation?’. If the strength of the evidence was deemed high or medium high for the technical options,the uncertainties in the modelling were reduced. The evidence was given a relevance classification of: “high”,“medium high”, “medium low” or “low”. The classifications are defined in Table 9 below.

It should be noted that the nature of the interview and workshop discussion process means that theserepresent the opinions and perceptions of the interviewees and workshop participants which could notalways be backed up with evidence from other information sources.

The evidence was analysed and interpreted using a variety of evidence analytical techniques such as SWOTanalysis, system analysis and root cause analysis/causal mapping where possible.

Classification DefinitionHigh High relevance for the UK cement sector

Good financial-economic decarbonisation dataRecent information (after 20005)Provides a good example/story of decarbonisationValidated across all evidence gathering methods

Medium high Relevance for the UK cement sectorFinancial-economic data not always complete or clear-cut and only generic decarbonisationdataProvides a good example/story of decarbonisationValidated by more than one evidence gathering method

Medium low Information that is too general or too specificRelevant grey literatureOld information but still relevantOnly mentioned via one evidence gathering method

Low Background informationNo or low applicability for the UK cement sectorGrey literature of limited valueOld informationLack of relevance and/or only mentioned once

Table 9 Evidence Classification Definition

A SWOT analysis is a different lens to examine the enablers and barriers and reinforce conclusions andlinkages between evidence sources. It identifies how internal strengths mitigate external threats and can beused to create new opportunities, and how new opportunities can help overcome weaknesses. By clusteringthe various possibilities, we identified key stories from the SWOT analysis which enabled us to describe thebusiness and market story in which companies operate. In order to understand the inter-linkages betweenthe SWOT analysis for the sector and the key enablers and barriers we identified from the literature review,interviews, and workshop, we analysed the root causes of the enablers and barriers and linked it back to themarket environment and internal decision making. The top SWOT outcomes were identified from theliterature review, reinforced in the interviews and voted on by workshop participants as the most important.These were shown above in Error! Reference source not found. of this Appendix B.

5 Two publications older than 2000 were included in the high quality documents



System analysis can be used to help decision makers identify a better course of actions and make betterdecisions. It is a process of studying a procedure or business in order to identify goals and purposes, and tocreate systems and procedures that will achieve those goals most efficiently. It uses an experimentalapproach to understand the behaviour of an economy, market or other complex phenomenon.

Root cause analysis is a method of problem solving that tries to identify the root causes of a problem. Aroot cause is a cause that - once removed from the problem - prevents the final undesirable event fromrecurring. Causal mapping is a visual representation, showing causalities or influences as links betweendifferent nodes. These maps can be used to aid strategic planning and thinking.



4. Detailed analysis of enablers and barriers

Enablers

# Category Enablers Literature review Interviews Workshops Analysis1 Financial/

TechnologyTechnological &financialfeasibility- iftechnology isproven andfinancially viable(typically less than3 year payback) itis more likely to bedeployed.

1 Literaturesource:Boston ConsultingGroup 2011 foundthat: “the cementsector is notobtainingreasonablereturns, asaverage return oncapital over thelast four years hasbeen between 3 –5 percent belowthe cost of capital.This lack of returnshas been, in part,due to exogenousfactors andimposed liabilities.In order to meetenvironmentallegislation inEurope, operationsface majorinvestments andoperating costs. Inaddition, capitalrequirements areone to two timeshigher compared

4 InterviewsInterviewee: “We’velooked at putting insolar farm andfinancing was ok, butthe connection costwas £13m. So we’velooked at all thesealternatives, butcurrently the bestoption is to keepincreasing alternativefuels use andoptimisation ofequipment.”

Interviewee: “We havea range of projects,but they have to hitspecific hurdle ratesto receive capital.More incrementaldecarbonisationopportunities aredelivered as part ofdaily operation ofplants.”

Interviewee: “Ourtypical payback periodis up to 3 years

(4)Workshopparticipantsindicated that itwas difficult todetermine whensomething isproven and viable.Participantsdiscussed thatoften it is enoughfor one plant tohavedemonstrated thetechnology prior toit beingimplemented.Another workshoptable indicated thatbeing the firstmover is the leastpreferred option,and indicated it isbest to be the firstfollower.

However,participantsindicated that anyinnovation thatwas determined to

Across the information sources it wasclear that technologies that havebeen successfully trailed previouslyand with payback periods under 3years would more likely beimplemented over others.

However, interviews also indicatedthat if third parties invested in theupfront costs of a technology with alonger payback the investment wouldlikely go through.

Under the current economic climate,acceptable payback periods rangefrom 2-5 years within the industrywith the average limit being 3 years.Some more strategic projects thatcould be utilised elsewhere or thathave other benefits apart fromreducing energy/carbon are givenconsideration with payback periodsup to and occasionally beyond 5years, but no further than amaximum of 7 years.

Following rather than being a firstmover with a new technology is thepreferred option as this lessens therisk of investment.



to other regions(with the exceptionof the US) and thecost of electricity isalso higher due toCO2 costs andfeed-in tariffs.”

although we dosometimes allow 5-7years if it's a strategicproject”

Interviewee: “We seek1 year paybackperiods if possible, nomore than 2 yearsmax.”

have anacceptablepayback period(typically up to 3years, but less forsome companies)would be investedin assumingcapital is available.

During theworkshopcompanies werenot permitted todiscuss theirsuitable paybackperiods due tocompetitionregulations.

2 Innovation Pipeline oftechnologicalinnovations toreduceenergy/carbon –ideas waiting forinvestment

--- 4 InterviewsInterviewee: “We tendto have a long termwish list of projects tobe implemented, butwill depend on futuremarket.

Interviewee: “No hugeprojects that are inpipeline though – thebig drive is to increasealt fuel use (e.g. 65%at one plant at themoment). Highestwe’ve managed hasbeen 85%.”

(2)Workshopparticipantsindicated thatthere are onlylimited technicalsolutions that areready to beimplemented andare not yetimplementedalready.

Remaininginnovations arehugely expensive(e.g. CCS) and/or

Interviewees expressed confidencethat there are robust innovationpipelines for next five years, but thatthese were predominantlyincremental improvements ratherthan any step change technologies. Itshould be noted that ‘smaller’projects still require multi-millionpound investment.

New innovations in pipeline arecarefully assessed against criteriasuch as ROI and carbon savings.However, any investment has tocompete for Capex with other non-energy related investments at plantsand ideas that offer the best return



Interviewee: “We tryto have 5 yearscapital programme forall plants. Make surepipeline is still ontrack or not – butdifficult financialtimes. Without any bigprojects we’ve tried tocontinue a long termplan of smaller energyimprovements. Someprojects paybackperiod would be about7-8 years in currenteconomic climate – tryto keep these inpipeline if financialsituation changes sowe can put theseforward.”

Interviewee: “We dohave many projectswe are always puttingforward – healthypipeline of projectsover next 5 yearsincluding some bigones. We’ll have tosee if they becomeviable financially”

Interviewee: “Quite intouch with

will provide anunacceptablereturn in terms ofcost or carbonsavings.

are more likely to be selected.

Workshop participants noted somelarger projects (inc. CCS) that couldbe considered, but these are notconsidered financially affordable forUK companies, are not yetdeveloped technically or they do notoffer a significant carbon savingcompared with their cost.



international scene onwhat is happening aswell as with supplychain – great networkand get approachedby entrepreneurs, etc.on new ideas toimplement”

Interviewee: “Eachproject is weighedagainst each other todetermine whichoffers best value andreturns. If selectedthen it’ll go into adetailed costing andfeasibility study (atthat point we’reinvesting a bit ofmoney to get thisstudy done). Have ateam of engineersworking on projectsthey’ll work on eachyear.If a project getsthrough the study itgoes to Exec to besigned off if above acertain threshold.Quarterly decisions,although it can bepushed through byspecial exec.decision.”



Interviewee: “Paybackperiods are typically 3years max. Thelongest paybackwe’ve asked forrecently is a 4 yearpayback. 5+ yearsdoesn’t make muchbusiness sense.We’ve got plenty ofsmaller projects inpipeline within theacceptable paybackperiods.”

3 Management& organisation

Commitment bytop managementto anenvironmentalpolicy/ climatechange strategy-enables topmanagement tosign off on lowcarbontechnologies asthey align with thecompany’sstrategies andpolicies.

--- 5 InterviewsInterviewee: “Mainconcern at themoment is to reduceemissions. Partly inresponse to EUpressures (EU ETS),partly to ClimateChange Agreement(UK), CarbonReductionCommitment (UK), butalso partly due tointernal commitmentto reduce emissions”

Interviewee: “Pluspoint is that top levelcommitment toimprovingenergy/climate

(4)Workshopparticipantsindicated that topmanagementleadership is anecessarycondition toreducing carbon.

They also notedthat they felt govt.should betterrecognise theleadership shownby UK cementcompanies onreducing carbon.

Some participantscalled for the govt.

All companies in the UK expressedthe view that their seniormanagement are engaged withclimate change and consider it animportant issue for their companyand sector.

The UK cement industry considersitself to be a world leader on tacklingclimate change for their sector andfeel they have demonstrated long-term leadership from an early stage.

Top level commitment has enabledUK companies to make manysignificant carbon-reducinginvestments to date, but it was notedby interviewees that decision-makingalways has to be balanced with costimplications. In recent years the needto reduce energy use costs has been



performance is there,but it does have to beaffordable”

Interviewee: “Youneed to be awarethese are really globalcompanies whocompete strongly onenvironmental issues.The companiescannot sit still andthey have no choice,but to havesustainabilitystrategies”

Interviewee: “Weaccept the scientificevidence on climatechange and thatbusiness and societyhave to find ways ofaddressing it”

Interviewee: “It wouldbe nice to feel that wehave a moralobligation on climatechange, but it’s nogood if it puts us outof business. So wewill always try and dowhat we can withinconstraints ofbusiness and the fact

to avoid anyadditional climatechange policysticks and torecognise theindustry’s earlyleadership anddecarbonisationachievements todate.

as important as decarbonisationconcerns although EU and UKclimate change regulations are alsohaving an increasing impact onoperating costs.

Interviewees commented thatsustainability and climate change ingeneral has become a key strategicissue and a market differentiator formajor cement companies and this isalso driving carbon-reductioninvestments.



that shareholdershave given us moneyand entrusted it to us.We have to survive asa business and ourfirst priority has to bethe shareholders, thenour staff, then furtherstakeholders inc. theenvironment”

Interviewee: “Trying tobalance. Some of ourinitiatives are drivenby the want and theneed to increasedecarbonisation ratherthan financialcalculations”



4 Market &Economy

A stable andprofitablebusinessenvironmentwould encouragefurther capitalinvestment andinnovation in UK.

2 Literaturesources:MPA 2009 statethat: “Growth inthe constructionsector will providea platform forinvestment in newproducts. Withoutconstruction sectorgrowth UK assetswill continue todecline and willplace the UKvulnerable toimports whendemand returns”

Boston ConsultingGroup 2008 foundthat: “Based on theexpected cost ofproduction in theEU assuming thecarbon price ofCO2 versus thecost of producingin non-ETScountries, clinkerand cementproduction in theEU is notcompetitivewithout freeallowancesallocation. As a

3 InterviewsInterviewee: “The bigissue for investment ismoney. 35% reductionin market makesthings difficult”

Interviewee: “A stableand buoyant cementmarket would be thebiggest enabler!Because we arecapital intensive weonly make the profiton the last fewthousand tonnes peryear so if we havehigher consumptionwe’ll have the excesscapital to invest inmore improvements”

Interviewee: “Longterm market stability isa big problem”

Interviewee: “cementconsumption in theUK per capita is thelowest in Europe. Sowe’re not spendingenough onconstruction or we’reusing differentmaterials.”

(4)Workshopparticipantsindicated that astable businessenvironment isvery important.

They indicated thatthere are currentlytoo many marketdistortions,interferences andvested intereststhat undermineprofitability andcould lead tooffshoring ofproduction andcarbon leakage.

One example thatwas noted was theCarbon Price Floorwhich they calledto be scrapped.

Participants notedthat the EUdemands that thesector meetscarbon challenge,but are notappreciating thatthese extra costsmake companies

All companies expressed the viewthat the key enabler to driving moreinvestment in the UK was a strongermarket for cement.

Some companies said that the on-going downturn in the cement marketsince 2007 is preventing them frommaking many long term investmentdecisions in the UK. Demand iscurrently around 35% less than itwas in 2007 and this has led tosignificant consolidation in the sectorover the last few years.

Interviewees recognised that govtalone could not re-energise themarket, but noted that govtstimulation of increased housebuilding would be very beneficial aswould delivering a large scalenational infrastructure plan.



result, the “wisebusinessman” willprefer to relocateproduction to morecompetitivecountries, thisleading toproductionoffshoring. At CO2prices above €35/t(expected for the2013-2020period3) thecurrent proposal ofthe Directive willlead to thecompleteoffshoring of thecement industry.At CO2 price of€25/t4, more than80% of EU clinkerproduction will beat risk of offshoringby 2020: 100% ofthe Italian, Greek,Polish and UKproduction, almost100% of Spanish,~75% of Germanand 65% of theFrench, ~70% ofthe production ofthe smaller EUproducers”

Interviewee: “There isa need for long termgrowth to enable moreinvestment. We needdelivery ofgovernmentinfrastructure pipeline(not just promises).”

uncompetitive.



5 Legislation A stable,consistent andpredictableregulatoryenvironmentwould enablebetter long termplanning andinvestment

2 literaturesources:Boston ConsultingGroup found that(to reduce carbonand remaincompetitivecement companiesrequire):“− A consistentand predictablelegal frameworkwhich allows forlong-terminvestmentplanning andintegrateseconomic,environmental andsocialconsiderationswithin acoordinated andconsistentindustrial policy atEuropean level− Climate changeand energylegislation that ischaracterised by alegal frameworkwhere parametersare fixed long-term, andcontinued securityof supply is

6 InterviewsInterviewee:“Government inducedpolicy risk is one ofthe most significantobstacles toinvestment - Morecertainty onregulations and costsis very important forthe industry so thecompanies can makelong term investmentdecisions”

Interviewee: “Weneed long term policycertainty”

Interviewee: “A bigbarrier is regulatoryrisk and uncertainty –at both UK and EUlevel (especially at EUlevel) and the degreeof interference intoemissions markets isa big problem. Phase3 was only a fewmonths old before thewhole debate onbackloading beganand now we’reworking on Phase 4.Our timetables are

(4)Workshopparticipants saidthat the sectorrequires very longterm planning andtherefore a morepredictableregulatoryenvironment wouldassist investmentdecision-making.

The sector isalready looking at2020-2050 viewand participantsfeel that govtpolicy does notcurrently meet thesector’s need toensure regulatorycertainty that farinto the future.

Participantsexpressed theview that govt. stilloperates on amore short-termbasis that hampersthe ability of thecement companiesto plan effectivelybeyond 2020.

A consistent finding across allinformation sources is that policycertainty is extremely important tothe UK cement industry.

Interviewees and workshopparticipants were of the view thatconstantly changing UK and EUregulations on energy and carbonare having a negative impact on theirability to forecast, plan and investappropriately as policy uncertaintiesare leading directly to commercialuncertainties.

Consequently the EU - and UK inparticular - are seen as investmentrisks by global cement companiesand this in compounded by the flatgrowth currently seen in the market.This is making internal competitionfor capital more difficult for UKcement companies who arecompeting with plants in countriesaround the world.

Policy certainty to 2030 and beyondis something all companies in thesector would like to see as theindustry has very long investmentcycles.



guaranteed withcompetitive energyprices, in a unifiedEuropean market;− Strongercoordination ofnational socialpolicies andincorporation ofsocial andeconomicfeasibilityconsiderations inone industrialpolicy for Europein order to allowcompanies toproceed with long-term and structuralinvestmentdecisions.− The high level ofregulatoryuncertainty inEuropediscouragescompanies frommaking theinvestmentsrequired in order toimprove theefficiency ofcement plants andthe lack of anappropriate legalframework deters

much longer thanthese phases soconstant interferenceresults in much morecost for us toaddress.”

Interviewee: “Thecross sectorialreduction factor – Acap across sectors.We didn’t see thiscoming and it wasdone at a time whenalready well intophase. We’d alreadysold cement andcouldn’t go back andask for extra moneyfor those emissions!When you work inglobal company ittotally underminesyour position.”

Interviewee: “Thecarbon price needs tobe forecast to beconsidered in projectfeasibility studies. Theprice doubled in priceover last year.Actually in line withDECC’s prediction,but they’re not alwaysright. Price volatility



companies fromadopting structuraladjustments”

Centre for LowCarbon Futures2011 found that:“Long term clarityis seen as vital tounderpin high cost,long termtechnologyinvestment.”

often related to EUpolicy. There’sbackloading issue totry and push carbonprice up to 15europrice per tonne whichpeople want. What weneed is certainty. Lotsof EU ETSdiscussions right nowto 2020, but we needto certainty to 2030-2050 if possible. By2020 there’ll need tobe a globalagreement. Forexample, theychanged allowancesafter most recentphase of EU ETSbegan.”

Interviewee: “Thepower sector seemsto be able toscaremonger and getdecisions made intheir favour. Govtintervention tends todestabilise us ratherthan help and createsinadvertentdisruptions in themarket. It’s very hardfor us as businesspeople that we can



ever trust that a govtpolicy will remain inplace – need longterm regulatorycertainty to enablebetter long termbusiness decisions.”

Interviewee: “Wewould like legislativecertainty. Will bringmore financialcertainty.”

Interviewee: “We wanta stable, long termpolicy environmentwhich does notundermine thecompetitiveness of UKmanufacturing.”

6 Legislation Level playingfield - Reform ofUK climatechange / energyregulations, taxesand incentives -Reform required toallow UK-basedcement producersto be more costcompetitive

3 literaturesources:Boston ConsultingGroup 2008 foundthat: “Compared tothe EU as a whole,UK clinkerproduction isexposed to ahigher risk ofoffshoring for threemain reasons: aless competitiveproduction cost, ahigher expected

5 interviewsInterviewee: “Talkinggenerally a lot of theissues are driven byregulation (climatechange agreement,decarbonisationcommitment, EU ETS)– a huge part ofdecision making isdriven by regulation.Then the other hugepart of it is driven bybusiness needs andoperational efficiency.

(4)RO: Participantsnoted theRenewablesObligation has ledto cementcompaniescompeting witheach other andother sectors forscare biomass-containing fuels.

FiT CfD: Anequivalent of FiT

Across all information sources it wasfound that the UK cement sector hasdisproportionate costs placed upon itcompared with EU and globalcompetitors due to unilateral climatechange policies in place in the UK.

All companies expressed a desire fora more level playing field to improvetheir competitiveness againstinternational producers andcompeting sectors in the UK thatattract more Government support.Some companies wish existingpolicies such as Carbon Price Floor



carbon price andthe geographicconfiguration ofthe country itself.”

And (in separateBCG report) that:“An even playfieldin compliance withregulatoryrequirements toguarantee that allcompeting playersare subject to thesame impositionsacross the(European) region”

CIVITAS 2012found that: “UKregulations onlyadd to alreadyconsiderable costscreated by EUlegislation. As aconsequence,government policyis likely to beenvironmentallyand economicallyself-defeating byencouragingmobile companiesto relocate to lesscarbon-constrained

The one thatoverrides everythingis maintainingcompetitiveness – welook at these bigstrategic decisionsbased on complyingwith regulation andmaintainingcompetitiveness.”

Interviewee: “Weneed better supportfor our industry – weneed it to be cheaperto invest than to betaxed. If the flip overis so expensive thenultimately it’ll drive usout of business in theUK. Too many sticks,not enough carrots.”

Interviewee: “Weshould have a levelfield play. Very hard toget permits forexample. Could offerstreamlinedprocedures.”

Interviewee: “Weneed competitivenessfor the cementindustry. Needsupport for indirect

CfD’s is needed tocompensate thecement sectormore.

CPF: Participantscalled for theCarbon Price Floorto be scrapped.

RHI: Participantsalso called foraccess to theRenewable HeatIncentive to avoidbiomass diversionaway from thesector and reformto the RHI. Theyalso suggestedreform to the‘closed loop’policies whichfavour recyclingrather thanburning of wastessuch as tyreswhich, whenapplied in thecement sector,involves therecycling of themetal and mineralcontent;participantsconsidered that

to be scrapped altogether and othersto be altered to exclude/exempt thecement industry as appropriate or tolimit the cost burden placed uponthem.

UK cement companies said that theentire UK clinker production sectorindustry is currently at risk of off-shoring as imports from somecountries are already competitive onprice. The likely substantial increasesin electricity prices over the next fewyears are expected to exacerbate thesituation further.



developingeconomies. Thisproblem is knownas ‘carbonleakage’ andparadoxicallyresults from theambition of thegovernment’sdecarbonisationstrategy.”

impacts.”Interviewee: “We arecommitted to WBCSDCSI guidance andcommitments, butthere is littlemotivation in somecountries toparticipate. We’resome way off have aglobal GHGagreement.”

Interviewee: “Thereare many differenceswith UK. The CarbonPrice Floor wasintroduced unilaterallyas a tax. Affects UK,but not EU. Wasteregulations are alsothreatening to takeaway streams ofwaste we can use formaking cement; thiscould mean revertingback to fossil fuels.”

the recyclingaspect ofcoprocessing isnot recognised.can lead tounintendednegativeconsequences interms ofdecarbonisations.Moreover,incinerators thatburn the sametype of waste areexcluded from theEU ETS andtherefore their CO2emissions are notaccounted for, atleast in the sameway that the sameCO2 would beaccounted in thecement industry

7 Market &economy

Betterrecognition ofwhole-lifeimpacts ofcement/concreteas a buildingmaterial – i.e.regulatorypromotion of

2 Literaturesources:CEMBUREA 2009found that: “Somenational designcodes andstandards placeundue emphasison minimising

5 InterviewsInterviewee: “There isa drive to reducecarbon which is notjust based oncompliance costs –it’s also to do withoverall companysustainability strategy

(3)Workshopparticipantsindicated thatthere is too muchfocus on thecarbon generatedin producingcement (and

All information sources indicated thatcement (concrete) has usefulqualities that are not currently fullyrecognised. In particular the thermalmass properties of concrete as abuilding material and the re-carbonisation of a significantproportion of carbon during thelifetime and recycling of concrete –



thermal propertiesof concrete inbuildings to reducebuilding energyuse during lifetime.

embodied impactsand energy use ofproducts, whilstlittle or no attentionis paid to thewhole-lifeperformance ofbuildings. Thebenefits ofheavyweightmaterials used inconstruction worksshould berecognised inexisting and futurelegislation, such asthe EnergyPerformance ofBuildings Directive(EPBD). Inaddition, nationalcompliance toolsfor assessing bothenergyconsumption andsustainableperformance ofbuildings need tobe amended totake due accountof thermal massand climatechange.”

And that:“Concrete can

including enhancingour productattractiveness toclients – Getting moreand more requests forit from govt and otherclients. UK definitelyhas much higherdemand for low-carbon buildingmaterials – this is adriver from the govtwho want to lead onclimate change.”

Interviewee: “Weexplain carbon profileof product to ourcustomers if they wantto understandimpacts. In future theindustry could includefull life cycle benefits(of concrete) and sellbenefits to clients”

Interviewee: “We alsoneed to look more atthe impact in buildingsand where weimprove their carbonperformance overlifetime”

Interviewee: “cementis essential for carbon

concrete) and verylittle recognition ofthe thermalproperties ofconcrete whichcan lead to highlysignificant energyuse reductions bybuildings that aresuitably designedwith suchproperties in mind.

Participantsexpressed a desirefor govt to look atthe whole life cycleof cement in termsof use in concretebuildings as wellas recycling andthe naturalrecarbonisationthat takes placewhen concrete isbroken down.

Participants saidthat suitableencouragement ofthe use ofconcrete in newbuildings throughgovt policy andstandards couldpotentially be a

this re-carbonisation can be up to30% of the total carbon emitted toproduce the cement.

Interviewees stated that they wouldlike to see more governmentrecognition of such properties andappropriate measures to encourageuse of concrete to lower emissionsfrom buildings through their lifetime.It was proposed that this could beachieved by modifying orimplementing appropriate buildingstandards and certifications in theUK.



achieve significantenergy efficiencywhen used inconstruction.Concrete canbuffer a largeproportion of heatgains in buildings.The high thermalmass of concretedecreases heatingfuel consumptionby 2-15%compared toequivalentlightweightconstructions; thishas been provenin research acrossthe range ofclimates found inEurope”

And that: “Duringthe life of aconcrete structure(such as a buildingor a road) thehydrated cementcontained withinthe concretereacts with theCO2 in the air.This process iscalled concretecarbonation. As

savings down the linein terms of its use, notjust manufacture.”

Interviewee: “you cansay that clientdemands are asignificant driver onthe cementcompanies. Althoughit is still not themajority of clients thatdemand such highdata and certificationstandards for thecement, the cleartrend is we’re headingmore and more in thisdirection”

Interviewee: “Govt isthe biggest buyer, soif it wants to increasesustainability in thesupply chain it easilycan. Could usecertifications andupdate buildingstandards. It’s all instandards andcertifications.”

Interviewee: “Full lifecost of housing /embodied carbon –

very large enablerto reducing UKcarbon overall(from wastedbuilding energy)and improving UKdemand forcement whichwould lead togreater ability tomake furtherinvestments in UKcement plants.



part of the CO2emitted during thecement productionis reabsorbed bythe cementthroughcarbonation, thisreaction is alsoreferred to ascementrecarbonation. Thecarbonation effectis enhanced whenconcrete iscrushed andrecycled.”

Nordic InnovationCentre 2005 foundthat: “Thecalculations showthat upto 30% of the totalCO2 emissionfrom cementproduction, or upto 57%of the CO2emission from theso-calledcalcinationprocess in cementmanufacturing, isre-absorbed whenthe cement isutilized in concrete

not wellacknowledged orsupported. Timberframe is favouredwhen building sectoris doing better as it isnow as it is quicker touse and capacity iseasier to ramp up fora builder. But aconcrete house laststwice as long as atimber frame houseand the thermal massand efficiency aremuch better and thereis the reabsorption ofcarbon into concreteand recyclability.Depending on whoyou speak to concreteis better; timberpeople will say timberis better. If govt werelooking at moreincentives incement/concrete thatwould be useful.”

Interviewee: “We arecommitted tosustainable builtenvironment anddisappointed to seegovt drop thesustainable homes



construction in theNordic countries.”

code. 10% of carbonin home comes frombuilding materials,90% from energyconsumption duringlifetime. We’reconcerned that if webuild less sustainablehomes now we’ll belocked into them for100+ years. Betterregulation has a bigrole to play.”

8 Technology Funding for thedevelopment andsuccessfuldeployment ofCCS (or CarbonCapture and Use)would enable thesector tosignificantlyreduce sectoremissions

3 Literaturesources:DECC 2013 foundthat: “IndustrialCCS could be akey technology forthedecarbonisation ofindustry sector,potentially allowingenergy intensiveindustries tocontinue usingfossil fuels whilesignificantlyreducingemissions. ESMEmodellingsuggests that asignificantcomponent oflong-termindustrial

6 InterviewsInterviewee: “We haveseen quite a fewDECC commissionedreports on viability ofCCS in industry, buthaven’t seen similarlevel of commitmentto actually fundingCCS plants”

Interviewee: “We can’tdecarbonise aswithout CCS as 60%is process emissions– so when targets areset for reductionsfundamentally thescale of the challengeis bigger as we haveto try and eradicatethe other 40%somehow.”

(4)Workshopparticipantsindicated that CCSwill be required tomeet long termdecarbonisationtargets as processemissions makeup such asignificantproportion ofcement’semissions profile.

Participantsquestioned whensuch R&D will befunded in the UKand by whom.They indicated thatthey would be veryinterested in CCS

A clear finding from the informationsources was that CCS will berequired if cement plants are to reachthe target of an 80% reduction incarbon by 2050. This is because thecalcination process in heatinglimestone is an unavoidable sourceof the sector’s carbon emissions. Theonly way to eliminate the emissionsfrom calcination is to use CCS or tocreate completely new types ofcement, but the latter approach hasits own barriers obstructing it (SeeBarrier 3)

All companies in the UK said thatthey could not afford the capital or bewilling to take the risk on scaling-upresearch or piloting such anuncertain and expensive technologywithout government and/or cross-sector support. Even if CCS doesbecome technically viable in future



abatementpotential lies inCCS technology.Industries whichemit carbon fromtheirmanufacturingprocess itself (forexample CO2emitted as aconsequence ofchemical reactions[e.g. cement]) arelikely to need toimplement CCS todecarbonise.Industries whichare most likely tobe suitable forCCS are iron andsteel, cement, oilrefining andchemicals. 29Industrial facilitieswhich are locatedclose to otherindustries or powerstations andstorage sites aremore likely to beable to implementCCS if they canshare transportand storageinfrastructure.cement: Post-

Interviewee: “Ourquestion to the govtwould be can yousupport our industryfor the next ten yearsto get new tech suchas CCS invested in?Green grants etc. tokeep us competitiveand help withstakeholders in localplanning issues.Planning is a majorissue for us and thebuilding trade as well.We’ve been observingCCS developmentshowever if we built aplant within next 10years then it’ll still betoo soon for CCS. Sothis uncertainty overnew tech and whetherour plant will beobsolete straight awayis a barrier to makinga new one. You’dnever recover thedelta.”

Interviewee: “CCS willhave to beimplemented tosignificantly reducemuch of our sector

if they had thefunds to invest init, but it is notcommerciallyviable andparticularly for firstmovers.

there are significant concerns overcapital and running costs as currentestimates are that a new plant withCCS installed would costapproximately double the cost of aplant without CCS and this couldmake cement produced at CCS-equipped plants fundamentallyuncompetitive with traditional plants.

However, enthusiasm for researchingand ultimately deploying CCS wasfound from the majority of workshopparticipants.

Most interviewees considered itunlikely that any CCS could bedeployed prior to 2025. Someinterviewees consider CarbonCapture and Use to be of morepromise as CCS would requireextensive transportation of carbonacross the UK to storage sites.

The point that without CCS,decarbonisation efforts could onlyreally focus on the 40% non-processemissions shows that CCS isessential for deep decarbonisation.



combustioncapture technologyusing amines isconsidered mostsuitable for currentcement productionmethods althoughresearch intoOxyfuel methodsis also under way.”

EIAGHG 2013found that: “CCSwill be required ifcementmanufacturers areto meet overalldecarbonisationtargets asefficiency savingshave limitations.Most cementcompanies feelCCS is relevant tothem, but only athird are willing tocontribute to a pilotproject due to highcosts”

CEMBUREA foundthat: “Carboncapture andstorage is currentlybeing researchedby the cement

emissions.”

Interviewee: “A keyenabler todecarbonisation ismore R&D intodecarbonisationopportunities such ascarbon capture anduse in the cementsector.”

Interviewee: “UKcement industry is notbig enough to fundCCS research.Enabler would besupport for pilotstudies such as thosein Europe. Don’t wantUK to fall behind incarbon capture. Wewant more researchgrants available and aproper strategy tomake it costs effectivefor sector.”



industry. Althoughnot proven on anindustrial scale,research oncarbon capture(post combustionand oxyfueltechnologies) isbeing undertakenby the Europeancement ResearchAcademy (ECRA)to identify thepossibilities it hasto offer.”



9 Management& organisation

Agreed andachievable,sector-widetargets andcarbon-reductionroadmaps assistsector in reducingemissions incoordinatedmanner

1 Literaturesource:MPA 2009 foundthat: “Considerableearly action by theUK Portlandcement industryhas decoupledeconomic growthfromenvironmentalimpact and theindustry hasreduced absoluteCO2 emissions by55 per centbetween 1990 and2011 (27 per centreduction pertonne of output),outstripping theUK economy as awhole.

MPA cementlaunched its firstCarbon Strategy in2005. The shortterm period ofaction in theoriginal strategyended in 2010.Since then therehas been aconsiderable effortby policy makers,

3 InterviewsInterviewee: “Thecement sector maybethe only sector tohave fully roadmapped not just themanufacture of ourproduct, but also howthe product then playsa significant role in thevalue chain of carbonemissions in concreteand buildings, etc.”

Interviewee: “cementindustry is veryforward thinking onsustainability andhave road mappedwell ahead of othersectors, but areconstrained by costsand market/policyuncertainties”

Interviewee: “As anindustry we have ourroadmap. Innovationis crucial. All thecompetition arelooking at lowerenergy cement, butthere are a lot ofchallenges and it willtake time to spreadthis around.”

(3)Workshopparticipants notedthat carbon-reductionroadmaps andtargets are alreadyin place (MPAroadmap).

All are publishedand available, butperhaps govt. isless awarebecause officialschange regularly.

Participantsindicated that theyfelt the marketplace is well awareof cement sectorroadmaps as thecement companiesare very effectiveat communicatingthese toconstructionsector.

The UK cement sector already hasemissions-reduction roadmaps inplace that have been created by theMPA in collaboration with UKcompanies.

The MPA’s roadmap presents twoscenarios that they think areachievable. The first scenario doesnot include CCS and forecasts amaximum emissions reduction of62% by 2050 (compared with 1990levels). The second forecasts apossible reduction of 81% if CCS issuccessfully deployed.

Many participants noted that they feltgovernment were simply notparticularly aware this road mappingwork had already been completedand agreed to by the sectorcompanies.



NGO’s andindustry groups tomap the necessaryreductions inemissions toaddress thescientificimperative tominimizeanthropogenicinduced climatechange. There hasalso beenconsiderableresearch into lowcarbon pathwaysand carbon footprinting.”

10 Innovation Governmentfunding and/orinvestmentsupport fordecarbonisationR&D activitiesand Capex costs.

4 Literaturesource:Boston ConsultingGroup state that:“The rightregulatoryincentives to drivegrowth (includes)− Focus EuropeanR&D&I funds ontargeted keypriorities, such asenergy andresourceefficiency, andalign national andEU fundingprogrammes;

3 InterviewsInterviewee:“Financing of projectsis the key – if longpayback there may besome need for somesort of externalsupport such as GIB.Interest rates need tobe more favourable toinvest in manyprojects.”

Interviewee: “Lowcarbon cements arebeing developed bysome of thecompanies globally,

(3)Workshopparticipants saidthat UK cementcompanies arecontinuallyinvesting inoperationalimprovementsusing their ownfunding.

However, theynoted thatadditionalavailability ofcapital would behelpful depending

It was found d from all informationsources that as the cement sector isvery competitive on price and the UKmarket is still experiencing sluggishgrowth, there is less capital availableto invest in the UK and/or investingthe capital in the UK is more riskyand less attractive than investing it inother countries.

The cost of borrowing for cementcompanies in the UK is oftenprohibitively high when comparedwith the potential ROI or the paybacktimes many innovations would entail.

There has been some hope that theGreen Investment Bank would



− Reform state aidlegislation in orderto allow publicseed money forbringing existingtechnologies tomarket and bridgethe gap forinvestment wherereturn oninvestment iscurrently too lowacross theindustry.”

MPA 2009 statethat: “TheEuropean industryis undertakingpractical researchand collaboratingwith equipmentsuppliers to findthe best capturemethods forcement but if theUK wants to be aleader then UKGovernmentfinancial support isnecessary for theUK cementindustry. Withoutthis support theUK cementindustry will miss

but the research is nothappening in the UKitself”

Interviewee: “There issome R&D going onin the sector atuniversities such asSheffield, Birminghamand Imperial.However, UK R&Dtends towards cementtypes and formulasrather than plant andequipment relatedresearch which tendsto be done abroad.Some of the newcement/concreteformulas are based onlower carbonoutcomes”

Interviewee: “Withsome funding forR&D, academicbodies tend to bemuch better than thecement companies atclaiming this funding.However the fundingwould be very usefulfor the industry, but itall happens so quicklywith so little visibilitythat the companies

on the level andtype of funding.

provide an avenue for capital forlonger term projects, but the interestrates are also not suitable to becommercially viable. Some otherform of government-led investmentsupport could prove useful to theindustry.

However, all the companiesinterviewed said that whilegenerating capital or gainingapproval for it is difficult they are stillinvesting in many incrementalefficiency improvements every yearas part of BAU.



its most ambitiousscenario of an 81per cent emissionreduction by2050.”

Centre for LowCarbon Futures2011 found that:“Some industryrespondentscommented on thedifficulty ofaccessinggovernmentsupport to promoteindustry R&D (inUK).”

EIAGHG 2013found that: “Mostcement companiesfeel CCS isrelevant to them,but only a third arewilling tocontribute to a pilotproject due to highcosts”

miss the opportunityto take some of thismoney. This moneyfor R&D might bemuch better spent bythe operators ratherthan academic andresearch bodies.”

Interviewee: “A coupleof companies havespoken with GIB, butthe rates are mainlymarket rates so notparticularly cheap wayto borrow”

Interviewee: “Wasteheat recovery issomething we’vewanted to do for along time, but evenwith high electricitycosts we can’t getpayback down under6-7 years so we can’tget that one to goahead. Would needsome kind of externalincentive such as agrant from the govt.Electricity supply ispretty problematic sothis would be a goodcandidate to addadditional energy



supply. Doesn’tappear to be anythingout there fromgovernment tosupport this. Couldpossibly work outagreements withequipment suppliersand payback throughelectricity but not sureit’ll work.”

11 Innovation Projects withadditional sidebenefits inaddition todecarbonisation

--- 1 Interview:Interviewee: “Thereare some projects thatif they are just basedon energy then theyare hard to justify, butsome of them we canpoint to ways theyimprove the quality ofthe product orenhance throughput –i.e. looking at widercontext to furtherjustify the cost”

(2)Workshopparticipantsindicated thatprojects that hadadditional benefits– beyond energyand carbonsavings – wouldget moremanagement buy-in, but most ideashave already beenimplemented.

While workshop participantsrecognised this as an enabler, theyexpressed the view that this is simplyBAU for them and that they areconstantly seeking to maximise co-benefits from various projects thatthey invest in.



Barriers

# Category Barriers Literature review Interviews Workshops Analysis1 Financial Requireme

nt forshortpaybackperiodsand/orhigh ratesof returnon energyefficiencyprojects

1 Literature source:Boston Consulting Group2011 found that: “the cementsector is not obtainingreasonable returns, asaverage return on capital overthe last four years has beenbetween 3 – 5 percent belowthe cost of capital. This lackof returns has been, in part,due to exogenous factors andimposed liabilities. In order tomeet environmentallegislation in Europe,operations face majorinvestments and operatingcosts. In addition, capitalrequirements are one to twotimes higher compared toother regions (with theexception of the US) and thecost of electricity is alsohigher due to CO2 costs andfeed-in tariffs”

4 InterviewsInterviewee: “The project engineerswill work up cost of a project – thatdetermines the cost of capital – thebenefits in terms of fuel, cost,carbon period laid out against cost.If payback period is not acceptablethen it will be rejected unless it’s astrategic project which can beshared around company. If a projectis just plant based then paybackperiod needs to be within 1-5 years.If strategic then there is more roomfor negotiation.”

Interviewee: “We’ve rejected severalideas for upgrades – some of whichwould have cost millions of pounds –as the payback period and ROI werepoor compared with other plantinvestments and we couldn’t justifythe costs”

Interviewee: “If a project had areturn of a year then it would beinstantly signed off”

Interviewee: “Payback periods areanother industry barrier. Companiesneed to be able to pay backinvestments in 2-3 years rather thanthe 10+ years the government oftenwants companies to invest. A couple

(3)Workshop participantsindicated that energy is nottreated differently to otherareas of business whenconsidering ROI and makinginvestment decisions.Therefore capex funds areoften tied up in other areasthat offer a better return. Anacceptable payback was moreimportant than capital costsand companies are willing tofund expensive projects if thepayback period is acceptable.

Some participants indicatedthat most of the ‘low hangingfruit’ energy efficiency projectshave already beenimplemented and some of thepossible future innovations areexpensive and do not offer anacceptable return oninvestment either inenergy/cost savings orreducing carbon.

It was also noted that becauseUK cement companies arecarbon/energy efficiencyleaders this means that globalcement companies could

In this energy intensiveindustry nearly all of theeasy energy efficiency anddecarbonisation measureshave been adopted. Thismeans that the remainingopportunities tend to beharder and with morechallenging investmentprofiles. Payback periodsfor advanced technologieswere seen as the mostimportant barrier acrossthe information sources.Some projects are deemedto be prohibitivelyexpensive without offeringsignificant energy andcarbon savings. It shouldalso be noted that for thecement sector the averagereturn on capital over thelast four years has beenbetween 3 – 5% below thecost of capital; this is animportant aspect regardingavailability of capital.

Many of the optionsdiscussed in the interviewsand workshop such aswaste heat recovery hadpaybacks of over 7 years



of companies have spoken with GIB,but the rates are mainly market ratesso not particularly cheap way toborrow”

Interviewee: “Unfortunately we don’thave a mandate to just invest inthings we want to – it’s got to makeeconomic sense”

Interviewee: “The return of capitalwould need to be more that the costof capital. Typically need to be ableto generate capital.”

achieve better carbon/energyreductions and returns oninvestment by investing inplants in other countriesinstead of the UK.

or were not suitable forsites. The interviewsrevealed that decisionmaking criteria usuallyincluded payback of 3years or less or in someinstances even 1 year orless. The maximumpayback reported was 5years for standardprojects, but most insistedon 3 years as a typicalmaximum for projects to begreen lit.

However, some companiesindicated that theysometimes got the goahead for projects withhigh payback periods (5-7years) if they were deemedto be strategic i.e. theproject had potential to besubsequently rolled out atother plants and/or hadadditional benefits beyondenergy and carbonsavings.

Workshop participantshighlighted that there maybe an opportunity for crosssector sharing to financelarge demonstrationprojects to overcomepayback or to utilise third



party financing.

2 Financial Lack ofaccess toandcompetition forcapital –internalcompetitionfor fundsfromcementplantsoutside UK.

--- 6 InterviewsInterviewee: “There is capexcompetition with plants elsewherearound the world – projects andplants compete on cost savings,carbon savings and marketopportunities.”

Interviewee: “Internal competition forcapex is big barrier”

Interviewee: “There is also a lot ofinternal benchmarking withincompanies by different plants indifferent countries. They arecompeting with each other forinvestment. The recession hasaffected many companies in sector,not just in UK. Financial investmenthas declined across the world sointernal competition for capitalinvestment is very strong.”

Interviewee: “Return on investmentis critical (and the assessmentincludes carbon price)”

Interviewee: “We are competing forcapital within an internationalbusiness. This is a barrier for us.”

Interviewee: “As part of globalcompany competing for capex thecases can be difficult to make –

(4)Workshop participantsindicated that competition forcapital can be separated outfrom lack of capital in somecases.

Plants in other countries oftenoffer a better return oninvestment (partly because oflower carbon priceselsewhere).

Global agreements are neededon carbon prices, but this isdifficult to resolve. For the timebeing companies must assumesuch agreements will not bemade in short term future.

Some participants indicated inthe UK there is a need forsomeone/body to bridge thegap between cementcompanies that want additionalcapital for energy efficiencyand funding organisations thatcould provide such capital.

Multi-national companieshighlighted that it is difficultto obtain funds for UKenergy efficiency projects,when there may be moreprofitable investmentsmore closely aligned to thecore business in otherplant locations outside theUK.

Interviews highlighted thatR&D funding has becomemore limited in size andnumber, or R&D fundingavailable is not earmarkedfor process efficiencyinnovations.

The workshop andinterviews indicated that insome instances there is nocapital available, and inothers, the capital is limiteddue to governancestructure of the companyor expenditure limited to apercentage of turnover.

The cost justification ofenergy efficiency projectsover other projects wasseen as an additionalinternal decision making



regulatory regime, high andincreasing electricity costs, EU ETS,CPF, etc.”

barrier.

3 Market Riskaversion –companiesare wary ofbeinglocked into the‘wrong’investmentchoices (inpart due tohightechnologycosts, longinvestmentcycles andconcernsoverproductqualityimpact)

1 Literature source:DECC 2013 notes thatcement sector suffers fromrisk-averse thinking - wary ofrisks to product quality orbeing locked in to ‘wrong’investment choice.

3 InterviewsInterviewee: “ Risk aversion – due topoor economic conditions we’ve hadideas we could do work on, butconcern over payback period andtechnical hiccups/delays related toquality of supply, etc. has putindustry off quicker investments”

Interviewee: “Unfortunately to datenew formulas have often had qualityissues compared to traditionalPortland cement. Durability is veryimportant and it could take decadesof testing for these products to provetheir longevity of strength comparedto Portland cement. When you buildskyscrapers and infrastructure youare spending billions of dollars andyou need to know it will last!”

Interviewee: “We’ve got a robustchange procedure, but have to becareful with any projects that couldinterfere with product quality andproduction levels.”

Interviewee: “A barrier is that weneed to ensure product quality andtechnical performance whilst usingmultiple fuel types.”

(4)Workshop participantsindicated that there arepotentially seriousconsequential financial andreputational risks involvedrelating to product quality.

The long life time of cementmeans that it must be durablefor many decades and thisalso means that testing newmaterials and formulationstakes a long time.

To overcome this barrier wouldrequire investment in newmaterials that can demonstratethe process and safety. Theconservatism of structuralengineers was also noted as abarrier.

Product quality is aparticularly importantconcern for the cementsector as concretestructures are expected tomaintain their strength andstructural integrity for along period of time.

It was also found thatconstruction specifies suchas architects andengineers are typicallyrisk-averse due to safetyand financial concerns.

Therefore finding radicalnew replacements fortraditional cementformulations such asPortland cement isproblematic. Any newcement products need tobe thoroughly tested andthis is especially the casefor any new concept thatsignificantly deviates fromtraditional materials.Therefore any promisingnew ‘low-carbon’ cementswould require many yearsof durability testing beforethey would be approved by



certification bodies orconsidered by customers.

While work is on-going tolower the carbon emittedfrom production of Portlandcement, these are oftenincremental changes to theformulas used and not thestep change required toeliminate significant carbonfrom the process ofcreating cement by usingcompletely novel materials.To date, new conceptssuch as Novacem cementhave not been deemedsuccessful or areunsuitable for the UK.

4 Legislation

Increasingcompetition for ofdiversionofalternativefuels andbiomasses.Specifically,theRenewableHeatIncentiveincreases

2 Literature sources:DECC 2013 found: “Refusederived fuels (RDF) can bederived from processinghousehold, commercial andindustrial wastes. Nearly 40%of the UK cement industry’sthermal energy demand issupplied using RDF. RDF hasapproximately 50% biogenicenergy content, therefore50% of the energy from RDFis considered to berenewable. The cementindustry also burns tyres as afuel, part of which is naturalrubber which is considered to

7 InterviewsInterviewee: “RHI is a problem – 10years ago we were the onlycompany who bought somealternative fuels and now we can’tafford them compared to othercompanies. It was previously almostzero cost and now similar price tocoal. If you look at small scalebiomass then RHI takes it all awayfrom us as we can’t get theincentive,

Interviewee: “Security of supply is aworry – we need to know we can geta long term supply when investing innew alt fuel equipment. One key

(4)Workshop participantsindicated that the sector hasbeen a pioneer in the use ofbiomass alternative fuels andhave demonstrated theirviability as a fuel source aswell as breaking down permitbarriers with the EnvironmentAgency in recent years.

It was noted that the RHI isapplied to other users, but notthe cement sector. However,no specific reason has beengiven for this decision andmany participants felt that their

A consistent finding fromall information sources wasthat the Renewable HeatIncentive and otherrenewable policies arehampering the cementindustry’s ability to sourcebiomass-containingalternative fuels and theseare being divertedelsewhere. The RHIrewards certain sectorsand households forburning biomass, but thecement sector does notcurrently qualify for theincentive and therefore



biomasscosts forcementsector as itis noteligible.

be renewable.”

MPA 2009 states:“Government policiescurrently inhibit themaximized use of AlternativeWaste Derived Fuel incement manufacture whichresults in a continued relianceupon fossil fuels. Otherpolicies allow AlternativeWaste Derived Fuel to beincinerated without a chargebeing placed on the resultingGHG emissions which meansthere is uneven treatment ofthe combustion of the samefuels in different applications• Current Government policiesto enhance the use ofrenewable heat are poorlyfocused and incentivise theuse of biomass for someactivities but not others,potentially creating a shift inbiomass use from one sectorto another without an overallenvironmental benefit. Thecurrent Renewable HeatIncentive creates an incentiveto move biomass use fromcement kilns to otherpotentially less efficient uses.This is an unwelcomeintervention in the market bya poorly designed policy.

question we now get asked when wedo alt fuel capex is “Do you have acontract in place to get this materialfor the long term?” Need to removedistortions out of the market such asRHI – it is not recognising that it canbe burned anywhere, why shouldone person get advantage?”

Interviewee: “Have been pushinggovt to allow cement sector to haveenergy incentives such as RHI. Govtis offering the incentives to otherindustries, but not cement sector. Sothe cement sector will be priced outof purchasing fuels such as biomassfuels. At the moment we’re notallowed access to the RHI becausewe are a direct firing industry.Basically any sector that usesboilers is offered this incentive byusing biomass boilers where steamcan be measured, but there is nodifference to it being burned fordirect fire in terms of emissionsimpacts”

Interviewee: “The RHI is notcurrently fair on our sector. Othersectors attract the incentive whereaswe do not because we were alreadydoing it. Power sector can get theincentive just by being late to partyand they are high profile.”

Interviewee: “The RHI needs to be

use of alternative fuels wasless carbon-intensive thanother sectors and householdsthat are eligible for the RHI.

Participants expressed thedesire for more stability andcertainty on RHI and for it tobe reformed to allow cementcompanies to become eligible.i.e. DECC to recognise direct-firing in the RHI.

they can no longer matchthe price some other usersare willing to pay for somebiomass fuels.

The industry argues thatas pioneers in the use ofalternative fuels this isfrustrating, but moreimportantly that there is nonet carbon benefit toburning biomass in theirsector or in another sector.

Several intervieweesargued that there were tworeasons that the cementsector may in fact hold anadvantage over otherusers of biomass andtherefore the industrydeserves to qualify for theRHI:

1. Some other users ofbiomass are quite smalland geographically diverse- this is particularly true ofhouseholds. The cementindustry argues that theirmore centralised use ofbiomass is more energyand CO2 efficient.

2. The cement sector isable to make use of the



• In 2011 almost 17% of fuelwas from biomass fuel andbiomass fractions. It isassumed that 40 per cent offuel use will comprise ofbiomass by 2050. This is anambitious assumption for thesame reasons as outlinedabove for AWDF but is alsolikely to be principallyinfluenced by the pressure onthe power generators andothers to fuel switch.”

reformed to offer us same incentiveas we’re doing same thing as othersectors, just not being rewarded”

Interviewee: “RHI is having asignificant impact on biomassavailability”

Interviewee: “We’d like policieswhich support use of biomass incement.”

ashes created fromburning alternative fuels byincorporating them intotheir cement productwithout creating waste.

There were no informationsources that presented anyjustifications as to why thecement sector does notqualify for RHI while othersectors do.

5 Organisation

Shortageofqualifiedengineersandspecialistskills andknowledge

1 Literature source:DECC 2013 notes thatcement sector suffers from aShortage of qualified staff(esp. heat engineers) andaging of workforce.

3 InterviewsInterviewee: “We have concernsabout UK skills available.”

Interviewee: “We struggle to attracttop graduate talent compared withmore glamorous sectors such astech. There are concerns about aknowledge gap occurring whenmore people retire from sector.”

Interviewee: “We need specialisedtechnical resources/skills. cementplant operators are highly skilled. If akiln is down for a day this can cost£100k. More complex tech needsgreater skill. The reduction inmanufacturing in UK makes itdifficult to find graduates wanting tocome into sector. Smaller pool torecruit from. How can govt help? We

(3)Workshop participantsindicated that it is difficult toattract top talent to the cementsector. They also noted that ittakes time to suitably trainindividuals.

The evidence sources forthis barrier were slightlymixed in terms of theimportance placed uponthis barrier.

Two interviewees and theliterature reviewedindicated a shortage inskilled workers, but theworkshop findings werenot quite so strong. Someparticipants argued thatthey did currently havesufficiently skilled workers,but that the longer termoutlook was not sopromising as the sectorhas a less attractive imagethan other sectors whichmakes graduate



need an environment where heavyindustry can flourish and makeyoungsters want to study and joinsector. cement perception is notpositive, but reality is its very cleanand technical work. Visitors arealways surprised by the level of skillrequired to make cement! We needto promote positive side of industry.”

Interviewee: “sector is rurally-based.We generally attract localyouth/students with well-paidapprenticeship. When we go look forspecialists such as environmentalexperts it can take a long time toattract the right person though.”

recruitment more difficult.

Some participants notedthat they felt thegovernment needs to domore attract young peopleinto heavy industriesincluding cement.

6 Legislation

Un-levelGLOBALplayingfield withoverseascompetitiondue todifferencesin climatechange andenergypolicies.(Twodistinctlevels –Globalplaying field& EU

3 literature sources:Boston Consulting Group2008 found that:“Based on the expected costof production in the EUassuming the carbon price ofCO2 versus the cost ofproducing in non-ETScountries, clinker and cementproduction in the EU is notcompetitive without freeallowances allocation. As aresult, the “wisebusinessman” will prefer torelocate production to morecompetitive countries, thisleading to productionoffshoring. At CO2 prices

4 interviewsInterviewee: “The carbon price flooris fundamental because it’s chargedto electricity providers and they passthat on to the customers. As cementis electricity intensive this meanshigher costs compared to others inEU and elsewhere. It’s thecumulative impact of energy andcarbon prices that it making usuncompetitive (in the UK)”

Interviewee: “We would likerevisions to Annex 2 of Emissionstrading directive to include cementsector and that – with Phase 4 ofETS – once it’s fixed, then nointerference whatsoever and then

(4)Participants indicated the lackof a level playing field isleading to more investmentbeing made outside the UK/EUby global cement companies.

Carbon leakage is occurringand will likely increase unlessplaying fields is levelled.

Global agreements arerequired to create more levelplaying field, but unlikely inshort term due to vestedinterests.

One suggested action was to

Workshop participants andinterviewees have notedthat EU companies are ata disadvantage with globalproducers, principally dueto the EU ETS as well ashigh production andenergy costs.

Although the industry isimpacted by carbonleakage, during theworkshop it was noted thatcurrently low carbon pricesand the economicrecession have temporarilylimited the impact ofcarbon leakage on the



playingfield)

above €35/t (expected for the2013-2020 period3) thecurrent proposal of theDirective will lead to thecomplete offshoring of thecement industry. At CO2 priceof €25/t4, more than 80% ofEU clinker production will beat risk of offshoring by 2020:100% of the Italian, Greek,Polish and UK production,almost 100% of Spanish,~75% of German and 65% ofthe French, ~70% of theproduction of the smaller EUproducers.

- EU ETS could makeEuropean cementmanufacturers uncompetitivewith global competitors /plants leading to possiblecarbon leakage”

CIVITAS 2012 found that:“the industry incurs carbonprices through various UKand EU regulations. Theindustry trade group, theMineral ProductsAssociations (MPA),estimates that these costs willbe €65m in 2013 alone, orover ten per cent of theindustry’s revenue.”

we can work on phase 5”

Interviewee: “Key issues are at theEuropean level - EU and non-EUcement companies have differentadvantages. How do you maintaincompetitive advantage at the globallevel? As you know in the UK, theindirect prices are higher than inother European (EU ETS ) states, sowe do not have the same level field.cement should be compensated forthe indirect costs in the UK,especially for the carbon price floors.In the UK construction market,cement competes against steel, thenthere’s the second field UK versusEU, and then EU field versusGlobal.”

Interviewee: “There needs to beinvestment certainty. We are part ofa global organization, when we aremaking investment proposals we arecompeting on a global basis. Soreturn on investment and fewer risksare important. All of the cementcompanies in the UK have capacitydeveloped on the global basis. Ifcompanies in the UK cannot becompetitive, operations are going tomove offshore”

implement a global “EmbodiedCarbon” system taking intoaccount of true life cycleemissions of cement fromdifferent markets (inc.transport carbon).Procurement drivers to‘reward’ low embodied carbon.

sector. However,interviewees, and someworkshop participants,indicated that they arebeginning to experiencecarbon leakage and areseeing an increase inimports as a result.

Interviewees wished forreform of the EU ETSsystem to make it fairer fortheir sectors and also toensure long term certaintyover allowances andcarbon prices.

The sector would like tosee global agreements andequalised carbon pricing tolevel the playing field oncarbon, but there isscepticism that this willhappen any time in nearfuture – partly due tovested global interests.



Boston Consulting Group2011 found: “An evenplayfield in compliance withregulatory requirements toguarantee that all competingplayers are subject to thesame impositions across theregion and, at the same time,that European players are notat a disadvantage whenfacing competition fromoutside the region− Challenge unfair subsidyregimes from non EUjurisdictions that have anegative impact on Europe’scompetitiveness and designproper regulatorymechanisms that can securea level playing field in fullcompliance with the WorldTrade Organization rules aslong as no equivalentmeasures apply to industryglobally.”

7 Legislation

Un-levelEU playingfield withoverseascompetitiondue todifferencesin UKclimatechange andenergy

2 literature sources:Boston Consulting Group2008 found that: “Comparedto the EU as a whole, UKclinker production is exposedto a higher risk of offshoringfor three main reasons: a lesscompetitive production cost, ahigher expected carbonprice and the geographicconfiguration of the country

4 InterviewsInterviewee: “cement industry areonly being treated with the stick andno carrot – costs from regulationsare continually rising in UK with littleincentives being offered to dobusiness here. It is a global industry.ICF Cost of climate change policiesshowed that it would cost more to dobusiness in UK in most industriesand in particular the cement sector.”

(3)Workshop participantsindicated that there needs tobe EU-wide harmonisation ofcarbon legislation andassociated costs to enable UK-based cement producers toremain competitive with EU-based producers. Vestedinterests are playing a role inpreventing harmonisation

While it was found that theEU ETS affects all EUcement producers,interviewees and workshopparticipants consistentlystated that the UK hasunilaterally implementedfurther climate change-related policies that areincreasing sector costsand starting to make the



policies.(Twodistinctlevels –Globalplaying field& EUplayingfield)

itself.Clinker production in the UKis 5 to 10% less competitivethan in other EU countries(like France or Germany)mainly due to labour andenergy cost.”

CIVITAS 2012 found that:“UK regulations only add toalready considerable costscreated by EU legislation. Asa consequence, governmentpolicy is likely to beenvironmentally andeconomically self-defeatingby encouraging mobile EIIs torelocate to less carbon-constrained developingeconomies. This problem isknown as ‘carbon leakage’and paradoxically results fromthe ambition of thegovernment’s decarbonisationstrategy.”

Interviewee: “In the UK we are notbeing compensated for energy costswhereas some other sectors arebeing supported (e.g. paper andsteel industries are beingcompensated – they have strongerlobbying power as well as passingthe EU test on this). Currently UKcement sector would pass the test,but as a Europe wide industry wedid not pass when test was carriedout several years ago. BIS havetried to support us to the EU, buthave other priorities so we are stillstuck with no compensation”

Interviewee: “sector needs to appearin Annex 2 of the emissions tradingdirective, but it does not unlike theiron and steel sectors. Basicallywhen thresholds were set cementfell under that. So cement sectordoes not receive any compensationfor carbon price floor and increasedenergy costs.”

Interviewee: “Carbon price floorcould be abolished, UK unilaterallyimplemented this and it’s purely astick.”

Interviewee: “We would like theremoval of carbon price floor asfundamental differentiator between

taking place.

It was noted that imports havealready reached price paritywith UK-produced cement andin some instances it is cheaperto import from abroad fromcountries such as Spain.

Some participants said theCarbon Price Floor should bescrapped or that there shouldbe compensation for cementcompanies. Some participantsexpressed a desire that the“UK govt should stopdiscriminating against UKindustries”.

UK uncompetitive withimports from Europeanneighbours such as Spain.

The Carbon Price Floor,Climate ChangeAgreements and highpass-through electricitycosts were all cited bymultiple interviewees aspresenting additional coststhat are not faced by EUcompetitors.

The uncertainty of EU andUK policy over the 30+year timeframe of majorinvestment in new kilnsmakes potential investorsvery uncertain aboutwhether they will get areturn on such investments



UK and Europe and to be approvedfor relief from the renewable feed intariff”

Interviewee: “A barrier in UK is ourgreen electricity taxes and otherpass through costs.”

8 Market Highlycompetitiveinternational market –UK is atrisk fromlower costimports

4 Literature sources:Boston Consulting Group2008 states: “Compared tothe EU as a whole, UK clinkerproduction is exposed to ahigher risk of offshoring forthree main reasons: a lesscompetitive production cost, ahigher expected carbon priceand the geographicconfiguration of the countryitself.

UK's geographic configurationoffers limited protectionagainst imports by sea, asclinker can be shipped allaround its perimeter andinland distances to becovered are minimal. As mostof the plants are locatedsouth of Liverpool, inlandtransportation costs from theports of Liverpool, Grimsby,Southampton and London arelow, so representing a limitedbarrier against offshoring.”

4 InterviewsInterviewee: “Need to get into govt abetter understanding of the industry– you just can’t raise the price andput the impact onto the customer.The margins are too low. Essentiallyyou’ll just eliminate the UK industryaltogether as imports increase.Basically we are and will be justslowly squeezed out by all thesesmall additional costs that ourforeign competitors don’t have”

Interviewee: “cement industry areonly being treated with the stick andno carrot – costs from regulationsare continually rising in UK with littleincentives being offered to dobusiness here. It is a globalindustry.”

Interviewee: “Our top barrier todecarbonisation is competitiveness– some of this is to do with UKgenerally, but also to do with policyand regulations”

(4)Workshop participants notedthat cement imports into theUK have increasedsubstantially in the last 10years despite reduced demandand sector consolidation in UK.

UK cement companies haveno control over their costdisadvantages.

To overcome this barrier,participants said that thereneeds to be:

- Certainty over carbonleakage protection

- Global comparableGHG agreement

- Same carbon policiesacross EU and world

cement imports into the UKfrom those companies thatdon’t manufacture in theUK have increased fromapproximately 3-4% to 13-15% over the last tenyears despite significantlyreduced demand (-35%compared with 2007levels) and consolidation ofsector in UK during thattime.

A range of factors aremaking the UKuncompetitive andvulnerable to importedcement. These include theadditional costs ofproducing cement in UKdue to UK-specificregulations such as theCPF or due to passthrough costs that haveraised energy prices.

The UK is more vulnerable



MPA 2009 states: “Growth inthe construction sector willprovide a platform forinvestment in new products.Without construction sectorgrowth UK assets willcontinue to decline and willplace the UK vulnerable toimports when demandreturns.

To date UK industrialconsumers have experiencedhigher electricity costs thanour competitors. Analysiscarried out by BIS hasconfirmed that UK energyconsumers will pay more fortheir electricity thancompeting nations as a resultof the UK’s decarbonisationpolicies. Industries that aresignificantly vulnerable tocarbon leakage such ascement will need protectionfrom these unilaterally appliedcosts so that they are able tocompete with importers on anequivalent basis.”

DECC 2013 states: “cementproduction in UK is a highlycompetitive market whichlimits the ability to passthrough costs of energy or

Interviewee: “Last resort is to put ourprices up, but then we’ll beuncompetitive internationally andwe’ll be beaten out by imports.”

Interviewee: “UK is particularlyvulnerable to offshoring. In 2014, 14-15% of the market is offshore.Because they are more competitive.In just over 10 years the increase inaround 10%. Also the increase isseen at the time of marketcontraction”

Interviewee: “In future we have adecision – do we invest in new kilnsor do we simply import instead?”

than many other countriesto imports and offshoringof production due to itsalready installed terminalcapacity and coastalgeography which makesimporting to sites aroundthe UK comparativelycheap and straightforward.

As UK cement companiesoperate in a highlycompetitive internationalmarket they have onlylimited ability to pass onany additional costs totheir customers in the UK.The impact on profitabilitymeans that companies arefinding it difficult to justifyfurther investment in UKoperations and the entiretyof UK production iscurrently at risk ofoffshoring in coming years.



investment to consumers.”

Boston Consulting Group2011 states: “Theseinsufficient rates of return arealso due to the fact that thecement and concrete sector isunable to pass on rising coststo customers. cement is oneof the few energy-intensivematerials that has seen itsprices fall by 13 percentbetween 2007 and 2011,despite a rising cost base ofbetween 6 and 26 percentduring the same period.”

9 Operational

Long plantlife(longevityof currentequipment)/investmentcycle-allowinglimitedopportunityto invest inmajortechnologicalmanufacturing changes(20-30years).

1 Literature source:DECC 2013 notes that thecement sector has “LongInvestment cycles and highcapital costs”

5 InterviewsInterviewee: “A cement plant willcost a minimum of £250m and willlast 30-40 years. Therefore there isonly really likely to be one moresignificant investment cycle betweennow and 2050”

Interviewee: “When building newplants you are looking at 50 yearsminimum. In theory new plants willhave the least intensive carbonfootprint, but it’s not financiallypossible to upgrade 1960/70sfactories to that level. If you try toregulate/price these old factoriesthen you’ll suffer carbon leakage toimports. Govt needs to justrecognise that we can’t just upgrade

(4)Workshop participantsindicated that the largest plantchange is to replace a kiln, butthat all kilns in UK had alreadybeen switched from wet kilnsto dry kilns in previous yearsas this had a short paybackperiod. Kilns have a lifespan ofapproximately 30 -40 years.

UK cement companies arecurrently unlikely to make anynew kiln replacements in nearfuture. This is partly becausepotential energy savings wouldbe much smaller than the wetto dry switch so would not offeran acceptable ROI.

Due to the long plant livesof cement kilns, there arelimited opportunities torebuild by 2050 andtherefore limitedopportunities to invest inadvanced technology thatcan significantly reduce acompany’s carbonemissions. The switch fromwet to dry kilns over past15 years has had biggestpositive impact althoughthis process is alreadycomplete in UK.

The workshop highlightedthat rebuild feasibilitystudies can help reduce



High capitalcosts fornew plantsorsignificantprojects.

everything as it’s too expensive.”

Interviewee: “New plant is mainopportunity to install big ticket itemsat that time - retrofitting is very costlyand not always feasible.”

Interviewee: “We are very capitalintensive with very long paybackperiods, 30-40 years and 7 years toplan and build new plants.”

Interviewee: “You see the really bigstep changes at point of plantconstruction. Typical payback is 30-40 years. At point of constructionyou install the best available tech atthe time. Plants are highly integratedso it’s not easy or cheap to replaceparts of already built plants. Morecommon is continuousimprovements such as switching todifferent fuel types.”

Participants also said theywould struggle to justifybuilding of any new plants/kilnsat present due to instability ofUK cement demand.

There are currently 12/13 kilnsoperating in UK.

the risk and test out moreinnovative rebuild designswith higher emissionreduction potentials.

However, it was also notedin both the workshops andinterviews that there are nomajor carbon-reducingtechnologicalbreakthroughs that arewaiting to be deployedsuch as the recent switchfrom wet to dry kilns.

No new plants or kilns arecurrently being built in theUK due to continuingmarket uncertainty andlimited growth.

10 Market &economy

Increasingcompetition for ofdiversionofalternativefuels andbiomasses- to otherusers whoholdadvantagesover the

2 Literature sources:IEAGHG 2013 states:“Competing demands for aswell as the current wastehierarchy in the EU WasteFramework Directive isrestricting the availability ofcertain types of alternativefuels”

MPA 2009 states that: “In2011 almost 17% of fuel wasfrom biomass fuel and

6 InterviewsInterviewee: “Most important reasonfor alternative fuel investments iscost of fossil fuels (e.g. Pet coke)compared with alternative fuels –side benefit is reduction in carbon. Iffossil fuels are significantly cheaperthan alt fuels again in future this willinfluence decision-making”

Interviewee: “Some UK policies giveincentives for use of biomass byother sectors e.g. Renewable

(3) Workshop participantsindicated that there isincreasing demand forbiomass-containing fuels fromthe energy from waste sectorand power generators.

In particular there has been asignificant adverse impact oncement sector due to theRenewable Heat Incentivewhich is not currently available

All information sourcesindicated that competitionfor alternative fuels andbiomass is significantlyincreasing or beingdiverted to recycling/reuseor other combustion whichis incentivised.

Interviewees argued thatsome of this is down to UKmarket distortions such asRHI and other policy



cementsector

biomass fractions. It isassumed that 40 per cent offuel use will comprise ofbiomass by 2050. This is anambitious assumption for thesame reasons as outlinedabove for AWDF but is alsolikely to be principallyinfluenced by the pressure onthe power generators andothers to fuel switch.

Current Government policiesto enhance the use ofrenewable heat are poorlyfocused and incentivise theuse of biomass for someactivities but not others,potentially creating a shift inbiomass use from one sectorto another without an overallenvironmental benefit. Thecurrent Renewable HeatIncentive creates an incentiveto move biomass use fromcement kilns to otherpotentially less efficient uses.This is an unwelcomeintervention in the market bya poorly designed policy.”

Obligation, Feed in Tariffs, Contractsfor Difference power, RHI, butsimilar incentives are not availableto the cement sector. Suchincentives drive up the price ofbiomass and can shift biomass fromcement to other sectors with no netenvironmental gain.”

Interviewee: “ We are having someissues with alt fuel availability”

Interviewee: “You tend to get costsavings by using alt fuels, but thereare risks on technology,permits/permission and fuelavailability.”

Interviewee: “Many fuels havebecome scarcer, particularly asinternational competitors buy our altfuels (e.g. China, Eastern Europebuying tyres). Bone meal producersrealised they could use itthemselves. The waste derivedmarket is constantly evolving, but wewant an even playing field.”

Interviewee: “Yes, we’re concernedabout a lot more pressure on thesupply chain. We signed long termagreement with a wastemanagement company. We cansecure most of our supply chain butneed to continue monitoring.”

to the cement sector. This hasled to other buyers out-competing cement companieswhen purchasing alternativefuels.

Participants requested thatRHI be made available tocement sector or that a new,more equal policy replace RHI.It was suggested that ideallythere would be assessments ofthe optimum places forbiomass to be used as a fuelas some participants arguethat their use of biomass has abetter carbon impactcompared with other users(e.g. households).

However, ‘circular economy’policies are a threat as thisrequires wastes to be reusedor recycled before beingconsidered for use as a fuel.

drivers such as theRenewables Obligationwhich encourage the useof such fuels. All UKcement companies arguetheir sector is unfairlyexcluded from policies andincentives that are offeredto other sectors for noclear reason.

It was also noted thatincreased internationalcompetition for alternativefuels – especially tyres –has also had an impact.

the EU Waste FrameworkDirective was also noted inliterature review andinterviews as beingresponsible for divertingfuels that were judged tobe suitable for recycling asthe Directive requires theprioritisation of recyclingover incineration and doesnot currently recognise co-processing as a combinedrecycling and recoveryprocess.



Interviewee: “We have to dofeasibility study for any new fuel.Has to make sense commerciallyand geographically. We also need tounderstand how it will behave in thekiln. Does it have an impact onquality or output? How many tonnesper hour do we need to burn versuscoal? It is expensive investing in anew fuel so in order to pay back youneed to have a sufficient and securesource.”

Interviewee: “Unlike other users wecan also use the ash left over tobecome cement. We’d like toachieve 70% of firing heat frombiomasses and waste fuels.”

11 Financial Riskaversion incementindustry –companiesare wary ofbeinglocked in tothe ‘wrong’investmentchoices (inpart due tohightechnologycosts, longinvestmentcycles andconcerns

1 Literature source:DECC 2013 notes thatcement sector suffers fromrisk-averse thinking - wary ofrisks to product quality orbeing locked in to ‘wrong’investment choice.

2 interviewsInterviewee: “ Risk aversion – due topoor economic conditions we’ve hadideas we could do work on, butconcern over payback period andtechnical hiccups/delays related toquality of supply, etc. has putindustry off quicker investments”

Interviewee: “Investors need realconfidence before investing the£250-300m it takes to build a newplant. Need investment certainty to2030 and beyond.”

(4)Workshop participantsindicated this was a majorbarrier, as often newlegislation requires unproventechnologies. No one wants totake the first risk. There is alsono large spare pot of money toinvest in potentially risky newinnovations.

This risk particularly applies toCCS which could result in apilot plant costing £500m+which is approximately doublethe cost of a traditional, CCS-free cement plant.

While risk aversion wasonly noted briefly as anissue in interviews and theliterature review, but it wasdetermined to be animportant barrier byworkshop participants.

Risk aversion in thecement sector ispredominantly based onthe long investment andcostly cycles that are afeature of the industry aswell as being partly due tothe highly cost competitiveaspect of the market.



overproductquality)

Workshop participants alsosaid that because cementsector equipment/plants arebuilt with very long life cyclesplanned this means thatcement companies have tovery careful not to sink fundsinto new equipment that mayend up not meeting industrystandards on product qualityand/or cost competitiveness.

To mitigate this barrier it wassuggested that there needs tobe more ways for the risks tobe shared or be underwrittenby the government.

Multiple interviewees saidit typically made moresense to be a first followerof proven technologiesrather than a first moverwho takes the financial riskon new technologies.

Without some mechanismfor sharing such risks withother stakeholder’sinterviewees indicated thatthis barrier was unlikely tochange.

12 Legislation

EU ETS –Riskinduced byfuture ETSuncertainty (unknownfuturecarbonprices,caps,proportionofallocations,etc.)

2 Literature sources:Boston Consulting Group2011 found: “the high level ofregulatory uncertainty inEurope discouragescompanies from making theinvestments required in orderto improve the efficiency ofcement plants and the lack ofan appropriate legalframework deters companiesfrom adopting structuraladjustments”

Boston Consulting Group2008 states that: “EU ETScould make European cementmanufacturers uncompetitive

5 InterviewsInterviewee: “ Uncertainty overregulations such as ETS are aproblem”

Interviewee: “ Fluctuations in thingslike a carbon price are notincorporated into current decisionmaking as carbon floor – even whenthe price was higher it wasn’t a bigfactor – ENERGY COSTS aredriving the move to lower energyuse rather than the carbon price”

Interviewee: “EU ETS: the way thelast round of allowances were made– we ended up with a lower thanneeded allocation for two plants

(4)Workshop participantsexpressed the view that theEU ETS cross-sectorialcorrection factor will reach apoint where it is not technicallypossible to get full allocations.They also did not feel happywith the data being used.

The EU ETS is having acumulative negative impact onUK cement companies andthere is a need for the systemto be overhauled and madefairer between industries andsectors.

Uncertainty and otherconcerns about the EUETS were found to be abarrier across allinformation sources.

The cement sector acrossEU feel that theirallowance as an industryhas been set too low.

Interviewees andworkshop participantsargued that while carbonprices from the EU ETSare currently manageable,there is significantuncertainty over what level



with global competitors /plants leading to possiblecarbon leakage”

because of the arithmetic. Almostlike being punished for being tooefficient! We need a recognition thatwe can’t just keep lowering the limitfor us.”

Interviewee: “One barrier is EU ETSand carbon leakage (it prohibitsinvestment due to regular reviewprocess because unless long termcertainty the EU is not the best placeto invest).”

Interviewee: “EU ETS new entrantrules are a problem. There is nocertainty about availability of freeallocation before invest >£250m andno certainty about the level of freeallocation following investment. Toorisky.”

“EU ETS creates a difficulty. Every 5years get a level of free allocation,but this declines every year. We arevulnerable to carbon leakage as anindustry and at some point leakagewill start to take place – only therecession and relatively low carbonprice has prevented this so far. Nextreview is in 2019 and the decisionsmade are so absolutely critical thatit’s almost a case of go or no go forstaying in UK.”

However, participants weresceptical that significant reformwould take place in short termand that carbon leakage willincrease for foreseeablefuture.

the allowances will be setat during the next review in2019. They also noted thatthe industry requires muchlonger term predictabilityand consistency in the EUETS to enable them toappropriately forecast andplan their activities.

One intervieweecommented that if theoutcome of the 2019review is particularlynegative for the cementsector then it could lead todivestment in the UKaltogether as the EU ETScombined with UK climatechange and energy costswould leave the UKuncompetitive comparedwith imports.



13 Market &economy

UK energyprices arehigherthan thosein manycompetingEU andglobalcountries(and likelyto risesignificantlyhigher incomingyears)

2 Literature sources:MPA 2009 states that: “dateUK industrial consumers haveexperienced higher electricitycosts than our competitors.Analysis carried out by BIShas confirmed that UK energyconsumers will pay more fortheir electricity thancompeting nations as a resultof the UK’s decarbonisationpolicies. Industries that aresignificantly vulnerable tocarbon leakage such ascement will need protectionfrom these unilaterally appliedcosts so that they are able tocompete with importers on anequivalent basis.”

Centre for Low CarbonFutures 2011 states that:“number of representativesidentified the high and risingcosts of energy and energytaxes in the UK, as well asrising commodity prices, as abarrier to investment. Parentcompanies see relatively poorreturns on investment in theUK compared with othercountries. Therepresentatives consultedreferenced the TUC/EIUGreport (2010) on thecumulative impacts of climate

3 InterviewsInterviewee: "About 30% of all ourinvestments and upgrades to plantsare centred around energy andcarbon efficiency savings”

Interviewee: “When you look back tothe 80s the difference was energywas cheap, capital was expensiveand we’re living with the decisions tohave gone for more energy intensiveprocesses from that time”

Interviewee: “New high energyprices have forced companies intoimproving energy performance”

Interviewee: “Electricity costs are abig issue – cheap coal and electricityabroad mean their production costsare lower”

Interviewee: “Bottom line is the UKhas the most expensive energy inEurope so therefore every extra bitof cost makes us that bit moreuncompetitive”

(4)Workshop participants felt thathigh UK energy prices are asignificant burden on theircompetitiveness.

They noted that imports havenow increased to almost 14%of total UK demand fromaround 3-4% ten years ago.They highlighted that part ofthis price parity is the high costof electricity and fuels in theUK.

All information sourceshighlighted that fluctuatingenergy prices makes itdifficult for cementmanufacturers to plan thereturn on theirinvestments, and are amajor operational cost.

Interviewees andworkshop participantsbelieved the electricity gridwould become moredecarbonised, but that theprice of electricity is toohigh already to allow costcompetitiveness withforeign producers.

Interviewees wereconcerned about UK’scompetitiveness in relationto Europe and othermarkets due to the higherenergy prices in the UK.



change policy on the energyintensive industries, with bothelectricity and gas costsexpected to rise by up to 22%by 2020.”

14 Market &economy

UKdemandfor cementis stillsignificantly below2007 levelsand growthforecastingis difficultwhichimpacts oninvestmentdecisions

1 Literature source:MPA 2009 states that: “It isvery difficult to accuratelyforecast future demand andproduction - thereforeassumptions used forroadmaps and milestonesmay not be accurate.

Growth in the constructionsector will provide a platformfor investment in newproducts. Withoutconstruction sector growth UKassets will continue to declineand will place the UKvulnerable to imports whendemand returns.”

1 InterviewInterviewee: “cement consumption inthe UK per capita is the lowest inEurope. So we’re not spendingenough on construction or usingdifferent materials”

(3)Workshop participants notedthat there has been significantconsolidation of the cementsector in UK since 2007 andan overall reduction inproduction capacity.

However, with demandcurrently rising this means thatUK production will soon be atmaximum capacity. Thismeans cement companies willbe left with a choice of whetherto build new plants or to importcement instead.

One action that would enableUK cement companies tocommit investment to buildingnew plants in the UK would befor the government to committo and deliver the ‘NationalInfrastructure Plan’ as thiswould significantly increasecement demand.

Findings were slightlymixed on this barrier assome companies statedthat demand was stilldepressed compared with2007 (approx. -35%) andsignificant new growth inUK economy andconstruction would be ofgreat benefit to theindustry. It was also notedthat a better businessenvironment would behelpful in generating orcompeting for capital forfurther investments.

However some workshopparticipants claimed thatdue to industryconsolidation productioncapacity was now muchlower and the modestimprovements in the UKeconomy have broughtdemand up and fullcapacity may soon bereached. This would leavecompanies with difficultdecisions on whether tosimply import cement or



trust that the economicrecovery is long term andinvest in new plantcapacity relatively soonafter shutting down plantsin the recession. Therewas no consensus onwhich approach would bebetter and which waycompanies would go.



15 Technology

UKgovernment is notbackingCCS R&Dasstronglyas othercountries

2 Literature sources:MPA 2009 states that: “TheEuropean industry isundertaking practicalresearch and collaboratingwith equipment suppliers tofind the best capture methodsfor cement but if the UKwants to be a leader then UKGovernment financial supportis necessary for the UKcement industry. Without thissupport the UK cementindustry will miss its mostambitious scenario of an 81per cent emission reductionby 2050.”

Centre for Low CarbonFutures 2011 found that:“Some sector respondentscommented on the difficulty ofaccessing governmentsupport to promote industryR&D.”

IEAGHG 2013 states that:“CCS will be required ifcement manufacturers are tomeet overall decarbonisationtargets as efficiency savingshave limitations. With currentlegal and economicconditions around CCS wouldimpair the competitiveness ofcement production and this

3 InterviewsInterviewee: “Even if we reached100% elimination of fossil fuels we’llstill have CO2 emissions asalternative fuels are not all biomassand there is the automaticcalcination problem in our cementproduction. CCS is the key to ourlong term low carbon future – whowill finance it? Who will be braveenough to make first steps? Willgovt do anything to support that?”

Interviewee: “Our big wish is forproper government funding forCCS!”

Interviewee: “Yes, could acceleratethe work that companies are doingindividually. It depends on whethercompanies are seeing it as acompetitive lead or as a generalsector need.”

(3)Currently support is only beingprovided to power sector toimplement CCS, not othersectors such as cement.

There will need to be specificCCS solutions for cementplants.

UK has an opportunity to be aCCS research leader and alsohas better options for carbonstorage than other countries.

Some participants indicatedthat there is a lack ofunderstanding of the CCStransition for the cementsector. There are significantcost barriers – one participantsaid that implementing CCS ata new plant wouldapproximately double the costto build the plant. The largephysical footprint ofimplementing CCS at a plantwould be a further barrier.

A clear finding from theinformation sources wasthat CCS will be required ifcement plants are to reachthe target of an 80%reduction in carbon by2050. This is because thecalcination process inheating limestone is anunavoidable source of thesector’s carbon emissions.The only way to eliminatethe emissions fromcalcination is to use CCSor to create completelynew types of cement, butthe latter approach has itsown barriers obstructing it(See Barrier 3)

All companies in the UKsaid that they could notafford the capital or bewilling to take the risk onresearching or pilotingsuch an uncertain andexpensive technologywithout government and/orcross-sector support. Evenif CCS does becometechnically viable in futurethere are significantconcerns over capital andrunning costs as currentestimates are that a newplant with post combustion



inhibits the development ofCCS”

CCS installed would costapproximately double thecost of a plant without CCSand this could makecement produced at CCS-equipped plantsfundamentallyuncompetitive withtraditional plants.

However, enthusiasm forresearching and ultimatelydeploying CCS was foundfrom the majority ofworkshop participants.Some of the intervieweesstated that strong govtsupport for CCS for thesector was one of theactions they would mostlike to see fromgovernment.

16 Technology

CCS formsintegralpart ofestablished sectorroadmaps,but thetechnologicalfeasibilityoraffordability is stillhighly

1 Literature source:Centre for Low CarbonFutures 2011 states that:“Transformative technologies,such as carbon capture andstorage, remain perhaps 10-15 years away fromcommercial deployment.”

4 InterviewsInterviewee: “The capital cost ofdoing CCS would basically doublethe cost of a plant. A new plant inUK would be £200-250m, but priceand plant size would double withCCS in place. And if we capturedthe carbon, then what do we do withit? Many plants are a long way fromstorage in seas and the plants can’tbe moved away from their quarrieseasily or cheaply. Biggest issueswould mainly be transport andstorage of the carbon along with

(3)Workshop participants saidCCS is technically achievable,but challenges areeconomic/commercial andlegislative.

CCS will add significant costsand it will be a challenge tofund and incentiveimplementation.

Need equivalent of FiT CfDavailable to power sector CCS

From all informationsources there wasoptimism that CCS (orcarbon capture and use) istechnically feasible.

However, nearly allinterviewees and workshopparticipants are scepticalabout the commercialviability of CCS both froman R&D/pilotingperspective as well as thelong term costs of installing



uncertain capital costs. If you were first to do itthen you’d need it to be supportedby govt as the risk and cost is just sobig. Why would you invest in that ifyou weren’t sure it would work?”

Interviewee: “Other than a fewprojects that have been happeningelsewhere, there is still a lack ofunderstanding about whether CCSwill ever be commercially andtechnically viable. I cannot see thatthe cement industry would be thefirst to prove success of thistechnology.”

Interviewee: “We think we canachieve a 62% reduction inemissions from 1990 levels ifallowed to use biomass andalternative fuels. But to get over80% the only technology is CCS.Don’t think it will be technically oreconomically feasible for more thanten years, but there is a role for CCSpost-2025/30.”

Interviewee: “We need support forCarbon Capture and USE more thanstorage. Transporting and storagemight be more difficult than usingthe carbon instead.”

to compensate industrial CCSinstallation. Will also needcarbon transport infrastructureto take carbon away fromplants to storage/useelsewhere.

There is uncertainty over whois willing to take ownership ofdriving CCS forward andmaking it viable in future forthe cement sector.

and running expensiveCCS equipment. Someparticipants argued thatthe sector would requiresignificant support for thetechnology to ever becomefinancially viable.


APPENDIX C TECHNOLOGY OPTIONS REGISTER


Appendix C – Full Technology options register Page 84 of 91

APPENDIX C TECHNOLOGY OPTIONS REGISTER

Technology options identified in the below tables come from sources listed in the references in section 6 of the main cement roadmap document

Name /Description

TechnologyReadiness

Level6Adoption

ratePractical

ApplicabilityCapex (per

site)Capex data

source7CO2

reductionElectricityreduction

Carbon DioxideReduction

Data Source

Kiln processtechnology (BAT

kiln)5 0% 100% £180,000,000

Adapted for thisproject based on

the followingreferences

(Global CCSInstitute, 2013;

CementSustainability

Initiative, 2009)and review bysector team

1% 0%

Directly fromliterature (Cement

SustainabilityInitiative, 2009)and review bysector team

Electricalefficiency

improvements9 0% 100%

£30,000,000

Directly fromliterature(Cement


0% 5%



6 Please note that for cases where no source is provided, expert opinion has been used to evaluate the TRL.7 Capex values shown in the table are for a representative site to which that option applies. While cost input data on some options was available on a per site basis, data for others was expressed differentlye.g. cost/tonne of production capacity, cost/tonne of emission. Where necessary, these data have been used to derive representative capex estimates per site, as shown in the table. To account for sectorswith diverse site sizes, a range of capex values for standard site categories (e.g. small and large sites) have been developed and then multiplied by the relevant proportion of sites in the sector of thatcategory.



Name /Description

TechnologyReadiness

Level6Adoption

ratePractical


site)Capex data

source7CO2



Data Source

Electricity fromwaste heat

8 0% 25%£11,000,000



(Global CCSInstitute, 2013;

CementSustainability


0% 1%



Cementitioussubstitution

8 8% 10.5% 0

Directly fromliterature

(Ricardo AEA,2013) and

review by sectorteam 100% 0%



(Ricardo AEA,2013; MPA, 2013;

EuropeanCement

Association,2013) and reviewby sector team

Alternative rawmaterials(calcined)

7 1% 2% 0

Expertjudgement

(PB/DNV GLconsortium) –

assumed samecost as

“Cementitioussubstitution”

67% 0%

Provided by tradeassociation withreview by sector

team andPB/DNV GL



Name /Description

TechnologyReadiness

Level6Adoption

ratePractical


site)Capex data

source7CO2



Data Source

Fuel switching tonatural gas

5 0% 25%£7,500,000



review by sectorteam

7% -10%

Expert judgement(PB/DNV GL

consortium) withreview from trade

association

Fuel switching tobiomass

9 18% 80%£7,500,000



review by sectorteam 31% -10%



(Ricardo AEA,2013; European

CementAssociation,

2013) and reviewby sector team

Hydrogen fuel 4 0% 0% -

Option notincluded inpathways 10% -20%

Expert judgement(PB/DNV GL

consortium) withreview from trade

association



Name /Description

TechnologyReadiness

Level6Adoption

ratePractical


site)Capex data

source7CO2



Data Source

Alternativecements

9 0% 5%£220,000



review by sectorteam

50% 0%



(Ricardo AEA,2013; CementSustainability

Initiative, 2009;Global Magazineof the ConcreteSociety, 2014;

ZKGInternational,

2014) and reviewby sector team

Fluidised bedkiln

4 0% 100% -

Option notincluded inpathways 3% -5%





Name /Description

TechnologyReadiness

Level6Adoption

ratePractical


site)Capex data

source7CO2



Data Source

Carbon capture8 690% 50%

£100,000,000



(Ricardo AEA,2013;

InternationalEnergy Agency

& WorldBusiness

Council forSustainable

Development,2009; CementSustainability


90% -100%



(Ricardo AEA,2013;

InternationalEnergy Agency &World Business

Council forSustainable

Development,2009) and reviewby sector team

Oxygenenrichmenttechnology

7 0% 75%£6,000,000

Directly fromliterature(Cement


3% -50%



8 We have assumed oxy-combustion capture as the most appropriate technology for use in the cement sector, on the basis of cost and efficiency. Oxygen enrichment is a separate option, which uses oxy-combustion to improve efficiency, but without carbon capture. All costs are for CO2 capture alone, including CO2 purification and compression. Costs associated with transport and storage/utilisation areexcluded.9 Element Energy, 2014 (Note – for oxy-combustion capture; post-combustion TRL 7)


APPENDIX D – ADDITIONAL PATHWAYS ANALYSIS


Appendix D – Additional Pathways Analysis Page 90 of 91

APPENDIX D ADDITIONAL PATHWAYS ANALYSIS

1. Option Deployment for Pathways under Different Scenarios

Challenging World

Figure 3: BAU pathway, challenging world scenario

Figure 4: 20-40% pathway, challenging world scenario

Pathway: BAU Scenario: Challenging World (CW)

OPTION Category ADOP. APP.

2014 2015 2020 2025 2030 2035 2040 2045 2050Energy efficiency 0% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Energy efficiency 0% 100% 0% 0% 75% 75% 75% 75% 75% 75% 75%

On site 0% 25% 0% 0% 0% 0% 0% 25% 25% 50% 50%Raw material or fuel 8% 11% 0% 0% 10% 10% 25% 25% 40% 40% 50%

Long term 1% 2% 0% 0% 10% 10% 25% 25% 40% 40% 50%

Raw material or fuel 0% 25% 0% 0% 0% 0% 0% 0% 0% 0% 0%


Long term 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 5% 0% 0% 0% 0% 0% 0% 0% 0% 0%Long term 0% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 50% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 75% 0% 0% 0% 0% 0% 0% 0% 0% 0%11 Carbon capture12 Oxygen enrichment technology

03 Electricity from waste heat04 Cementitious substitution05 Alternative raw materials (calcined)06 Fuel switching to natural gas07 Fuel switching to biomass08 Hydrogen fuel09 Alternative cements10 Fluidised bed kiln

DEPLOYMENT

01 Kiln process technology (BAT kiln)02 Electrical efficiency improvements

Pathway: 20 - 40% Scenario: Challenging World (CW)


2014 2015 2020 2025 2030 2035 2040 2045 2050



On site 0% 25% 0% 0% 0% 0% 0% 25% 25% 50% 50%


Long term 1% 2% 0% 0% 10% 10% 25% 25% 40% 40% 50%


Raw material or fuel 18% 80% 0% 0% 5% 10% 15% 25% 25% 33% 33%Long term 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 5% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 50% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 75% 0% 0% 0% 0% 0% 0% 0% 0% 0%

04 Cementitious substitution05 Alternative raw materials (calcined)06 Fuel switching to natural gas07 Fuel switching to biomass08 Hydrogen fuel09 Alternative cements10 Fluidised bed kiln11 Carbon capture12 Oxygen enrichment technology

03 Electricity from waste heat


DEPLOYMENT



Figure 5: Max Tech pathway without CCS, challenging world scenario

Figure 6: Max Tech pathway with CCS, challenging world scenario

Collaborative Growth

Figure 7: BAU pathway, collaborative growth scenario

Pathway: Max tech, no CCS Scenario: Challenging World (CW)


2014 2015 2020 2025 2030 2035 2040 2045 2050




Long term 1% 2% 0% 0% 25% 25% 50% 50% 75% 75% 100%



Long term 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%


Long term 0% 50% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 75% 0% 0% 0% 0% 0% 0% 25% 50% 100%




DEPLOYMENT

Pathway: Max tech with CCS Scenario: Challenging World (CW)


2014 2015 2020 2025 2030 2035 2040 2045 2050

Energy efficiency 0% 100% 0% 0% 0% 0% 10% 25% 50% 75% 100%Energy efficiency 0% 100% 0% 0% 75% 75% 75% 75% 75% 100% 100%

On site 0% 25% 0% 0% 25% 25% 50% 50% 75% 75% 100%


Long term 1% 2% 0% 0% 25% 25% 50% 50% 75% 75% 100%




Long term 0% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 50% 0% 0% 0% 0% 0% 0% 10% 25% 50%

Long term 0% 75% 0% 0% 0% 0% 0% 0% 25% 50% 66%




DEPLOYMENT

Pathway: BAU Scenario: Collaborative Growth (CG)


2014 2015 2020 2025 2030 2035 2040 2045 2050Energy efficiency 0% 100% 0% 0% 0% 0% 0% 0% 0% 10% 10%



Long term 1% 2% 0% 0% 10% 10% 25% 25% 40% 40% 50%



Long term 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%


Long term 0% 50% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 75% 0% 0% 0% 0% 0% 0% 0% 25% 25%11 Carbon capture12 Oxygen enrichment technology

03 Electricity from waste heat04 Cementitious substitution05 Alternative raw materials (calcined)06 Fuel switching to natural gas07 Fuel switching to biomass08 Hydrogen fuel09 Alternative cements10 Fluidised bed kiln

DEPLOYMENT




Figure 8: BAU+ pathway, collaborative growth scenario

Figure 9: Max Tech pathway without CCS, collaborative growth scenario

Figure 10: Max Tech pathway with CCS, collaborative growth scenario

Pathway: 0 - 20% Scenario: Collaborative Growth (CG)


2014 2015 2020 2025 2030 2035 2040 2045 2050


Energy efficiency 0% 100% 0% 0% 75% 75% 75% 75% 75% 100% 100%On site 0% 25% 0% 0% 25% 25% 50% 50% 75% 75% 100%


Long term 1% 2% 0% 0% 25% 25% 50% 50% 75% 75% 100%



Long term 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%


Long term 0% 50% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 75% 0% 0% 0% 0% 0% 0% 0% 25% 25%


03 Electricity from waste heat02 Electrical efficiency improvements01 Kiln process technology (BAT kiln)

DEPLOYMENT

Pathway: Max tech, no CCS Scenario: Collaborative Growth (CG)


2014 2015 2020 2025 2030 2035 2040 2045 2050



On site 0% 25% 0% 0% 25% 25% 50% 50% 75% 75% 100%


Long term 1% 2% 0% 0% 25% 25% 50% 50% 75% 75% 100%


Raw material or fuel 18% 80% 0% 0% 25% 25% 50% 50% 75% 75% 100%Long term 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 5% 0% 0% 0% 10% 25% 50% 50% 75% 100%

Long term 0% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 50% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 75% 0% 0% 0% 0% 0% 25% 50% 75% 100%




DEPLOYMENT

Pathway: Max tech with CCS Scenario: Collaborative Growth (CG)


2014 2015 2020 2025 2030 2035 2040 2045 2050

Energy efficiency 0% 100% 0% 0% 0% 0% 10% 25% 50% 75% 100%Energy efficiency 0% 100% 0% 0% 75% 75% 75% 75% 75% 100% 100%

On site 0% 25% 0% 0% 25% 25% 50% 50% 75% 75% 100%


Long term 1% 2% 0% 0% 25% 25% 50% 50% 75% 75% 100%




Long term 0% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Long term 0% 50% 0% 0% 0% 0% 10% 25% 50% 75% 100%

Long term 0% 75% 0% 0% 0% 0% 0% 10% 20% 25% 33%




DEPLOYMENT

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