Energy and Climate ChangeMemorandum submitted by the Mineral Products Association

1. Introduction

1.1. The Mineral Products Association (MPA) is the trade association for the aggregates, asphalt, cement, concrete, lime, mortar and silica sand industries. With the addition of The British Precast Concrete Federation (BPCF), it has a growing membership of 418 companies and is the sectoral voice for mineral products. MPA membership is made up of the vast majority of independent SME companies throughout the UK, as well as the nine major international and global companies. It covers 100% of GB cement production, 90% of aggregates production and 95% of asphalt and ready-mixed concrete production and 70% of precast concrete production. Each year the industry supplies in excess of £5 billion of materials to the £110 billion construction and other sectors. Industry production represents the largest materials flow in the UK economy and is also one of the largest manufacturing sectors.

1.2. This response to the inquiry on consumption based GHG reporting draws on the experiences on MPA Cement which is part of the Mineral Products Association.

Specific Inquiry Questions

2. How do assessments of the UK’s greenhouse gas emissions differ when measured on a consumption rather than a production basis

2.1. Research1 , 2 suggests that the consumption based calculation of the UK’s GHG emissions shows quite a different picture to the inventory of emissions originating from UK based sources and that the problem is not unique to the UK.3

2.2. It is important that the UK begins to look seriously at consumption based emissions reporting. The pressure from globally unequal carbon pricing is increasing on UK manufacturing installations and “carbon leakage” threatens to increase the rate of manufacturing loss from the UK. Annex I shows the cumulative burden of carbon taxation on UK cement manufacture in 2013 when the UK’s Carbon Price Floor is introduced.

2.3. Over the period 2001 to 2010 sales of cement have decreased by 26% but imports by non GB manufactures have increased by 10%. As a result the market share of non GB manufacturer imports has risen from only 3% in 2001 to 13% in 2010 (Annex II). At present the UK GHG statistics would translate this into a reduction of emissions.4 Clearly this would misrepresent the UK’s GHG “footprint” emissions and lead to potentially false claims about the UK’s contribution to the mitigation of climate change.

3. Is it possible to develop a robust methodology for measuring emissions on a consumption rather than production basis and what are the challenges that need to be overcome to deliver this?

3.1. In the UK, verified data is available on cement manufacturer and the emissions associated with its production emissions. It would not be too difficult to estimate the emissions from imported product as the product is produced to tight specifications, placed on the market only when complying with a harmonized European standard. Cement product types are therefore relatively homogenous, especially for the emissions intensive intermediate product, clinker.5

4. What are the benefits and disadvantages associated with taking a consumption-based rather than production-based approach to greenhouse gas emissions accounting?

4.1. The benefits are clear in that consumption based emissions reporting will more closely reflect the carbon footprint of the UK. It will encourage locally based manufacture and help secure UK manufacturing jobs. It will improve security of supply for strategically important materials such as cement used for construction and lime used for drinking water treatment and steel manufacture. It will help to prevent the migration of skills outside of the UK.

4.2. The principle disadvantage to a consumption based approach is that in the short term it will not be as accurate as production based accounting.

5. Is there any evidence of industry relocating from the UK to other countries as a result of UK climate change policy?

5.1. Most of the UK cement producers are owned by global companies with head offices outside of the UK. These companies have closed plants in the UK in recent years and issued announcements6 that investment is being put on hold because of increased pressure from carbon taxation. This is at the same time that imports of cement are increasingly made up from companies that do not manufacture in GB. The amount of cement imported by companies that do not have cement manufacture in GB has increased dramatically over the period 200110, as illustrated in Annex III.

5.2. Moreover, it is important that investors are not given the signals that it is acceptable to invest in less carbon constrained nations and import goods into the UK. At a time when economic growth is vital to the UK economy the signals for investors are of paramount importance.

6. Would it be (a) desirable and (b) practicable for the UK to adopt emissions reduction targets on a consumption rather than production basis?

6.1. (a) It is certainly desirable, primarily for those companies that are vulnerable to carbon leakage and that operate in the EU Emissions Trading Scheme. It is desirable because it would show that in many cases the climate change impacts of material consumption are increased by adding the transport emissions when the products are imported.

6.2. Furthermore it is desirable so that purchasers and specifiers of material use in the UK are aware of the additional carbon impact of transport and are encouraged to buy locally produced goods.

6.3. (b) At the macro level it is practical to adopt emission reduction targets based on consumption rather than production. Initially the data will not be as accurate but will still provide a truer picture of the UK’s climate change impact.

7. What are the potential implications at the international level of the UK adopting a consumption- rather than production-based approach to greenhouse gas emissions accounting?

7.1. There is no reason why consumption based emissions accounting should create any negative implications at the international level. It will not create a barrier to trade but will make trade more sustainable with increased transparency.

7.2. International GHG accounting would have to remain on a production basis at the country level to ensure that there is no double counting.

8. Are there any other issues relating to consumption-based emissions reporting that you think the Committee should be aware of?

8.1. Consumption based emissions reporting will build understanding of the UK’s carbon footprint and allow carbon leakage of UK operations to less carbon constrained economies to be more closely monitored. It may also facilitate carbon based border tax mechanisms to address such distortions.

October 2011`

Annex I

Annex II

Annex III

1 Carbon Trust 2011 – International Carbon Flows.

2 Policy Exchange 2010 - Carbon Omissions Consumption‐based accounting for international carbon emissions. Andrew Brinkley & Dr Simon Less.

3 Glen P. Peters, Jan C. Minx, Christopher L. Weber, and Ottmar Edenhofer. Growth in emission transfers via international trade from 1990 to 2008. Proceedings of the National Academy of Sciences of the United States of America. May 24, 2011 vol 108 no 21 8903-8908.

4 If we consider sales and production to be the same for the purposes of this example.

5 Portland Cement clinker is ground into a fine powder with added gypsum to form the cement product. Clinker can also be ground with other “cement-like” by-products and waste to produce other cement types.

6 14 Feb 2008. Lafarge announce 1 billion investment hold in Europe citing carbon taxation as an uncertainty.

Prepared 16th April 2012