Select Committee on Science and Technology Minutes of Evidence

Supplementary memorandum by The British Cement Association

13.   Can you summarise trends in your industry since 1990, both as regards total energy consumption and greenhouse gas emissions?

  The trends in specific energy consumption and CO2 emissions are given in the following graph and table.

Data on CO2 emissions from cement manufacture
19902002 Reduction %
tonnes, cement13.75M 11.54M(16)
tonnes, CO213.22M10.15M (23)
total tonnes CO2/tonnes cement0.96 0.88(8.5)
fuel tonnes CO2/tonnes cement0.435 0.355(18)
Note: The "fuel tonnes" relates to the CO2 emissions from all non-biomass fuels, [ie conventional plus waste-derived fuels], as in the EU ETS.

14.   What proportion of total UK industrial and business greenhouse gas emissions is represented by your industries? How has this changed since 1990 and what changes are predicted between now and 2020?

  In 1990, the cement industry CO2 emissions accounted for 2.19 per cent of the UK total anthropogenic CO2 emissions. By 2002, this had fallen to 1.84 per cent. [Data from National Air Emissions Inventory 1990 to 2002].

  These are the total CO2 direct emissions from the industry of which about 40 per cent is from the fuel, ("fuel CO2"), and 60 per cent from the decomposition of limestone, ("process CO2"), [ie in a typical modern 5-stage precalciner kiln].

15.   How do you monitor and calculate the greenhouse gas emissions produced in your industry? What is the process of verification?

  Involvement in trading of carbon credits through the UK Climate Change Levy, UK Emissions Trading Scheme and the EU Emissions Trading Scheme requires external verification of the components from which CO2 emissions are calculated, ie coal, petroleum coke, waste-derived fuels, and electricity.

  For example, the EU Monitoring and Reporting Guidelines are covered by Commission Decision of 29 January 2004 establishing guidelines for the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council.

  Through the World Business Council for Sustainable Development Cement Sustainability Initiative, WBCSD CSI, the industry has agreed on a global protocol for the reporting of greenhouse gas emissions. This forms the basis of the reporting of emissions in the UK and EU, with certain modifications to accommodate the relevant legislative framework.

16.   How far have such changes since 1990 been as a result of restructuring, changes in output, export of capacity overseas, and so on, and how far as a result of technical developments in energy efficiency?

  The UK industry currently manufactures ~90 per cent of the cement used in the country, but this level of domestic production is under threat from imports from countries in which the financial burdens associated with emissions trading are substantially less. In addition to this competition on the price of cement, cement manufacturers face strong internal pressure from within their own companies for the capital funding of new plant with which to meet increasing demands of low CO2 emissions.

  The installation of new, energy efficient plant, and/or the shifting of production to large modern, efficient kilns requires substantial investment. This is dependent upon securing the requisite funding which in turn demands a high level of certainty in the legislative regime. The development cycle [ie from planning to full scale operation] for plant in the energy intensive sector is many years and is generally longer than the phases of the Kyoto agreement. In the case of cement, this development cycle is ~7 years, and once installed, the plant will have an operational lifetime of 30 years or more.

  Within the United Kingdom, the cement industry is engaged in a £400 million programme of investment in new plant. As part of larger international groups, UK cement companies must compete for funding of capital projects on an international basis, and consequently, any "gold plating" of European legislation or additional national controls provide strong disincentive for investment in UK projects. Uncertainty over future phases of the EU Emissions Trading Scheme has resulted in the postponement of the proposed new cement plant and the installation of a terminal for the import of cement from elsewhere in the group.

17.   What is the scope for further reductions in both energy consumption and greenhouse gas emissions within your industry? What are the main difficulties and the main opportunities you face?

  An analysis of the cement industry in 2002 by the World Business Council for Sustainable Development, (WBCSD), indicated a worldwide potential to reduce CO2 emissions by approximately 30 per cent by 2020 using conventional approaches such as those described above. In order to deliver CO2 reductions of 60 per cent or more by 2050, it indicated that the industry must explore a number of advanced CO2 management approaches, and three potential options are: the use of non-limestone based binders; produce cement and electrical energy on hybrid cement-energy facilities; employ carbon capture and sequestration.

  Cement companies within the UK are investigating the use of biomass as fuels (including energy crops), and the siting of wind power generators adjacent to their quarries.

18.   In assessing the opportunities for reducing energy consumption within your industry, how do you interpret the term "cost-effective"? How far are energy efficiency gains just a by-product of normal investment in improved equipment, and how much of conscious investment?

  Unlike the primary production of aluminium for which electricity is the principal energy source, in the cement industry coal, coke and petroleum coke account for 82.5 per cent of the fuels used on an energy basis.

Energy Source%
Petroleum Coke8.1
Gas Oil1.1
Heavy Fuel Oil<0.1
Natural Gas0.3
Electricity (kilns/grinding)11.0
Waste derived fuels5.0

  The cement industry is continually seeking to reduce energy consumption, improve its energy efficiency and thereby reduce CO2 emissions. Worldwide, the cement industry is responsible for ~5 per cent of anthropogenic CO2 emissions, but within the United Kingdom the contribution is 1.8 per cent. Within the industry, each company is engaged in a programme on continual improvement of its processes through:

    —  Improved kiln control systems;

    —  High efficiency motors and drives;

    —  Improved energy management procedures;

    —  Higher efficiency crushing and grinding techniques; and

    —  Optimization of raw material chemistry.

  Although individually these result in relatively small, progressive reductions in CO2 emissions, together they lead to significant overall improvements. However, large "step changes" in fossil fuel CO2 emissions can only be achieved by replacing fossil fuels with waste-derived fuels, or investing in new plant.

  The replacement of fossil fuels with waste-derived materials provides an important means of reducing CO2 emissions. The range of waste-derived materials used has now expanded from used oils and solvents, sometimes referred to as SLF (Substitute Liquid Fuels), or RLF (Replacement Liquid Fuels), to include: used tyres; pelletized sewage sludge (PSP); meat & bone meal (MBM); packaging (such as Profuel); refuse-derived fuel (RDF).

  The use of these waste-derived material as fuels in cement kilns is an efficient means of recovering their energy content which would have been lost had they been landfilled, or generated CO2 in an incineration process. This avoidance of emissions, such as methane from landfills and CO2 from incinerators, through the use of waste derived materials in the cement industry is an important component in the overall reduction in GHG.

  The development of replacement fuels has been more marked mainland Europe, where from a level of 3 per cent substitution in 1990, the average rate has risen sharply to 12.2 per cent in 2001, and in many countries extremely high levels of waste-derived fuel are used: >80 per cent, Netherlands; >40 per cent, Switzerland, Austria; >30 per cent, Belgium, France, Germany, Norway, (Sweden 29 per cent).

  Typically, the time involved in gaining permanent authorisation for a new fuel is 15-30 months. In addition the up-front costs of plant required to trial are £1 million to £2 million, with trial costs adding a further £600,000 to £800,000. All of these costs are essentially risk capital, which is forfeit if permanent permission is not forthcoming. These lengthy authorization periods have a significant effect on the payback period. Delays between the end of trials and the granting of permits are problematic in terms of continuity of supplies (of alternative fuel to required quality standards) and operational conditions.

  In addition to cutting down CO2 emissions, other significant environmental benefits result from the use of waste-derived fuels: reduced emissions of NOx and particulates; conservation of resources; and avoidance of the use of waste treatment options at the lower end of the waste hierarchy. In 2001, the recovery of energy from 4.37 million tonnes in European cement kilns saved 3.5 million tonnes of coal and yielded significant reductions in stack emissions. Of these wastes, approximately 1/3 was hazardous.

19.   How has the burden of environmental regulation on your industry changed in since 1990?

  The graph below indicate the cumulative effect of European legislative measures in the area of the environment since 1990, [UNICE data].

  In addition, the recovery of energy from the use of waste-derived materials as fuels is subject to the Substitute Fuels Protocol, an extra-statutory provision administered by the Environment Agency.

  Modifications to streamline this procedure were introduced in February 2005, but these controls only apply to the cement and industries, although waste-derived materials are used in a number of industries without these restrictions.

  Furthermore, these are "vertical" controls, applied on a plant-by-plant basis on each occasion when a waste-derived fuel new to a specific plant is used. More appropriate would be "horizontal" controls that used a single assessment of each fuel used in cement kilns, and used this across the industry in conjunction with local stakeholder consultation at a plant level.

20.   How high a priority is energy efficiency within your industry? Do individual companies have energy efficiency representation at Board level? How are investments in energy efficiency measures handled and budgeted?

  Energy accounts for approximately 35 per cent of the variable costs of cement manufacture, and this is strongest driver towards the improvement of energy efficiency, particularly during times of rapidly escalating energy costs. Mandatory measures are counter productive for energy intensive industries such as cement.

21.   How effective have the Climate Change Levy and Climate Change Agreements been in your industry? What progress has been made towards achieving your 2010 targets?

  The industry met its targets in the "target years" of 2002 and 2004, and the graph/table given in response to question 13 indicates that it is on course to meet the 2010 targets.

22.   What impact will EU Emissions Trading have on your industry? How will it interact with the Levy and Climate Change Agreements, both in the initial phase and in phase 2, post-2007?

  As noted in the response to question 16, there is a long investment cycle for the cement industry. This has precluded investment, in addition to that already planned, which is necessary to reduce the impact for Phase 1 of the EU ETS. Thus the effect of the European scheme will be to add costs to our members, since as overall it appears to be unlikely that the Phase 1 allocations will meet the industries needs.

  The interaction of the EU ETS and CCL is a burdensome bureaucratic duplication of effort, which does nothing to further reduce CO2 emissions. There are two different monitoring systems and the rules for interactions between the two for indirect emissions, process emissions and waste fuel derived emissions are convoluted and unnecessarily complex.

  The UK Government presentation to the European Commission recommending the UK "opt out" argued the equivalence CCA and EU ETS on the basis of the same inputs and outputs of both schemes.

  The BCA believes that installations covered by the EU Emissions Trading Scheme should be excluded from the Climate Change Levy, and thereby reduce the duplication of effort by government and industry.

23.   It is widely argued that the most effective way to reduce energy consumption is to increase prices, either across the board, or, if the object is to reduce carbon emissions, through targeted "eco-taxes". What would the impact of such an approach be on your industry?

  The World Business Council for Sustainable Development Cement Sustainability Initiative (WBCSD CSI), estimated that a carbon tax of $50/tonne (

38.9/tonne), an amount implicit in a number of potential (worldwide) government policies would add an average of ~$12/tonne (

9.3/tonne) to the manufactured cost of cement.

  Compared with other materials, cement has the highest CO2 emissions per unit of profit, and along with lime, the highest CO2 emissions per unit of turnover. Furthermore, unlike steel, cement is a low value product with limited ability to absorb additional costs. It is thus very susceptible to any additional carbon dioxide/energy related costs.

  For example, emissions trading at

15/tonne CO2 will approximately double the variable cost of cement production. The value of

15/tonne equates to about the cost of transport per tonne of cement from the Far East, thus placing domestic manufacture at a severe disadvantage.

  [Since emissions trading under the EU ETS came began on 1 January, carbon prices have risen from

4-5 per tonne to about

15-16 per tonne].

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