Michael McSweeney, Cement Association of Canada (CAC), explored the Canadian cement industry, and looked at how Canada is dealing with the climate change challenge.
In December 2016, Canada’s First Ministers adopted the Pan Canadian Framework on Clean Growth and Climate Change—a joint federal-provincial roadmap to “lead Canada toward a prosperous low carbon and climate-resilient future”. The cornerstone of the agreement includes a commitment to a national price on carbon, building on the carbon pricing systems already in place in Canada’s most populous provinces. Equally significant for the cement sector, the framework commits to historic investments in green infrastructure, public transit, and clean technology and innovation.
The Canadian cement and concrete industry has welcomed these developments and continues to play its longstanding role in supporting the design and implementation of climate mitigation and adaptation policies, including carbon pricing. The CAC’s objective is to help federal, provincial, and local governments rise to the climate change challenge in a manner that preserves and enhances the competitiveness of the sector, while incentivizing solutions that both reduce greenhouse gases (GHGs) from the manufacture of cement, and support a low-carbon and climate-resilient-built environment through strategic lifecycle-driven investments in infrastructure.
Carbon pricing and cement sector competitiveness Carbon pricing in Canada: As of January 2017, all but one cement facility in Canada operate in a provincial economy that has priced carbon. The CAC’s cement facilities are subject to a dollar/t carbon tax applied directly to fossil fuels:
- British Columbia: 2 facilities’ price is CAN$30/t tax
- Ontario- and Quebec: facilities, under the Western Climate Initiative’s (WCI) linked cap-and-trade system, have CAN$18/t.
- Alberta: facilities are subject to a hybrid-carbon-pricing scheme: fixed carbon price of CAN$20/t—rising to CAN$30/t by 2018—but, where Emissions-Intensive Trade-Exposed sectors (EITEs) like cement will benefit from output-based allocations indexed to intensity benchmarks in a manner similar to cap-and-trade systems.
At the national level, Canada has committed to a 2030 GHG reduction target of 30% below 2005 levels, and to using carbon pricing as one of the tools to get there. In October 2016, the federal government announced that it will backstop existing provincial pricing systems with a minimum national carbon price. Beginning in 2018, the federal government will impose a price on carbon in all provinces that do not have an equivalent pricing system in place, starting at CAN$10/t and rising in CAN$10 increments to CAN$50/t by 2022. The scope of the federal price is to be modeled on British Columbia’s carbon tax (i.e. applied directly to fossil fuels and not broader categories of emissions, such as non-combustion industrial process emissions). Importantly, the federal government has indicated that the equivalency of provincial systems with the federal price will be evaluated on price—also price coverage, stringency, provincially legislated GHG reduction targets, and the presence of other provincial policies that support emissions reductions.
Protecting the competitiveness of Emissions-Intensive Trade-Exposed sectors (EITEs): The fact that cement is a highly emissions-intensive, trade-exposed industry has been well-documented internationally and in Canada, by such groups as Clean Energy Canada, Sustainable Prosperity, and the EcoFiscal Commission (Click logo and 2 images to link to website and 2 PDFs). A carbon price that applies to cement facilities domestically, but not to competing facilities outside of the country, reduces the local industry’s competitiveness against imports, as well as in export markets.
Put simply, cement manufacturers cannot transfer the cost of carbon pricing to the price of cement and remain competitive against cement manufactured in non-carbon-priced markets. For example, British Columbia’s carbon tax nearly doubles the cost of traditional kiln fuels and has resulted in significant loss of market share against imports from the US and Asia. It has also had the compounding effect of discouraging investment in the sector, since cement manufacturing facilities in British Columbia must compete for capital with other facilities in the corporate portfolio operating around the world.
After a year of analysis of the competitiveness and leakage challenges created by British Columbia’s carbon tax, the coalition recommended that the British Columbia government adopt an output-based allocation system for EITEs.
- Free allowances, or their output-based allocations equivalents, are the cornerstone strategy for preventing leakage in EITE sectors.
- As the intensity benchmarks used to establish the number of free allocations that a cement facility receives decline over time, leakage and competitiveness challenges remain.
- The cost of compliance will ultimately tip the balance in favor of cement in/from non-carbon-priced markets.
- Some market-ready solutions for reducing GHGs in cement manufacturing face other market and regulatory barriers.
The Canadian cement industry has been working hard to identify and address these barriers through regulatory and policy reform, as well as by leveraging carbon revenues to support investments into LCF infrastructure and other low-carbon technologies.
Low-carbon strategies (LCF) for the cement industry; Alternative low carbon fuels: In comparison to leading international markets, fuel substitution rates at Canadian cement facilities are low: 8-12% across the fleet. There are few market incentives to divert waste from inexpensive landfills toward more environmentally friendly solutions, thereby limiting access to significant and sustained volumes of LCF materials. In addition, regulatory and social license barriers have reduced incentives for cement manufacturers to pursue LCF investments.
As part of engagement on carbon pricing, it has been possible to attract regulatory reform as well as financial support for transitioning to lower carbon fuels. British Columbia and Ontario facilities are benefiting from a five-year fund—The Climate Change Action Plan—to invest in facility-level LCF infrastructure and market development, to help coal-intensive sectors transition to lower carbon fuels. These investments could help ease the competitive impacts of transitioning to lower carbon cement production and put the Canadian fleet on a path toward best-in-class low-carbon fuel use.
Portland limestone cement: The Canadian cement sector recently came together to promote portland limestone cement (branded as ContempraTM) as a no-regrets opportunity to reduce GHGs from concrete. ContempraTM cement reduces the GHG footprint of concrete by 10%, offering immediate carbon reductions from construction projects, while maintaining the same level of strength and durability as regular concrete. If adopted as a full replacement for all cement sold in Canada, ContempraTM could yield annual CO2 reductions of up to 900,000 t, at no additional cost. A significant component of climate change engagement has therefore been focused on helping to identify lifecycle-based procurement strategies and tools that can identify and incentivize significant GHG reduction opportunities in the built environment.
Carbon capture and utilization: The cement sector is slowly benefiting from the development of innovations in clean technology and investment focused on long-term carbon capture and utilization solutions. A facility in St. Marys, Ontario has attracted significant excitement with its algae-based carbon capture system, Pond Technologies, which captures flue gas as a feedstock for algae—subsequently processed into other salable commodities such as biofuels, nutritional supplements, and agricultural feedstocks. Carbonated concrete is also drawing interest to move Canada closer to carbon-neutral and/or carbon-negative concrete products and systems on a lifecycle basis.
It is important that governments understand that they will require time to mature and scale. It is essential that industries maintain a competitive playing field, particularly in the context of carbon pricing, and think creatively about the role of public procurement in drawing new low-carbon technologies into the market.
LCA for low-carbon, climate-resilient infrastructure: Governments have made a significant commitment to renewing and modernizing Canada’s infrastructure, with a view to facilitating a transition to a low-carbon climate-resilient economy. It must be diligent in ensuring that cement is understood as a strategic asset in the effort to reduce GHGs and make communities more resilient to the impacts of climate change. In this effort, lifecycle costing and assessment (LCCA/LCA) is the most important ally in demonstrating the economic, social, and environmental value that the strategic use of concrete can offer to a huge variety of infrastructure projects. Multivariable thinking must be integrated into core planning and tendering frameworks used by public procurement agencies so communities may benefit from cost-effective, low-carbon, and climate-resilient infrastructure investments.
The cement and concrete industry is working hard with a variety of infrastructure, environmental, cleantech, and stakeholders, to help ensure that Canada’s infrastructure investments return the greatest possible value to communities by integrating three lifecycle-based screens into all infrastructure investments. Full economic-lifecycle-cost assessment, rather than the initial cost framework, guides most infrastructure decisions today. While there is now an abundance of lifecycle data and tools, a lack of consistency in boundaries, methodologies, and robustness can impede credible full lifecycle carbon assessments, causing confusion in the marketplace. With the exception of pavements, there currently exist few robust yet accessible tools to properly inform an integrated infrastructure design and decision protocol.
These challenges could be overcome with a modest investment to integrate, refine, and standardize a lifecycle-carbon platform, and fill in remaining lifecycle-inventory information gaps. Work underway at MIT, the Athena Sustainable Materials Institute, and the Risk Sciences Institute to amass lifecycle costing data and tools, making it easier to accommodate uncertainty around the impacts of any given project.
Integrated approach should also take into account climate change and the need for increased resilience in infrastructure. New studies from MIT show that failing to accurately value the risk to infrastructure from disasters—more extreme weather—can have a dramatic impact on the lifecycle cost and carbon performance of a given project (e.g. premature replacement or repairs).
Conclusion: Throughout history, concrete has been an essential material in the building and modernization of economies around the world, and is poised to become an even more valuable commodity as society marches toward a more sustainable, more resilient and more prosperous low-carbon future. As an industry that offers a host of expertise, affordable solutions, and innovations for the low-carbon and climate-resilient communities of the future, the climate agenda is an important opportunity for the sector.
For the entire WorldCement.com online article titled “Rising to the challenge”, please go to: https://www.worldcement.com/special-reports/03072017/rising-to-the-challenge/.
For the the Pan Canadian Framework on Clean Growth and Climate Change website, please go to: https://www.canada.ca/en/services/environment/weather/climatechange/pan-canadian-framework.html
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