The Cement Sustainability Initiative A Sectoral Approach for the Cement Sector

1. DEDICATED TO MAKING A DIFFERENCE The Cement Sustainability Initiative A Sectoral Approach for the Cement Sector December 2007 Patrick Verhagen, Holcim

2. Introduction The Cement Sustainability Initiative (CSI): • is a Sustainable Development project since 2000 by 18 leading cement companies operating in more than 100 countries; • is developing the basis for a global Sectoral Approach (SA) with stakeholders as a way to enable more rapid,equitable and economical GHG mitigation. The intended global SA: • should operate within the UNFCCC; • be compatible with existing and future mechanisms (ETS’s); • assumes similar sectoral agreements in other sectors.

3. Cement demand and associated CO2 emissions are growing, mostly in developing countries. IEA forecasts doubling of production by 2050. Kyoto targets are valid for 2012; the post 2012 global agreement is uncertain. SA’s are expected to be compatible with present approaches (APP, EU) and mechanisms, as well as a transitional step to a global agreement. Context

4. Context • SA’s need emission data soundly based on extensive monitoring, reporting and verification (MRV). • SA’s can contribute to global mitigation by incentivizing company action in developing nations, e.g. with a ‘no-lose’ approach with non-binding targets. • SA’s will require effective government regulations that cover the whole sector.

5. Key Success Factors A successful approach must include: Mitigation SA must deliver tangible verifiable reductions, starting with lower intensity of emissions. Acceptance SA must be accepted by Policy Makers, requiring governments and industry to define sectoral targets and related implementation mechanisms. Global All major economies must participate.

6. Key Elements • Intensity-based • Improve CO2emissions intensity using benchmarks. • Differentiated targets are required. • Clear, simplemetrics • Based on the WBCSD/WRI CO2 protocol. • Simple CO2 intensity metrics: t CO2 / t product. • Any market credits to be fungible with other systems • CDM/JI etc. • ETS’s Cap & Trade allowances based on intensity targets. • Incentives for developing countries with sector-based crediting. • Promote technology development & transfer

7. Current Supporting Actions -four areas- • Policy Development • Stakeholder policy dialogues ongoing in EU, APP and Japan. • Other dialogues foreseen in 2008 in India, USA and East Asia. • Trade associations to lead country negotiations. • Benchmarking methodology proposals to be developed in 2008. • Estimated global sectoral GHG reduction potential with present technology to be presented in 2008. • Data Collection • Common WBCSD/WRI CO2 Protocol data (DONE). • Analysis of 1990, 2000, 2005 data (DONE). • Open platform to accommodate the global cement industry.

8. Current Supporting Actions -four areas- • 3. Capacity building • Protocol training and workshop sessions in China and India. • Development of the CSI approach in India. • 4. Technology Development and Transfer • Process research with institutions and organizations. • Public Sector Partnership on fuel substitution (China). • Support APP program, e.g. Chinese Center of Excellence. • Carbon Capture options.

9. Major Challenges and Opportunities • ‘No-Lose’ in China and India • Who will set and update the benchmarks and stretch/motivating targets? • Verification • Engaging trade associations • Transparent base for defining benchmarks • Fungible with existing and future systems • Promoting sector-based crediting • Place at the policy discussion table