Targets and compliance options for Canadian cement operations

1. Targets and compliance options for Canadian cement operations Angela Burton, Director – Government Affairs Cement Sustainability Initiative COP11 Side Event Montreal, Canada December 5, 2005

2. Context • Cement and concrete industries contributed approximately $6.6 billion or about .52% of total Canadian GDP in 2004 • Canadian Portland production 13.8 mmt in 2004 • Portland cement exports to US above 5 mmt in 2004 • Cement operations in 5 of 10 Canadian provinces • Federal government has constitutional jurisdiction to implement international environmental agreements • Provincial governments have constitutional jurisdiction over natural resources and industry

3. Continuous improvement: Direct GHG per tonne down 7% since 1990 Reduction in overall energy intensity by 12% since 1990 Product demand increased by 24% Longstanding constructive dialogue with governments based on four elements: Process limitations / energy efficiency Alternative fuels / energy recovery Industrial by-products Technology investments Action on Climate Change

4. Total Canadian emissions were 740 Mt in 2003, an increase of 24% over 1990 This is 180 Mt above our Kyoto Protocol target of 6% below 1990 or 560 Mt average annual emissions between 2008 and 2012 GDP has grown by more than 42% since 1990, for an average decrease in emissions intensity of 1% per year The greatest contributors to Canadian emissions are the energy (37% or 275 Mt) and transportation (24% or 180 Mt) sectors These two sectors are responsible for nearly all growth in Canadian emissions since 1990 The cement industry contributed 11 Mt or just under 1.5% of Canada’s total emissions in 2003 Canada’s National Inventory

5. Climate Change Plan for Canada • The Climate Change Plan for Canada, released in April 2005, articulated 6 key areas for action:

6. Covers energy, mining and manufacturing sectors, including electricity, upstream oil and gas, transmission, refining, mining, smelting, pulp and paper, cement, steel, chemicals Elements of the LFE system include: Regulated intensity targets based on projected 2010 emissions Access to a variety of domestic and international market based compliance options Mandatory monitoring and reporting subject to auditing and verification Guaranteed $15 per tonne compliance options BATEA standard for new facilities and modernizations Large Final Emitters System

7. Draft drafting instructions for cross cutting regulations released for public comment prior to COP 11 Sector specific regulations are being developed based on LFE target setting criteria: Fixed process emissions = 0% reduction target Combustion emissions = 15% reduction target Total target not to exceed 12% for any sector Cement industry is finalizing details of an approach that meets the above criteria and: Is based on clinker emissions intensity Builds the incentive to reduce clinker to cement ratio into regulation Acknowledges reductions from 2000 baseline Cement Industry Regulation

8. Central to Canadian market liquidity Project based, voluntary Broad as possible in terms of project types and accessibility Not intended to produce Kyoto compliant units, potential for linking agreements Aggressive timelines for establishing system Many significant issues: Specifications for quantification and verification Time required for development of protocols Accreditation of verifiers Procurement rules for the Climate Fund Capacity building Overall transparency and inclusiveness of process Offsets System – Design

9. Offsets System – Project Cycle

10. Canada faces most significant challenge to achieve national target of any Annex B country LFE system is most advanced aspect of Canadian plan, however some issues and details yet to be resolved Cement industry has made progress towards establishing regulatory certainty for the first commitment period More significant issues remain with respect to domestic emissions trading, in particular the offsets system THANK YOU Conclusion