Cement Industry and Climate Change What we (can) do Holcim Group Support Dr. Bruno Vanderborght Vice...

Cement Industry and Climate ChangeWhat we (can) do

Holcim Group Support

Dr. Bruno VanderborghtVice President Climate Protection

Cement Presidents MeetingMontreal, Canada 10 July 2007

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Presidents Meeting July 10th, 2007Holcim Group Support

Agenda

Business realities

« Political realities »

Getting the Numbers Right

Invitation for Participation

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“Political realities”: Emissions continue to grow (faster)

Increasing political awareness of the need to combine socio-economic development with reduction of CO2 emissions and energy consumption, world-wide

Global growth of CO2 emission: 1990 – 2000: 1,0 % / year

2000 – 2005: 3,3 % / year

Global energy intensity of GDP and CO2 intensity of energy mix have not improved anymore since 2000

Actual growth of CO2 emission since 2000 is faster than the most energy intensive scenario of the IPCC

Source: National Academy of Sciences of USA, May 22, 2007 0700609104

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“Political realities”: Differentiated responsibilities

Status 2004 Population CO2 cumul CO2 emission CO2 growth

Annex 1 20 % 78 % 60 % 27 %

Non Annex 1 80 % 22 % 40 % 73 %

Annex 1 + China 40 % 85 % 78 % 71 %

Annex 1 includes FSU Source: National Academy of Sciences of USA, May 22, 2007 0700609104

Annex 1 world accountable for large majority of historical accumulated CO2 in atmosphere and current emissions

Emerging economies cause majority of emission growth

Annex 1 plus China are dominant in current and future emissions

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“Political realities”: Tendencies for post 2012

Global geopolitical pressures & tendencies for post 2012:

1. Annex-1 countries and companies are expected to demonstrate action first, and contribute financially for the clean(er) development of non-Annex 1 countries and companies

2. Largest non-Annex 1 countries (China, India, Brazil, Mexico, South Africa) to accept efficiency objectives / commitments for post 2012

3. Annex-1 countries are expected to further contribute financially for adaptation and clean development in other non-Annex 1 countries

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Agenda

Business realities




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Business realities for emission reduction

Companies & society can improve average CO2 intensity (CO2 per unit product, production or consumption) through using new, more efficient installations, products and services

But can only reduce absolute emissions through closing existing, CO2 and energy intensive installationsand building new ones with an improvement of efficiency that exceeds the growth of production.

Closing existing assets affects the (depreciated) “cash cows”, causes stranded assets and impacts asset value

This will only happen with the adequate economic and financial incentives that inevitably must go “beyond business-as-usual” mechanisms.

These incentives can only come from mandatory, government regulated market mechanisms.

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Business realities: The basis of the incentives

The ultimate basis for the incentives to reduce is: the regulatory scarcity of emission rights in Annex 1 countries, the flexibility and the price created through Emissions Allowance

Trading the opportunity to create additional emission rights in non-Annex 1

countries

The Business impact, risks and opportunities are defined by: The total cap on Emission Allowances (to countries via the Kyoto

Targets, for companies via ETS total cap) The Allowance Allocation to companies in any ETS The regulatory tools to demonstrate Additionality and the Baseline in

CDMPlus The possibility to pass the cost to the consumer And law enforcement

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Business Future: Performance Based Systems

The total cap on Emission Allowances (to countries and companies) The Allowance Allocation to companies in any ETS The demonstration of Additionality and the definition of the Baseline in CDM

Should all be based on Sectoral Performance Standards (CO2 per unit of product(ion)), i.e. a Sectoral Approach, or sectoral benchmarking.

This is currently not yet the case, notably due to a lack of reliable, representative information on CO2 and energy Performance of products and production.

Hence the project: “Getting the Numbers Right”

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Agenda

Business realities




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The cement industry needs to know

The cement industry world-wide, regionally, locally needs to know:

Where are we? From where do we come? Where can we go? Where do external stakeholders expect us to go? In CO2 emission and energy performance (CO2 / ton product) In Absolute CO2 emissions (ton CO2 / year) With existing and with new technologies At what cost and at what value?

But the cement industry does not (yet) have the information to answer those questions,

And others (IEA, IPCC, academia) assert to know and as such risk defining our future obligations

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Cement Sustainability Initiative: Climate Protection

1. Global harmonization of monitoring and reporting of CO2 emissions and energy consumption: WBCSD-WRI-CSI cement protocol

2. CSI members: Corporate public reporting, commitment & verification (as of 2006)

3. “Getting the Numbers Right”: World-wide Cement Industry CO2 and Energy Information System for:

I. Need to know

II. Communication

III. Improvement of Clean Development Mechanism (CDM): Performance Standards for demonstration of additionality and definition of baselines

IV. Improvement of Emissions Trading System (ETS): Performance Standards for allowance allocation

V. Scenario analyses

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GNR Objective

The objective of the CSI project “Getting the CO2 numbers right” is to develop representative statistical information on the energy and CO2 performance of clinker and cement production worldwide and regionally to serve the need of internal and external stakeholders.

CO2, Thermal energy, Electric Energy, Clinker / Cement, Fuel mix, AFR, production, kiln type & capacity

Know where we are, Communication, Credibility, National & Regional initiatives, CDM, Policy shaping, post Kyoto

CSI – CEO approved October 2006

CSI – Expansion with regional federations and other companies

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From Data to Information, Knowledge, Action

Basis of the system =

Data at plant level (clinker, grinding, clinker substitutes) Data at national company level (including all clinker substitute

material inputs)

Data aggregation to information

Global, regional, national Technology Time (1990, 2000, 2005, … updates) Different statistical analyses

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Key concerns

Quality of information, and data

Complete for each participant (all plants, all parameters) Full compliance with CSI Cement Protocol = Standard Accurate Representative In the future: external assurance

Guarantee of confidentiality of sensitive information

Guarantee of compliance with anti-trust legislation

Compliance with “Code of Conduct”

Outsourcing to International Service Provider

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Data collection: Plant level (clinker / cement)

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Data collection: Plant level (clinker / cement)

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Data collection: Country - company level (cement)

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Project Planning

Service Provider = PriceWaterhouseCoopers IT systems are developed and in test period. Launch end of this week Contracts: Final editing: Ready for signature end of this week July 2007: data entry for CSI member companies October 10th: first reporting to CEOs of CSI member companies Expansion to all European countries through Cembureau imminent

Invitation for expansion of participation to all cement federations world-wide

Periodic update, expansion and further development

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CSI Members (with headquarters country)

Original Members

1. CEMEX (Mexico)

2. Cimpor (Portugal)

3. HeidelbergCement (Germany)

4. Holcim (Switzerland)

5. Italcementi (Italy)

6. Lafarge (France)

7. Siam Cement (Thailand)

8. Taiheiyo (Japan)

9. Votorantim (Brazil)

Additional Members since 2002

1. Ash Grove Cement (USA)

2. Cimentos Liz (Brazil)

3. Cementos Molins (Spain)

4. CRH (Ireland)

5. Grasim Cement (India)

6. Portland Valderrivas (Spain)

7. Secil (Portugal)

8. Shree Cement (India)

9. Titan (Greece)

Communicating Organizations

1. Cembureau (Europe)

2. VDZ (Germany)

3. PCA (USA)

4. CIF (Australia)

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Agenda

Business realities




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Participant: What you give & What you get

1. What you give. Input data on CO2 and energy performance of all your plants

according to CSI-Protocol According to contractual agreements

2. What you get. Access to all results of analyses on consolidated data Right to use the results according to the contractual agreements Right to ask additional analyses

3. Cost of participation. Development and operation paid by CSI core members Expansion paid by participants from Annex 1 countries Participation from federations and companies in non-Annex 1

countries is free of charge Cost of additional requests on case by case

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Contractual arrangements

1. Master Agreement between PWC and WBCSD-CSI. Scope of work Roles & responsibilities of PWC, participants, WBCSD-CSI Fees and payments Limitation of responsibilities of WBCSD-CSI Project Management Committee IT Service Level Agreement

2. Individual Agreement between PWC and each Participant. Mirroring the Master Agreement Confidentiality and Anti-trust Agreement Code of Conduct Project Management Charter

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GNR Project management

Howard Klee, CSI secretariat: [email protected]

Bruno Vanderborght: TF1 co-chair: [email protected]

Manuela Ojan: TF1 co-chair: [email protected]

Francisco Centeno: LD sponsor: [email protected]

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