Cement, Carbon and the Cost of Cities

Published: Monday, September 12th, 2016 by Lenora

This week’cement_brickss business section in The Economist highlighted “Cracks in the surface” about the carbon footprint and resource intensity of cement companies, as well as efforts to green the industry. The magazine’s comment follows the June release of CDP’s report “Visible Cracks,” which analyzes carbon mitigation efforts and vulnerabilities in the cement industry.

The world’s rapidly growing developing cities depend on cement because concrete, in which cement is the key input, is the most widely used building material in the world. Governments, banks and investors who are financing real estate and infrastructure in these cities should consider their exposure to the costs of carbon mitigation. Construction technology, such as the use of concrete formwork to build rapidly and efficiently, currently drives urban infrastructure. The same technology drives low-cost industrial home-building.

The cement industry’s exposure to carbon emissions matters more than industry is ready to admit. G20 governments are moving forward with commitments made at COP21, which included engaging the business, finance and investment worlds to do their (considerable) part. That directive was re-emphasized in the G-20 communiqué this past week.

Neither The Economist nor CDP find much praise for major sustainability successes in the global cement industry, mostly highlighting the broadly good behavior of the now merged LafargeHolcim. Otherwise, carbon capture remains too costly. Energy efficiency is improving slowly. The Economist’s article also points out diverging internal carbon prices while CDP suggests that even a low carbon price could wipe away billions in market value.

In all fairness, most resource intensive corporate behemoths across industries are just starting to analyze their carbon exposure – let alone divulge that analysis and act aggressively to address exposures. That’s no excuse for ignoring the urgency of a response.

New technology and materials are chipping away at industry by recycling existing material, manufacturing new aggregates and cutting back on intensive limestone quarrying.

As long as concrete remains the material of choice for building globally, the industry may believe it can afford to make incremental changes and not fear alternatives till it can buy its way out of any tight spots.

Those charged with building new cities should be on notice that the industry’s carbon exposure could mean higher costs to build critical infrastructure as emissions reductions policies and mechanisms eventually take their toll. Those projects that can least absorb the higher costs will be most vulnerable.