Executive summary:

Cement is an integral base material for the global economy, but it poses a major climate challenge. Cement production generates 7-8% of global carbon dioxide (CO2 ) emissions and the sector’s emissions trajectory is incompatible with the Paris Agreement goal of limiting warming to 1.5°C above pre-industrial levels.

In recent decades, China has been central to the boom in cement production and its associated emissions. China produces more than half the world’s cement, generating 13-15% of its national CO2 emissions. Therefore, cement sector activity is critical to meeting China’s goals of peaking national emissions before 2030 and reaching carbon neutrality by 2060.

The Chinese economy has above average cement and concrete consumption. China’s cement demand has been falling for several years, and China appears to have reached peak cement production. Demand is likely to continue falling for several decades, bringing significant climate benefits. Still, enhanced demand reduction and elimination of remaining sector emissions are required to meet climate goals.

Successful cement sector decarbonisation requires a ‘whole-of-system’ approach. Significant demand reduction would greatly accelerate emissions reduction. There is considerable potential for enhanced materials efficiency, including optimised building design and extended lifespans; substitution of cement and concrete with materials such as structural steel and timber; and increased circularity through reuse and recycling of cement, concrete, and other building materials.

Concurrent efforts must decarbonise the cement production process, specifically for clinker, which generates 90% of conventional cement’s CO2. Global cement’s carbon intensity has fallen by about a fifth since 1990, mostly through energy efficiency, reduced clinker content in cement, and alternative fuel use. These routes still have significant - but diminishing - emissions reduction potential. Breakthrough technologies, such as alternative binder-based cements, and electricity and renewable-powered kilns, could deliver deeper decarbonisation if they can overcome significant market entry barriers.

Many industry representatives and stakeholders consider carbon capture, utilisation and storage (CCUS) to be cement’s most important emissions reduction route. However, this brings significant cost and technical challenges, and substantial deployment has yet to materialise. Most fundamentally, CCUS overdependence in any sector helps sustain residual emissions and competition for finite CO2 storage. It thus risks mid-century achievement of net zero emissions at a global level, which is critical to reaching the Paris goals. CCUS should be minimised in favour of eliminating emissions at-source.

China’s cement production has a lower than global average carbon intensity, largely due to its lower clinker ratios and high energy efficiency. However, Chinese producers have room to improve in areas including alternative fuel use and, as with global peers, development of deeper decarbonisation pathways.

China faces both universal and nationally specific challenges in getting close to a zero emissions cement sector. The unpriced CO2 generated by conventional cement and the high cost of transitioning industry assets are key barriers. Lack of demand for low emissions cement, restricted green finance, and difficulties coordinating climate action across industry and the broader economy are additional concerns. Chinese companies must also balance climate efforts with falling profitability tied to falling demand. Individual decarbonisation routes face discrete challenges.

Strengthening existing and implementing new policies could help China’s cement sector meet its climate goals. European approaches can serve as valuable reference points in this regard. The European Union (EU) and Germany – a leading EU member state in cement production and climate policy – have implemented, or proposed, a diverse range of policies and regulations related to demand reduction, decarbonising production, and deploying CCUS.

China’s priority on decarbonising cement is to successfully integrate the sector into its Emissions Trading System (ETS). While the EU maintains the world’s most-established and successful ETS, its coverage of cement has not been optimally calibrated for deep decarbonisation thus far. However, coming reforms are set to significantly improve its impact. The European example could serve as reference for China’s ongoing ETS design. Numerous other EU and German policy and regulatory frameworks provide similar opportunities to inform policy- and decision-making.

This report recommends the following actions over the short, medium, and long-term1 to create favourable conditions for deep decarbonisation of the cement sector in China:

Short-term: • Optimise cement’s ETS inclusion • Ensure national cement and building standards are fit-for-purpose • Improve alternative fuel availability and access • Adopt innovative public funding mechanisms • Improve industry access to green finance

Medium-term • Enhance national capacity for demand reduction • Create green lead markets through public procurement and labelling • Ensure a smooth industry transition to a low demand, low emissions future

Longer-term • Support continual technology breakthroughs through R&D • Pursue limited CCUS development • Pursue cooperation on global cement decarbonisation • Build and maintain a supportive and integrated industrial ecosystem

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