Cost-Efficient Decarbonization of Portland Cement Production

Abstract

Accounting for nearly 8% of global annual carbon dioxide (CO2) emissions, the cement industry is considered difficult to decarbonize. While a sizeable number of abatement levers for Portland cement production is becoming technologically ready for deployment, many are still viewed as prohibitively expensive. Here we develop a generic abatement cost framework for identifying cost-efficient pathways toward substantial emission reductions. We calibrate our model with new industry data in the context of European cement plants that must obtain emission permits under the European Emissions Trading System. We find that a price of €81 per ton of CO2, as observed on average in 2022, incentivizes firms to reduce their annual direct emissions by about one-third relative to the status quo. Yet, these incentives increase sharply at a carbon price of €126 per ton. If cement producers were to expect such carbon price levels to persist in the future, they would have incentives to reduce emissions by almost 80% relative to current emission levels. JEL Codes: M1, O33, Q42, Q52, Q54, Q55, Q58