Cementing
the global
net-zero transition

Prepared by Climate Bonds Initiative.

Contents

Table 1. Policies impacting the cement industry across the value chain1

1. Context 3

UPSTREAM

MIDSTREAMDOWNSTREAM

Low-carbon energy
and infrastructure

Low-carbon
production processes

Increase demand for
low-carbon cement &concrete and enhance its
circularity

Accelerate renewableenergy deployment

Establish carbon contracts fordifference

Implement green
public procurement

Ensure strategic and
1.5°C-aligned CCS
infrastructure for the
cement industry

Mandate credible transition plansat the entity-level

Improve waste
management and circular
economy requirements

Strengthen carbon pricing with areformed framework against therisk of carbon leakage

Scale up off-takeagreements

Guide green investment throughstandards and sector-specificcriteria and taxonomies

Establish a “green window”
for zero/near-zero carbon
cementIntroduction 3
Sustainable finance markets are a criticalfinancing tool 3
The role of standards and sector-specificcriteria 4
2. Cementing the net-zero transition:
key decarbonisation options andinvestment requirements 5
Understanding cement
sector emissions 5
Technologies and solutions are available
today that can kickstart the transition
while emerging ones can complete thepicture 6
3. Policies to ensure a credible
transition 8
Upstream policies 8
Midstream policies 8
Downstream policies 10
4. Outlook 12
Annex: Climate Bonds Initiative Cement
Criteria 13

List of acronyms
CBAM Carbon border adjustment mechanism

KPI Key performance indicator

CCfD Carbon Contracts for Difference

LEILAC Low Emissions Intensity Lime
And Cement

CCS Carbon capture and storage
CCU Carbon capture and usage
CEF Connecting Europe Facility
CEMBUREAU European Cement Association
CLT Cross-laminated timber
CO2 Carbon dioxide
DNSH Do No Significant Harm
EOR Enhanced oil recovery
ETS Emissions Trading System
EU European Union
GCCA Global Cement and Concrete Association
GPP Green public procurement
GSS Green, social and sustainability
IEA International Energy Agency
IIGCC Institutional Investors Groupon Climate Change

MSW Municipal Solid Waste
NGEU Next Generation EU
PCIs Projects of Common Interest
PSF Platform on Sustainable Finance
RED Renewable Energy Directive
RRF Recovery and Resiliency Facility
SLB Sustainability-linked bond
TEG Technical Expert GroupTEN-E Trans-European Networks for Energy
TSC Technical screening criteria
UNFCCC United Nations Framework Convention
on Climate Change
UNIDO United Nations Industrial
Development Organisation
UoP Use of Proceeds
WB World BankIMF International Monetary Fund
IPCC Intergovernmental Panelon Climate Change

Cementing the global net-zero transition Climate Bond Initiative21. Context
Introduction
Climate change is a global emergency that
goes beyond national borders, requiring
international cooperation. The 2015 United
Nations Framework Convention on Climate
Change (UNFCCC) Paris Agreement aiming tolimit the average global temperature rise to
1.5°C is a testament to this. Currently, 195 out
of 198 Parties to the UNFCCC are Parties to
the Paris Agreement.2
Despite commitments to the Paris Agreement,
limiting global warming to 1.5°C is beyond
reach without immediate and deep emissions
reductions across all sectors. To achieve
this limit, all sectors of the economy must
decarbonise rapidly, reducing emissions by
nearly half by 2030 and to net zero by 2050. As of
November 2022, around 140 countries had statedor considered net-zero targets, representing
about 90% of global emissions.3

Providesclarity with
science-based
criteria

Supports
uptake ofdecarbonisation
leversCement production accounts for around
7% of global emissions and it is the second
largest global industrial emitter after steel.4
Achieving the goals of the Paris Agreement will be
impossible without decarbonising sectors suchas cement and yet, the carbon intensity of global
cement production has only slightly decreased
in recent decades, and it is significantly behind a
Paris-aligned pathway.5
For cement and other industrial sectors(known as hard-to-abate), the barriers todecarbonisation are much higher than others
due to technological, economic, or sociopolitical reasons. The decarbonisation of
cement is not just a technological challenge but
also a financial and political one. It will require
a new range of decarbonisation levers that are
identified and guided through sector criteria,
financed by the financial sector and promoted
and de-risked with policy support.
Policy will impact the adoption of all theselevers – technological or financial. This shortpaper provides an easy-to-implement guide tothese policy levers available to policymakers andgovernments around the world.

Supportive
policyStimulates
flow offinance

Supports
technology
development

Sustainable finance markets
are a critical financing tool
Labelled debt (green, social,sustainable, sustainabilitylinked and transition bonds– GSS+) has grown from a
conceptual idea to a major
global market. Climate Bonds
recorded cumulative aligned GSS+ volume of
USD4.2tn by the end of the first half of 2023.6
Given their forward-looking key performanceindicators (KPIs), sustainability-linked bonds(SLBs) are inherently transition focused. SLBs
represent an opportunity for entities to link
their net-zero targets with access to sustainablefinance. However, many early examples of SLBs
and transition bonds have raised concerns about
greenwashing in the market because the targets
were not material or ambitious.7 There are otherconcerns about the relevance and reliability oftargets which are set by the issuing entity and are
therefore difficult to benchmark against peers or
wider goals such as the Paris Agreement targets.
Around USD4.3bn SLBs have been issued in
the cement sector in 2020-2023 (as of June2023). Despite the growth of these instruments,
their potential has not been fully exploited in
hard-to-abate sectors.

Cementing the global net-zero transition Climate Bond Initiative

Heidelberg Materials SLB
and its potential alignment
with Climate Bonds cement
Criteria
Heidelberg Materials
issued its first SLB in
January 2023.15 The
EUR750m deal had acoupon rate linked toCO2 emissions per tonneof cementitious material up to 2026 and2030. Heidelberg Materials aims to reduce
CO₂ emissions (scope 1) to 400 kg/t ofcementitious material by 2030, around 30%
below 2021 levels.16
This could be in line with Climate Bonds
cement Criteria threshold of 463 kg CO2
emissions (scope 1 and 2)/t of cementitious
material by 2030 (see Annex).17

Less than 2% of SLBs issued have originatedfrom entities operating in the cement
sector.8 In part, the potential of SLBs is not
being exploited due to the lack of standards andparticularly sector-specific criteria. The Criteria
developed by Climate Bonds allow investors toverify the Paris alignment of SLBs more easily.

3

The role of standards andsector-specific criteria
Climate Bonds has designed
science-based guidance at
individual sector level. Thiscan assist stakeholders to
identify companies, assets andprojects following 1.5°C-aligned
pathways and support informed investment
decisions consistent with Science Based Targets
initiative (SBTi) and the Transition Pathway
Initiative (TPI) approaches.9
In the absence of formal consensus bygovernments or industry bodies, the wide varietyof actions, targets and commitments emerging
from industry players may not align with a 1.5°C
future. Risks include investing in projects toextend the life of high-emitting assets that could
rapidly become stranded.
Several pathways for cement decarbonisation
have been modelled.10 These are basedon different scenarios and assumptionsand vary depending on the regional focus.
Consequently, the paths differ but provide a
valuable indication of the potential to reducegreenhouse gas (GHG) emissions and the roleof low-carbon technologies.

Ensuring that capital flows towards net zeroaligned projects is an essential piece of the
puzzle to decarbonise cement.12 The Climate
Bonds Standard and Certification Scheme is aneasy-to-use screening tool that provides a clear
signal to investors and intermediaries on the
climate integrity of Certified Climate Bonds. Thiscan be used to screen assets and capital projects
so that only those with climate integrity will becertified through their contribution to climate
mitigation, and/or to adaptation and resilience
to climate change. The Climate Bonds Criteria
also include cross-cutting criteria addressing
other impacts by setting qualitative measures
such as specific criteria for the use of biomassor hydrogen as a fuel, waste-derived fuels andcarbon capture and storage (CCS) technologies,
as well as Adaptation and Resilience
requirements, see Annex.13
In April 2023, Climate Bonds expanded its
Standards and Certification Scheme. It now
also allows for the Certification of non-financial
corporates, assets, and sustainability-linked
instruments. The cement sector criteria also
include a pathway that can enable Certificationof an entity (a cement company or part of acompany) and any debt instruments issued bythem including SLBs.14

The cement sector transition to a 1.5°C-aligned
pathway will be achieved by implementing a mixof technologies in both existing and new facilities.
Scientific standards, such as the Climate
Bonds Standards and sector-specificeligibility Criteria, will guide investment incredible transition activity and provide asset
owners with the right path to decarbonise
existing facilities or switch to new low-carbon
cement production plants. Policymakers canalso utilise them in setting regulations andincentives for sector decarbonisation.11

Cementing the global net-zero transition Climate Bond Initiative4

2. Cementing the net-zero transition: key decarbonisation options
and investment requirements
Understanding cement
sector emissions

their emissions reduction targets. Cement is alsoa crucial component of installations providing
renewable energy, such as wind turbines andhydroelectric dams.21

Concrete is the second mostused substance in the world
after water, and cement
production accounts foraround 7% of worldwide
CO2 emissions, see box.18 If
global cement manufacturing were a country, it
would be the third-largest emitter on the planet,
after China and the United States of America.19
Cement also releases the most emissions per
dollar of revenue, around 6.9 kg of CO2/USD, muchhigher than iron and steel (1.4 kg), oil and gas (0.8kg), and chemicals (0.3 kg).20

The cement making process consists of several
steps. Over 80% of emissions occur in the kiln
and preheater/precalcinator, see the red box
in Figure 1.22 These emissions are linked tothe current production process and can bebroadly separated into combustion and noncombustion emissions.23
Non-combustion emissions (calcination
process) account for around 60% of thedirect emissions in the production process.
They do not result from fuel combustion but
from chemical reactions in the clinker
calcination process.24

Cement is a key input into the supply chain ofmany industries, especially construction andinfrastructure. Therefore, decarbonisation of
cement production processes is a critical enabler
to the transition of these sectors and achieving

Importantly, these emissions cannot be
reduced by substituting fuels. This is very
different from other industrial processes where
the bulk of process emissions relate to fueluse, see Climate Bonds A Green Future for Steel,for comparison.25

Cement vs concrete
Even though the terms cement andconcrete are often used interchangeably,
they are two different materials. Cement
is a fine powder and a key ingredient in
concrete production.43 Concrete, a mixtureof cement, water, and aggregates (bothcoarse and fine), is the second most-usedsubstance in the world after water.

Most of the remaining CO2 emissions arefuel combustion emissions (about 30%).
Fossil fuels (predominantly coal), biomassor alternative fossil and mixed wastes areburnt to reach high temperatures to make clinker– the main constituent of cement – in a kiln ataround 1450°C.

Climate Bonds Initiative andthe net-zero transition
Climate Bonds hasembarked on an ambitioustransition programme
to provide the industrial
pathways, sustainablefinance standards, policies,
and investment guidance required todeliver credible transition in the hard-toabate sectors.
The financial markets must implement
the results of this work to support the
decarbonisation of the cement sector. This
paper follows Climate Bonds A Fork in the
Road for the Global Steel Sector.44 These
policies are complemented by the Climate
Bonds sustainable finance criteria for the
cement sector published in 2022.45 In April
2023, Climate Bonds expanded its Standards
and Certification Scheme to the certificationof non-financial corporates, assets, andsustainability-linked instruments.46
Climate Bonds also published policy
guidance on the net-zero transition of theEuropean steel and cement sectors, as well
as a comprehensive toolkit of 101 policy
levers available to governments, regulators,
and central banks to facilitate the transition
to net zero.47

Figure 1. Cement making process
Raw materials, energy, and resources

Clinker and cement manufacturing

QuarryCrusher

Kiln and preheater/
precalcinator

Energy,mega-joule/ton

40

5

40

100

CO2 emissions,kilogram/ton

3

1

7

17

Transport Raw mill

CoolerCement mill

Logistics

Total

3150

160

285

115

3895

479
319
Calcination
Fossil fuelprocess combustion

28

49

22

925

Source: https://www.mckinsey.com/industries/chemicals/our-insights/laying-the-foundation-for-zero-carbon-cement#cement

Cementing the global net-zero transition Climate Bond Initiative

5

Cement is a crucial input for many industries andis inevitably part of a low-carbon future.26 It will
therefore need substantial technological andfinancial investment to be able to play its role inachieving a zero-carbon future.
The cement sector is at an early yet
critical stage in the transition to net zero.
Energy intensity has gradually decreased overthe past decades due to dry-process kilns andefficiency improvements. However, fossil fuels
still provide over 90% of energy input and thisshare needs to decrease to around 60% by 2030
in a net-zero scenario.27
The overall carbon intensity of global cement
production is well behind a Paris-aligned
pathway.28 It amounted to 656 kg CO2/ton of
cement in 2019 and this will need to decreaseby almost half by 2030 to reach a Paris-aligned
pathway target of 360–370 kg CO2/ton.29
Global cement production levels haveremained stable in recent years (around 4,300
Mt of cement were produced in 2021).30 In 2021,
China accounted for around 55% of the world’s
cement production, followed by India at 8%.31
Cement demand is expected to rise steadilyin the coming decades, by almost 50% by
2050.32 There is large regional variation in thisincreased global demand. The highest demand
increase is expected to occur in India, Latin
America, and Africa due to population growth,urbanisation, and infrastructure development.33
Such an increase is estimated to more than offset
the long-term decline in cement demand in
China, resulting in a higher demand for cement in
2030 in a business-as-usual scenario.34
Aligning with a net-zero scenario will require
global cement production to remain stable
until 2030 and therefore major improvements inenergy and material efficiency, as well as the useof alternative building materials, are needed.
Meeting new cement demand with fossil-based
facilities would likely result in long-term carbon
lock-in and stranded assets (due to their longlife cycle), threatening jobs and putting theParis-aligned pathway out of reach.35 Cement
asset lifetimes reach up to 60 years and theinvestment choices made by cement companies
will create long-lasting path dependencies, wellbeyond 2050. By investing in technologies thatare consistent with a net-zero scenario they can
avoid stranded assets and the risk of facing higheconomic losses.36

Table 2. Key decarbonisation options for the cement industry48
Non-combustion levers

Short term

Medium and long term

Maximise the use ofalternative binders

Improve clinker-to-cement ratio
Implement carbon capture &storage technologies (CCS)

Combustion levers

Maximise energy efficiency

Adopt low-carbon electricity
and solar thermal energy

Substitute fossil fuels withalternative fuels such aswaste-derived

Use low-carbon hydrogen as
an alternative fuelTechnologies and solutions
are available today that cankickstart the transition while
emerging ones can complete
the picture
Approximately 60% of thetotal CO2 emissions of thecement manufacturing
process come fromchemical reactions, whilemost of the remaining CO2 is
produced by fuel combustion, see Figure 1. Key
decarbonisation options can therefore be divided
into these two groups; see Table 2 and Climate
Bonds paper Concrete policies to underpin the
cement transition for a more detailed overview
of these levers.37
Some of these options are more likely to be
implemented in the short term and continue
being developed and implemented in thefollowing years, while other technologies are
estimated to need more time to achieve maturity.
To address non-combustion emissions, the key
levers discussed to date include carbon capture
technologies, improving clinker-to-cement
ratios and the use of alternative binders. These
are supported by the IEA Net Zero Scenario
which estimates the need to capture around
180 Mt of cement emissions by 2030, comparedto the 0.1 Mt currently captured, and for theclinker-to-cement ratio to fall 1% annually by2030 reaching 0.65 by 2030.38
For combustion levers, maximising energy
efficiency and substituting fossil fuels withalternative fuels can help achieve emissions
reductions in the next few years. Further researchis needed to determine and test the use ofelectrification, solar thermal energy, and greenhydrogen to deliver further reductions in the
cement making process.
While these are the levers that are envisaged
today, for many hard-to-abate sectors, there will
be new technology developments emerging
which may completely change the sector, andpolicy should be supportive of these. Pilot
projects are being developed around the

Cementing the global net-zero transition Climate Bond Initiative

world to test and scale up new and emerging
technologies to address both combustion andnon-combustion emissions, see box below.
In addition, reducing the use of cement throughmaterial substitution can be another option
to achieve the net-zero transition. In some
applications, cross-laminated timber can substitutecement, steel and other carbon-intensive
materials traditionally used in construction.39
Massive investment is needed to develop
and roll out low-carbon production
technologies to transform the global
cement sector. The transition is supported
by government emissions reduction goals andassociated policies. There is a narrow window to
implement the policies required for the cement
sector to transition to net zero.
Financial flows need to be aligned with a Pariscompatible scenario, avoid lock-in, and be inplace for the next investment cycle considering
the longevity of cement assets (up to 60 years).
The cement industry is very capital intensive.
The capital required to transition the global
cement industry could reach USD70bn
annually between 2030 and 2040 (double
current levels).40 This includes building new
low-carbon production capacity and renovating
existing plants with technologies such as CCS.
Other studies forecast an additional investment
of USD16bn annually on business-as-usual totransition to net zero.41 The sustainable debt
market could unlock the financing needed for
cement companies that commit to ambitious
targets and can develop credible transition plans.
The cost premium of low-carbon concrete inconstruction projects is difficult to generalise
and can vary widely across regions. However,given that concrete represents around 5%of a typical building, a green premium on
concrete will not significantly increase thefinal cost of a new building.42 Even in a highestimate scenario where low-carbon concrete
costs 50% more than conventional concrete,
the cost implication for a new building would
be less than 3%.

6

Low-carbon cement projects
LEILAC (Low Emissions
Intensity Lime And
Cement) started in 2016
to pilot a breakthroughtechnology to
cut emissions
while maintaining
competitiveness.49 It successfully piloted
direct separation at the HeidelbergCement
plant, which captures non-combustion CO2emissions. The second phase – LEILAC2 –started in 2020, with funding from Horizon
2020 and the industry. It is aimed at becoming
operational by 2023 and implementing largescale demonstrations by 2025. This facility alsoplans to demonstrate the use of less carbonintensive heat sources for calcination, such as
electricity.
Norcem, the leading
Norwegian supplier of
cement is conducting
research into carbon
capture applications for
cement manufacturing.
Its project at the plantin Brewik is currently on track and aims tobecome operational by 2024.50

VTT Decarbonate
developed an electric kiln
which can replace fossilbased alternatives in the
cement making process,while also integrating
it with carbon capture
technologies.51 The project is in Finland andsuccessful trials were completed in 2021–2022.
Brimstone, basedin the United States,
has announced thedevelopment of a new
cement making processthat sources lime from
calcium silicate rocks
rather than limestone,
avoiding process emissions during thecalcination process and producing a magnesiumbased waste product that can absorb emissions
from fuel combustion.52 According to Brimstone,
this would be less expensive than standard
production methods and chemically equivalent
to Portland cement clinker. The project isstill in its early phase and in 2022 Brimstoneannounced plans to establish a first-of-its-kinddemonstration facility in the United States before
scaling up its process.53

Cementing the global net-zero transition Climate Bond Initiative

Synhelion aims todecarbonise industrial
processes with hightemperature solar heat.
With concentrated
solar power, a mirror
array concentrates
solar radiation onto a receiver. Concentrated
radiation becomes high-temperature process
heat exceeding 1500°C. Synhelion and Cemex
plan to construct a carbon-neutral cement plantusing concentrated solar power, combined with
CCS, and started this project in 2019.54
Cambridge Electric
Cement came up withan innovative process
converting construction
and demolition waste
to cement over molten
steel using an electricarc furnace, which is usually used to recycle
steel scrap. The related Cement 2 Zero project
aims to demonstrate this process: recycling
concrete to create a slag-forming addition
which could replace high-quality cement.55 In
other words, this project aims to combine steel
and cement recycling in a single process which,when powered by renewable energy, could
produce zero/near-zero emissions cement.

7

3. Policies to ensure a credible transition
The decarbonisation of hard-to-abate
industries will need strong policy support.
Robust policy instruments and supply chain
coordination are required to support the cement
industry’s transition to net zero. These policies
apply to different parts of the cement industry
value chain: upstream (low-carbon energy
and infrastructure), midstream (low-carbon
production processes), and downstream(increasing demand for low-carbon cement andenhancing its circularity).

Upstream policies
Accelerate deploymentof renewable energy andenabling infrastructure
Abundant low-carbon
energy and enabling
infrastructure – renewableelectricity, CO2 transport and storage, and greenhydrogen, together with other levers – arenecessary for the cement sector transition.
As all sectors will need to transition to a lowcarbon economy, the cement industry will not bealone in needing greater access to abundant andaffordable decarbonised energy.
Accelerated deployment of renewableenergy sources, as well as related infrastructure,is needed to meet significant growth in demand
which is estimated to increase by more than onethird by 2050.56

Ensure strategic and 1.5°C-aligned CCS
infrastructure for the cement industry
Carbon capture and storage technologies (CCS),
as noted, are likely to play an important role in
reducing CO2 emissions from the cement industry,
notably those emitted during limestone calcination.

(PCI) status, which grants projects accelerated
permitting and potential financial assistanceunder the Connecting Europe Facility (CEF) budget
for energy. PCIs are prioritised based on their
net-zero contribution.58 Supportive policies, suchas accelerated permitting, can favour priority
sectors to ensure CCS is reserved for emissions
which cannot be prevented. This is vital to prevent
overreliance on these technologies, as CCS
cannot remove all emissions and has a limited
impact on scope 2 and 3 emissions, which
account for a significant proportion of carbon
emissions from other sectors.

Midstream policies

Policymakers can also establish robust
standards for CO2 infrastructure. They are
key to ensuring high emissions capture efficiency
rates, storage longevity, preventing CO2 leakage
at all stages of the process, and ensuring the CCS
process uses low-carbon energy. CCS technologies
will need to use low-carbon electricity (100g CO2e/
kWh declining lifecycle emissions threshold in the
EU Taxonomy) and meet technical criteria on thetransport of CO2 and underground permanentgeological storage of CO2 in the EU Taxonomy toqualify as a low-carbon solution.59

A CCfD is a subsidy agreement between apublic authority and a company to financea decarbonisation project. The amount ofsubsidy depends on the difference between
the carbon price in a specific context and thestrike price. This mechanism could be applied
to de-risk investments in innovative and often
more expensive decarbonisation technologies in
the cement sector, and several governments are
implementing such a scheme, see below.

Many of the world’s cement kilns emit CO2 on far
lower scales than fossil gas processing facilitiesor thermal electricity generation.60 This scale
influences CO2 capture costs, as capture costs
per tonne normally increase as the magnitudeof the CO2 source decreases. As a result, cementkilns may have greater capture costs than otherapplications. Carbon Clean and Svante are
two companies that have developed a capture
technology that is well-suited for medium-scale
applications, such as those in the cement industry.

Carbon contracts fordifference (CCfDs) can
facilitate the developmentof innovative and lowcarbon technologies, especially during the
incubator phase, providing long-term carbon
price stability.61 However, being a subsidy-type
instrument, CCfDs can be extremely expensive forpublic authorities, particularly in the first years.62

In the case of a low-carbon cement project, a CCfD
would be agreed between a public authority and acement company whereby one of the two parties
pays the difference between the carbon priceand the strike price. This strike price can either
be negotiated between public authorities andcompanies or through competitive tendering.
The price agreed upon between a regulator
and a company equals the carbon pricenecessary for the project to be economicallyprofitable, see Figure 2 referencing the EU
carbon price. In this way, a stable carbon

Figure 2. Carbon contracts for difference

Importantly, carbon capture in cement is
not a way to prolong fossil fuel combustionthat can be replaced. On the contrary, it should
be focused on addressing the 60% of processrelated emissions that cannot otherwise beabated. The IEA database captured one CCS
project currently under construction – Norcem
Brevik, see above– and 26 CCS planned to be
operational by 2030 at the latest (as of March
2023).57 These 27 projects are estimated to havean annual capture, transport and/or storage
capacity of around 20 Mt CO2.

Carbon price

Agent
pays

Strike price
Govt. pays

EUR/tCO2

Policymakers can ensure the strategic
prioritisation and application of CCS
while establishing robust standards forinfrastructure and its related investments.
Infrastructure development prioritisation
schemes can include strategic infrastructuredevelopment for transporting CO2 to storagesites. For example, CO2 transport infrastructureis eligible for EU Projects of Common Interest

Establish carbon contracts
for difference

Time

Cementing the global net-zero transition Climate Bond Initiative

Source: https://climatestrategies.org/wp-content/uploads/2021/03/Carbon-Contracts_CFMP-Policy-Brief-2020.pdf

8

price reduces investment risk in breakthroughtechnologies needed to transition hard-to-abate
sectors, such as the cement sector.63

CCfDs in the EU, Germany, and Canada
As a result of the recently
agreed EU-ETS review, CCfDs
will be implemented at the EU
level through the Innovation
Fund to provide support todecarbonisation projects andcertainty to investors.90 Sucha provision is in line with
REPowerEU, a plan presented in
May 2022 by the EU Commission
to rapidly reduce dependence
on Russian fossil fuels and fastforward the green transition.91
As part of the plan, the European Commission
announced that it aims to encouragehydrogen adoption and electrification inindustrial sectors by implementing CCfDs
and dedicated REPowerEU windows to
support a full transition of existing hydrogenproduction in industrial processes from fossil
gas to renewables, as well as the transition tohydrogen-based production processes in new
industrial processes.

In May 2022, the German government issued
a call for expression of interest in CCfDs, tosupport innovative technologies contributing
to the decarbonisation of the hard-to-abate
sectors.92 Draft funding guidelines for CCfDs
have been recently published, including
some specific eligibility requirements, suchas the need for the project to align withGermany’s 2045 climate neutrality target:each awarded project will have to meet
specific GHG emissions thresholds in linewith this target.93 In June 2023, theGerman government released its
EUR50bn plan to decarbonise hard-toabate sectors through CCfDs, with aparticular focus on hydrogen.94

investors.64 These embody the credibility, clarity,and transparency necessary to create an active
market, see Figure 3. This guidance is also thefirst step in the Certification of the whole entity
transition which will enable investors to preference

investments based on the quality of the entitylevel transition strategy and execution plan.

Mandate credible transition plans at theentity-level
Several regulations are emerging with provisions
including a transition plan outlining thestrategy and plan that an entity will pursue toachieve Paris alignment. Transition plans are
an increasingly important tool in strengthening
the decarbonisation efforts of corporates acrossall sectors, including the cement industry.
Mandating the existence of transition plans is one
step towards making transition plans a facilitatorof a credible and ambitious transition at theeconomic level. However, the mere existence ofa transition plan will not achieve anything unlessthat plan is robust and is being implemented.
Understanding the rigour and ambition oftransition plans is an emerging field.
Climate Bonds recommends thatpolicymakers actively consider how they canstrengthen the quality of transition plans
if mandated. To provide a structure and rigour
around which transition plans can be analysed,
Climate Bonds published Transition Finance forTransforming Companies which sets out Five
Hallmarks that companies must adhere to whensetting out an entity-wide transition plan for

Figure 3. Five Hallmarks of a Credibly
Transitioning Company

In its 2023 Federal Budget, the Canadiangovernment referenced CCfDs as a tool togive certainty on the carbon price, incentivise
investment in low-carbon technologies, andsupport the transition of hard-to-abate sectors
such as cement.95

As regulations are tightening globally to reduce
emissions and limit climate change, many
cement companies have started to outline
decarbonisation and net-zero targets, including
Holcim, Heidelberg Materials, CEMEX, andUltraTech Cement.65

Target underdeveloped decarbonisation
technologies through R&D programmes

1. Paris-aligned targets

2. Robust Plans

5. External reporting• Select sector-specifictransition pathway alignedwith Paris Agreement goals• Set the strategy and plan todeliver on those KPIs

a. External reporting andindependent verificationon the KPIs and strategy todeliver(per Hallmarks 1 and 2)• Company-specific KPIs thatalign as early as possible
with that pathway• Science based, address
scope 1, 2 & 3 emissions
and address short, medium
and long term

3. Implementation action• Capital expenditure,operating expenditure• Other actions detailed in
the strategy• Prepare associatedfinancing plan detailed costestimates and expectedsources of funding• Put in place necessary
governance frameworks toenact change

4. Internal reporting• Track performance• Re-evaluate and recalibrate
KPIs as needed

Cementing the global net-zero transition Climate Bond Initiativeb. Annual reporting of
independently verified
progress in terms of action
taken and performanceagainst targets(per Hallmarks 3 and 4)

Government research and development (R&D)
financing will play a crucial role in enabling
nascent decarbonisation technologies to scale andreach economic viability. Such R&D programmes
can specifically target technical challenges.
Some hard-to-abate sector decarbonisation
technologies, including in the cement sector,
are only at the pilot stage and their large-scale
application still needs to be tested. Collaboration
between public and private stakeholders andinternational cooperation will pool resources,
improve the identification of R&D priorities, andstrengthen knowledge exchange.
There is no silver bullet currently available
to achieve deep decarbonisation of
the cement industry. R&D programmes
can help develop and scale breakthroughdecarbonisation options in all industries, but
the cement sector is particularly dependent
on the emergence and scale up of innovativetechnologies.66 For example, clinker substitution
and replacement can be a potential growtharea for R&D, together with kiln furnace
electrification, new construction materials
development and uptake of innovative solutions
for recycling and reuse of cement and concrete.
9Implement carbon pricing with aneffective framework against the risk ofcarbon leakage
Carbon pricing, through a carbon tax oremissions trading scheme, is implemented to
fix market distortions and capture the externalcosts of carbon emissions by charging emitters,either with a tax on emissions or a cap-and-tradesystem whereby sectors are allocated emissions
allowances. Part of the value of carbon pricing
is its technology neutrality, enabling the market
to find the most cost-effective solutions tocarbon-intensive activities. Carbon pricing can
improve the business case for green technologies
and incentivise efficiency gains by placing an
economic value on emissions. To do so, prices
need to be high enough to have a material
impact and not be weakened by free emissions
allowances, as is currently the case for theEuropean steel sector. For the carbon price toencourage clean investment, it must be highenough to prompt action. Carbon price volatility
will discourage green investment. However,carbon pricing alone cannot be relied on todrive transition. Other policies are required toovercome market failures and inertia, increase
the green asset pipeline, and channel funding totransition the whole economy.
The cost of CO2 emissions currently represents
a fraction of total cement production costs
in countries where carbon pricing is applied.
However, the cost of carbon emissions will
increase rapidly in the EU, as free carbon
allowances (presently covering up to 100% of
cement sector carbon emissions) under the EU
Emissions Trading System (ETS) are withdrawn.
The EU carbon price, established via the ETS,
doubled in 2021 to EUR79.38 on 20 December
and reached the EUR100/t CO2 milestone in
February 2023.67
Concerns over carbon leakage, the relocationof carbon-intensive industries to avoid pricing,have been a barrier to carbon price introduction.
While many jurisdictions have provided free
emissions credits to specific sectors, this weakens
the price signal. The IMF has also proposed aninternational carbon price floor, suggesting afloor of USD25-75/tCO2 by 2030, depending on
their level of economic development.68 This
would provide long-term green investment
certainty globally and help to address carbon
leakage concerns.
Carbon border adjustment mechanism(CBAMs) are under discussion to address the riskof carbon leakage. A CBAM applies local carbon
pricing to imports of carbon-intensive goods,
accounting for any pricing used in the countryof production. This can strengthen local carbon
pricing, as industries no longer need to receive
free allowances to ensure competitiveness. It
also incentivises global action, as third countries
might implement carbon pricing schemes tocapture revenue. Turkey’s chief negotiator at
the COP26 climate summit declared that the
EU’s plan to introduce a CBAM was a factor inconvincing Ankara to ratify the Paris Agreement.69
In May 2023, EU institutions signed the CBAM
regulation, which will enter into applicationin its transitional phase in October 2023.70 In
December 2022, EU institutions reached anagreement on the CBAM design: it will not only
cover the sectors envisioned in the Commission’s
proposal (iron and steel, cement, aluminium,
fertilisers, and electricity) but also hydrogenand other downstream products, as well as
indirect emissions under certain conditions.
Such changes make the CBAM more ambitious
and bring some progress in levelling the playing
field between EU and non-EU producers.71 The
CBAM will become effective in 2026 and will befully phased in from 2035, giving little incentive
for emitters to decarbonise their production
processes in the first years.72 Importers will
start paying the CBAM financial adjustment in
2026. Several countries such as Canada andthe UK are considering similar initiatives anda CBAM is already in place in California, wherean adjustment is applied to certain imports ofelectricity.73

Downstream policies
Implement green public
procurement
The purchasing power ofgovernments and otherpublic bodies totals around
USD11tn each year.74 Public
procurement accounts for up to 40% of the
global cement demand and represents a highshare of consumption in critical industries for
cement activities, such as construction andinfrastructure.75 Public procurement can also be
a considerable incentive for developing a lowcarbon cement market.
Green public procurement (GPP) can increasedemand for decarbonised cement goods andfor the whole value chain. The opportunity for
GPP is huge and historically, public procurement
has been a key lever to bring down emissions.
The State of Berlin was able to reduce its GHG
emissions by 47% through GPP.76
Aligning with Taxonomy criteria will ensure
climate-alignment and consistency of sustainable
investments. For example, the US government
aims to spend 80% of its procurement funds with
suppliers that have set targets for their scope
1 and 2 emissions by 2023. Major suppliers to
the US federal government will be required todisclose their greenhouse gas emissions andclimate-related financial risk.77
The development of mandatory criteria is key
to effective implementation of GPP. In somejurisdictions, such as the EU and South Korea,
GPP remains voluntary, meaning that each

Cementing the global net-zero transition Climate Bond Initiative

public authority can decide whether to follow
this guidance.78 However, even voluntary criteria
can drive demand for sustainable goods andservices. For example, the European Commission
and some Member States have defined some
additional general guidance through national
criteria on different sectors.79
In 2021, a coalition of governments andorganisations, led by the United Kingdom andIndia, with current members including Canada,
Germany, Japan, Saudi Arabia, Sweden, theUnited Arab Emirates, and the United States,
launched the new Clean Energy Ministerial
Industrial Deep Decarbonisation Initiative(IDDI). Coordinated by the United Nations
Industrial Development Organisation, thisinitiative aims to create market demand for
low-carbon industrial materials, especiallysteel and cement. Governments are among the
top buyers of construction materials such as
cement. In fact, public authorities account foraround 20-30% of global construction industry
revenues.80 Governments signing IDDI’s Green
Public Procurement Pledge are required to start
using low-emission steel, cement, and concreteby 2030 for public construction projects, andmonitor and disclose their embodied carbon
emissions by 2025. At COP28 in November 2023,
Canada, Germany, and the UK are expected toreport on their GPP commitments.

Improve waste management and circular
economy requirements
A circular economy aims to maintain the value of
products, materials, and resources by returningthem to the product cycle at the end of their use,
minimising waste generation.81
Fly ash from coal-fired power plants, blastfurnace slag and by-products of fossil-based
primary steel manufacture can be used in
cement production as supplementary cementing
materials, replacing the clinker with moresustainable materials.82 However, with fossil fuelreduction and then phase out, such materials will
become rare.
After demolition, concrete can be 100%
recycled, although new concrete production
requires additional materials. This candecrease reliance on primary resources andreduce landfill waste. Recycled concrete isutilised as recycled aggregate in new concreteor other applications such as road building.
The global construction and demolition
waste recycling market was valued at around
USD126m in 2019 and is estimated to reacharound USD149m in 2027.83 However, despite
its potential, the level of recycling and material
recovery of construction and demolition waste
varies greatly across regions.
Recycling clinker and cement is much more
technically challenging.84 In June 2022, Holcim
announced the production of the world’s first10

clinker made entirely of recycled minerals.85
According to the company, the 100% recycledmaterials used range from wood ash to wastefrom mineral processing.

Autostrade per l’Italia
Group and the use of green
construction materials

The cement industry substitutes secondary
resources such as non-recyclable waste orbiomass waste for its fossil fuel thermalenergy usage. While incinerating waste forenergy poses a risk of high GHG emissions andenvironmental impacts, it is a potential way for
cement production to reduce its fuel-related
emissions, provided that specific additional
requirements are met. This is especially relevant
when considering the need to halve emissions
by 2030 to reach the Paris Agreement goals andthe fact that only a few alternatives exist today forfuel switching.

In its Sustainability
Financing
Framework,
Autostrade perl’Italia Group,
Italy’s leading tollroad infrastructure
operator, highlighted
that it aims to reach its decarbonisation
targets using green construction materials
for all its infrastructural development
projects. This shows the increasing appetitethat end-user companies have for abatingconcrete and cement emissions.96

Burning alternative fuels and raw materials does
not amount to zero emissions. Climate Bonds
requires that all emissions released from wasteburning are included in meeting the thresholds
within the cement Criteria. Waste-derived fuels
can be considered in line with Climate Bonds
Criteria only when all recyclable waste has been
removed before burning, following the Climate
Bonds Waste Management Criteria.86 Moreover,
Municipal Solid Waste must remain a transition
fuel and is considered as such only until 2035.
Finally, continuous monitoring of non-GHG
pollutants must be demonstrated to align with
Climate Bonds Criteria and publicly disclosed.
The waste management sector must movetowards better reuse and recycling schemes,
waste prevention and – across the economy –better product design.

Scale up off-take agreements
Policy instruments can lower the risk of lowcarbon cement by enabling and scaling up
off-take agreements.87 These represent a futurepurchase commitment to buying a product,defining the specific terms of the contract
several years in advance, therefore providing
long-term demand certainty. However, theseadvance purchase commitments carry a risk forthe buyer. As stated above, public procurement
is very important to the cement sector. Publicauthorities could include green off-takeagreements in their procurement, increasingcertainty on demand for future low-carbon
cement while reducing their GHG emissions.

Cementing the global net-zero transition Climate Bond Initiative

Establish a green window for the trade ofzero/near-zero carbon cement
In addition to carbon pricing policies andmeasures against the risk of carbon leakage,a broad policy platform, a green window,
would encourage the international flow ofgreen goods, services, and capital.88 Such agreen window could entail reducing tariffs onenvironmentally friendly goods, services andproducts produced using green processes.
Cement world trade totalled USD14.8bn in 2021,
compared to USD550bn for iron and steel, andexperienced a 16.6% growth compared to 2020.89
However, low-carbon cement would be a perfectcandidate for such a green window: zero tariffs on
zero-carbon. In 2018, the average tariff for cement
was 7.77%, compared to 5.03% for steel.
This green window could compensate for CBAMrelated trade curtailments and stimulate green
capital flows by reducing restrictions on capital
destined for green or transition projects.

11

4. Outlook
The cement industry is vital to the global
economy. Cement is a crucial input for multiple
industries such as construction and infrastructure
and its inclusion in the transition to net zero isessential. Cement accounts for around 7% of
global emissions, and is reliant on energy-intensive
production processes dependent on coal.
This decade is crucial to the cement
sector transition and meeting net-zerocommitments. Cement demand is expected torise steadily in the coming decades, by almost
50% by 2050. Meeting this new demand withfossil-based facilities would likely result in
long-term carbon lock-in and stranded assets,
threatening jobs and putting the Paris-aligned
pathway out of reach. Cement asset lifetimes
reach up to 60 years and the investment choices
made by cement companies will create longlasting path dependencies, well beyond 2050. By
investing in technologies consistent with a netzero scenario they can avoid stranded assets andthe risk of facing high economic losses.
Finance needs to flow to 1.5°C-aligned
pathways and activities. Massive investment
is needed to develop and roll out low-carbon
production technologies to transition the global
cement sector: USD70bn annually between
2030 and 2040 (doubling from current levels).
However, the sustainable debt market could
absorb these investments and support cementcompanies that commit to ambitious targets anddevelop credible transition plans.

Decarbonisation levers

Policy levers
Lever-specificMaximise the use ofalternative binders
Implement carbon capture andstorage technologies (CCS)

Scale up off-take agreements
Ensure strategic and
1.5°C-aligned CCS
infrastructure for the
cement industry

Maximise energy efficiency
Substitute fossil fuels withalternative fuels such aswaste-derived

Applicable to the whole
sectorEstablish a “green window”
for the trade of zero/near-zerocarbon cement
Implement green public
procurement (GPP)

Improve waste management
and circular economy
requirements

Improve clinker-to-cement ratio

Establish carbon contracts
for difference (CCfDs)
Mandate credible transition
plans at the entity-level

Use low-carbon hydrogenas an alternative fuelAccelerate deployment of
renewable energy andrelated infrastructure

Guide green investment
through standards andsector-specific criteria andtaxonomies

Adopt low-carbon electricity
and solar thermal energy

Accelerate deploymentof renewable energy andrelated infrastructure

Target underdeveloped
decarbonisation technologies
through R&D programmes
Implement carbon pricing with
an effective framework against
the risk of carbon leakage

The success of the cement transition
relies heavily on strong policy support.
Policymakers can play a significant role indetermining which pathways are taken. The
Climate Bonds Sector Criteria for cement
and this policy paper provide science-based
guidance on what constitutes a Paris-aligned
cement transition.
Policies must be coherent and aligned toencourage demand for low-carbon cement,
facilitate investment in the transformation of
cement companies and assets, and enable
the scaling of innovative clean technologies.
Therefore, this paper is wide ranging andincludes different policy levers, see box.

Cementing the global net-zero transition Climate Bond Initiative12

Annex: Climate Bonds Initiative Cement Criteria
Figure 4. Emissions pathways for cement production facilities andcement production companies (scope 1 & 2 emissions combined)
Carbon intensity (tonnes of CO2/tonnes

0.6
Company pathway

0.5
0.4
0.3
Plant pathway

0.2
0.1
0
2020

2025

2030

2035

2040

2045

2050

Table 3. Threshold values forming the emissions pathway for all cement production facilities97
Year

Carbon intensity (t CO2/t
cementitious product)

Year

Carbon intensity (t CO2/t
cementitious product)

Year

Carbon intensity (t CO2/t
cementitious product)

Year

Carbon intensity (t CO2/t
cementitious product)

2020

0.469

2028

0.384

2036

0.253

2044

0.107

2021

0.458

2029

0.374

2037

0.234

2045

0.089

2022

0.448

2030

0.363

2038

0.216

2046

0.071

2023

0.437

2031

0.345

2039

0.197

2047

0.054

2024

0.427

2032

0.326

2040

0.179

2048

0.036

2025

0.416

2033

0.308

2041

0.161

2049

0.018

2026

0.406

2034

0.289

2042

0.143

2050

0.000

2027

0.395

2035

0.271

2043

0.125

Table 4. Threshold values forming the emissions pathway for all cement production companies(scope 1 and 2)98
Year

Carbon intensity (t CO2/t
cementitious product)

Year

Carbon intensity (t CO2/t
cementitious product)

Year

Carbon intensity (t CO2/t
cementitious product)

Year

Carbon intensity (t CO2/t
cementitious product)

2020

0.616

2028

0.494

2036

0.320

2044

0.145

2021

0.597

2029

0.478

2037

0.295

2045

0.127

2022

0.583

2030

0.463

2038

0.270

2046

0.108

2023

0.568

2031

0.440

2039

0.245

2047

0.089

2024

0.554

2032

0.416

2040

0.219

2048

0.070

2025

0.539

2033

0.392

2041

0.201

2049

0.051

2026

0.524

2034

0.368

2042

0.183

2050

0.000

2027

0.509

2035

0.344

2043

0.164

Cementing the global net-zero transition Climate Bond Initiative13

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78. https://ec.europa.eu/environment/gpp/eu_gpp_criteria_en.htm;
https://wedocs.unep.org/bitstream/handle/20.500.11822/32535/
GPPK.pdf?sequence=1&isAllowed=y79. https://ec.europa.eu/environment/gpp/index_en.htm
80. https://www.industrialenergyaccelerator.org/wp-content/
uploads/IDDI_factsheet_23-Mar-2023.pdf
81. https://ec.europa.eu/eurostat/web/circulareconomy#:~:text=What%20is%20the%20circular%20
82. https://www.nature.com/articles/d41586-022-00758-4
83. https://www.alliedmarketresearch.com/construction-anddemolition-waste-recycling-market-A06246
84. https://newclimate.org/sites/default/files/2020/12/SGCCC-EUCement-paper-NewClimate_Nov2020.pdf
85. https://www.holcim.com/who-we-are/our-stories/recycled-clinker
86. https://www.climatebonds.net/files/files/Cement-CriteriaDocument-Final-241022.pdf
87. https://materialeconomics.com/latest-updates/steeling-demand
88. https://www.climatebonds.net/2021/09/carbon-pricing-climateaction-new-countdown-cop-policy-briefing
89. https://oec.world/en/profile/hs/iron-steel; https://oec.world/en/
profile/hs/cement?growthSelector=value2&cumulativeMarket
ShareSelected=share
90. https://www.europarl.europa.eu/meetdocs/2014_2019/plmrep/
COMMITTEES/ENVI/AG/2023/02-09/ETS_final_text_EN.pdf
91. https://eur-lex.europa.eu/legal-content/EN/
TXT/?uri=COM:2022:230:FIN&qid=1653033742483
92. https://www.bmwk.de/Redaktion/DE/Publikationen/
Klimaschutz/klimaschutzvertraege-bekanntmachung-desinteressenbekundungsverfahrens.html
93. https://www.lexology.com/library/detail.aspx?g=8c3a61c4-46f34118-98f2-41740c07799b
94. https://www.cleanenergywire.org/news/germany-launchespioneering-subsidy-system-slash-industry-emissions
95. https://cement.ca/budget-2023-supports-a-clean-competitivefuture/
96. https://www.autostrade.it/documents/10279/49049770/
ASPI_Sustainability_linked_financing.pdf/c271264e-7fb2-a123-1130198b93c5c668?t=1671204433536
97. Pathway based on a starting point (in 2020) of the EU Taxonomy
thresholds for cement. Trajectory of the Science-Based Targets
Initiative sectoral decarbonisation pathway applied to this starting
point to reach net zero by 2050. Full methodology in the Background
Paper. https://eur-lex.europa.eu/resource.html?uri=cellar:d84ec73cc773-11eb-a925-01aa75ed71a1.0021.02/DOC_2&format=PDF
98. Based on the Science-Based Targets Initiative 1.5-degree pathway
for cement: https://sciencebasedtargets.org/sectors/cement withthe methodology accessible at https://sciencebasedtargets.org/
resources/files/Cement-guidance-public-consultation.pdf

Lead author: Fabio Passaro
Contributors: Bridget Boulle, Lily Burge
Editorial support: Stephanie Edghill, Caroline Harrison
Design: Godfrey Design, Joel Milstead

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Cementing the global net-zero transition Climate Bond Initiative

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