This note presents CEMBUREAU’s initial reaction to the ‘Fit for 55’ package. It will be complemented in the coming weeks by more details position papers on the key issues identified below.
Overall view on the ‘Fit for 55 Package’
- The European cement industry is committed to ambitious CO2 reduction emissions objective (CEMBUREAU Carbon Neutrality Roadmap). It is critical that the ‘Fit for 55’ package supports low-carbon investments in the European cement industry whilst providing a stable regulatory framework.
- The EU cement industry faces rapidly-increasing imports from non-EU countries1 , and CO2 costs account for a major share of the overall industry’s costs. The ‘Fit for 55’ package will exacerbate these trends. It is therefore indispensable that the existing carbon leakage measures are strengthened through the introduction of a CBAM.
- It is critical that the different legislative proposals of ‘Fit for 55’ are considered as an overall package, given the many dependencies between them, to avoid inconsistencies and overlaps. Carbon Border Adjustment Mechanism (CBAM) – draft Regulation
Carbon Border Adjustment Mechanism (CBAM) – draft Regulation
- CEMBUREAU welcomes the Commission’s draft Regulation on CBAM as a key opportunity to drive deeper CO2 emissions globally while equalising carbon costs between EU and non-EU suppliers.
- The European cement industry is exposed to carbon leakage, a trend that will be exacerbated as the EU increases its climate ambition. A CBAM is therefore indispensable to ensure that EU and non-EU suppliers compete on the same CO2 cost basis.
- To achieve this objective, CEMBUREAU believes that the draft CBAM Regulation must be strengthened to:
- Ensure a full CO2 cost equalisation by strictly mirroring the carbon costs faced by EU suppliers;
- Develop a watertight monitoring and reporting system for measuring embedded emissions and avoiding circumvention;
- Include indirect emissions and give due consideration to transport emissions, thereby mirroring the CO2 cost structure of EU producers;
- Include a solution for EU exports to avoid a situation where CBAM would result in lower access to export markets for the European industry, with a negative impact on global CO2 performance;
- Ensure that CBAM comes into operation as soon as possible to mitigate the risk of carbon leakage which is increasing under the pressure of growing imports, changing import business patterns and a sharp increase of the CO2 price.
- It is essential to ensure a gradual and ‘de-risked’ implementation of CBAM, where the instrument co-exists with ETS free allocation at current level until it is fully operational and tested. In the absence of clarity on content and timing for a watertight CBAM that fully equalises CO2 costs, CEMBUREAU believes that free allowances under EU ETS need to be maintained at current levels. Any reduction of free allocation should be done gradually and in parallel with a successful and efficient application of the CBAM along the lines set out above.
EU Emission Trading Scheme (ETS) Review – draft Directive
- CEMBUREAU supports the review of the Emission Trading Scheme (ETS) to align it with an increased climate ambition. Such reform will put significant pressure on industrial sectors and will require significant investments in decarbonisation technologies.
- The increase of the Linear Reduction Factor (LRF), the re-basing of the cap and strengthened benchmark rules will put considerable pressure on the industry, and further accentuate carbon leakage in the sector. In this respect, CEMBUREAU believes that the proposals on a Carbon Border Adjustment Mechanism (CBAM) are a significant step in creating a level playing field between EU and non-EU cement producers. As mentioned above, it is essential to ensure a gradual and ‘de-risked’ implementation of CBAM, where the instrument co-exists with ETS free allocation at current level until it is fully operational and tested.
- ETS revenues should be used to unlock investments in breakthrough technologies such as Carbon Capture, Use and Storage (CCUS), which plays a pivotal role in the cement industry. Whilst the introduction of Carbon Contracts for Difference (CCDs) is welcomed, it is imperative that clear accounting rules are put in place to incentivise the re-use of CO2 . As things stand, the draft Directive would significantly constrain the potential of CCUS technologies and emissions reductions.
- The use of non-recyclable waste and biomass waste is a key lever to reduce emissions in cement production. Going forward, it is key to include waste incinerators in the EU ETS so that they are faced with similar climate requirements to those of cement kilns. In addition, the expansion of carbon pricing to other sectors such as road transport and buildings is necessary, but these sectors should be placed in a separate scheme, as suggested in the legislative proposals.
Other points of the package
- Renewables Directive: Our sector is still looking at the text to understand the potential implications on biomass waste usage, which is a significant way to reduce the cement industry’s carbon footprint. It is important that the review provides clarity to users of biomass waste and facilitates their use.
- Energy Taxation Directive: the review should not further threaten the competitiveness of industries by removing industry-relevant exemptions. Our sector is concerned by the modified non-applicability provisions in article 3 (mineralogical processes and dual use)
1 Despite EU ETS Free allocation, EU cement imports from non-EU countries have increased by 160% over the past five years (2016-2020), and by 25% in 2020 alone (Eurostat)