Memorandum by the British Cement Association
2. The British Cement Association supports
the use of emissions trading in combination with the other Kyoto
mechanisms as an appropriate means for achieving reductions in
greenhouse gas emissions. While concurring with this in principle,
the BCA believes that in its present form, the EU Emissions Trading
Scheme is flawed in its scope and application.
3. Limitations on the effectiveness
of emissions trading. Implementation of "Best Available
Technique (BAT)" is one of the requirements of the permitting
procedure under the European Directive on Integrated Pollution
Prevention and Control (IPPC). All UK cement plants are authorised
under IPPC permits by the Environment Agency. However, once implemented,
until further technological advance takes place, any required
increase in output or reduction in CO2 allocation leaves no alternative
but the purchase of carbon credits.
4. Non-Compliance with Targets. Full
implementation and rigorous enforcement of the trading scheme
across all EU Member states is a prerequisite to an equitable
competitive framework for European industry. Failure on either
part will result in an unfair competitive advantage to industry
within a non-compliant Member country. Consequently, the second
phase of the scheme will be compromised, as will the EU's international
credibility for delivering its Kyoto obligations.
5. Non-EU Countries. Failure to
ratify the Kyoto protocol, by the non-participation of key countries
such as Russia and the United States, will impact upon the competitiveness
of the EU. The susceptibility to international competition of
the EU's cement makers has been demonstrated by the European Cement
6. Hasty Implementation. The implementation
of the EU Emissions Trading Directive has been driven by an unrealistic
timetable being imposed by the Commission, with the connivance
of the Council. Insufficient time has been allowed to develop
robust procedures and sound methodologies. This has been compounded
by the UK Government's politically driven desire to be first to
publish its National Allocation Plan. Insufficient thought has
been given to developing the necessary "smooth transition"
Ministers have declared they wanted between the EU ETS, the UK's
trading scheme and the Climate Change Levy. Failure to redress
the rush to implementation will lock-in problems from the start.
8. The manufacture of cement is an energy
intensive process, and within the United Kingdom the cement sector
is responsible for approximately 2 per cent of the anthropogenic
emissions of carbon dioxide.
This reflects the lower level of cement usage in the UK, (~225
kg/person/annum), compared with that in mainland Europe, (400-500
kg/person/annum), and suggests that domestic buildings regulations
do not reflect the benefits that may be achieved by utilising
the high thermal efficiency of concrete structures.
10. For social, environmental and business
reasons, the industry is committed to reducing its greenhouse
10.1. The British Cement Association and
its member companies have entered into a Climate Change Agreement
with UK government to increase the energy efficiency of cement
manufacture by 25.6 per cent over the period 1990 to 2010.
10.2. Through their parent companies, Lafarge
Cement UK, Castle Cement, and Rugby Cement are committed to carbon
reductions through the World Business Council for Sustainable
Development Cement Sustainability Initiative, (WBCSD CSI). In
addition, Buxton Lime Industries has undertaken to adopt the commitments
within the WBCSD CSI.
11. The introduction of the EU Emissions
Trading Scheme at EU level and its implementation at UK level
do not give industry the certainty on which to base major long-term
investment decisions, whilst weakening industrial competitiveness.
12. Evidence on the UK's implementation
of the EU Directive, and in particular the draft National Allocation
Plan is being prepared by BCA for a consultation being undertaken
by Defra. Reference to the cement industry's views in this context
have been included as an example of how the EU Directive in practice
will affect UK industry in general and the cement industry in
13. BCA RESPONSES
Question 1. The Commission is this year expected
to review their programme on climate change.
Is the EU approach to climate
change appropriate both for achieving its Kyoto targets and maintaining
Is the balance between Member
State and EU action correct?
14. Emissions Trading. The British
Cement Association supports the use of emissions trading in combination
with the other Kyoto mechanisms
as an appropriate means for achieving reductions in greenhouse
gas emissions. While concurring with this in principle, the BCA
believes that in its present form, the EU Emissions Trading Scheme
is flawed in its scope and application, viz.
14.1. The allocation of the EU Kyoto target
of 8 per cent is inequitable and appears to be out of step with
the Lisbon Agreement and other EU commitments relating to competitiveness.
Similar reservations have been expressed by EU Energy Commissioner
Loyola de Palacio
14.2. A restricted number of industries
fall within the ambit of the EU ETS~46 per cent within
the United Kingdomand these include many sectors in which
there have already been substantial reductions in CO2 emission
but excluding the politically sensitive areas of transport and
domestic usage where appreciably less progress has been made.
15. Approach within the EU. In order
to achieve significant reductions in the emissions of carbon dioxide,
it is necessary for the cement and other industries to make substantial
levels of investment in capital plant. In the cement industry,
the time from making the initial decision to invest and the operation
of the new plant is typically ~seven years, and the sector as
a whole has committed to a £500 million investment programme,
with each of BCA's four member companies developing a new cement
16. However, the economic assumptions on
which these decisions were based are undermined by uncertainty
in the nature and financial implications of EU Emissions Trading,
which are even greater from 2008 onwards, when the second phase
17. Consequently, investments which might
have been made in Europe may go to other regions in the world
where there is greater certainty.
18. Approach within the UK. The
approach of the United Kingdom government to the entire UK Climate
Change Programme appears to be narrowly focussed upon heavy industry
and power generation.
18.1. Appreciable progress in the reduction
of CO2 has already been made and verified through the industry's
participation in the UK Climate Change Levy Scheme (CCL).
18.2. However, far from giving businesses
"first mover advantage", the CCL has left a legacy of
additional bureaucracy and muddle.
18.3. In addition, firms over-achieving
their CCL targets have been penalized in the allocation of carbon
under the EU ETS, whilst those outwith the scheme have been subject
to no such reductions.
19. Limitations on the effectiveness
of emissions trading. Once an industry has invested in the
best available technology, the only remaining possibility with
which to address growth and/or future reductions on CO2 allocation
is the purchase of credits.
20. In this respect, the cement industry
is in a less strong position than virtually all other sectors
falling within the EU ETSmetals; lime; paper; glass; textiles;
chemicals; power. Cement has the highest CO2 emissions per unit
of profit, and (emissions) trading at
15/tonne CO2 will approximately double the variable
cost of cement production.
21. The manufacture of one tonne of cement
results in the generation of approximately one tonne of CO2.
Thus the cost of trading carbon at
15/tonne CO2 equates to about the cost of transport
per tonne of cement from the Far East.
22. Imports. Within the present
format of the scheme both at UK and EU level, there is no provision
to prevent "carbon leakage" from the import of cheaper
products produced in countries where manufacture is subject to
less stringent CO2 emission or environmental controls.
23. Reflecting these concerns, the European
Cement Association CEMBUREAU, is to monitor the level of non-EU
imports into the sector, and BCA would encourage the EU to undertake
a similar exercise in relation to all industries falling within
the EU ETS.
24. Question 2. Given that the Commission
recently warned that only the UK and Sweden are currently on course
to meet their emissions reduction targets under the Kyoto Protocol,
how can the EU live up to its commitments under the Protocol?
What measures should be taken
against those EU countries not on course to meet their targets
under the Protocol?
What impact might inaction by
individual Member States have on the EU as a whole?
How will the accession of 10 new
Member States affect the EU's climate change ambitions?
The UK will hold the Presidency
of the EU in the second half of 2005; what should be their priorities
to achieve a sustainable policy on climate change?
25. Action against non-compliance with
targets. Unless action is taken against Member States that
do not meet their targets, other Member States will be financially
disadvantaged, the second stage of the EU ETS compromised, and
the position of the EU as leader in emissions trading will become
25.1. Member States that are not on course
to meet their targets must be left with no doubt that the sanctions
within the Emissions Trading Directive will be imposed. However,
the EU does not have a good record in the pursuance of infractions
by Member States.
25.2. The current inability of the Commission
to address the obligations of France and Germany under the European
Monetary Scheme is pertinent to the expected failure of most Member
States to achieve their Kyoto targets. Unless this issue is addressed
many Member States will have little incentive to work towards
their Kyoto targets.
25.3. Other Member States appear to be placing
reliance on the Joint Implementation and Clean Development Mechanism
to achieve their targets. Although questionable in potential effectiveness,
it is nevertheless indicative of the desire of these governments
to shield their energy intensive industries from stringent, low
25.4. BCA believes that aside from the UK
(and possibly Germany), other Member States are working with their
energy intensive industries to minimize the effect of this legislation
on their competitiveness.
26. Effect of inaction on the EU as
whole. The competitiveness of industry within those Member
States that achieve demanding targets will be undermined, particularly
in the UK where those targets exceed the requirements of the allocation
within the EU of the Kyoto targets.
27. Non-EU Countries. If Kyoto is
not ratified by the United States, Russia, and other countries,
then the competitiveness of the EU as a whole will be harmed.
An assessment of the available cement and clinker capacities in
countries with no constraints on CO2 emissions has been made by
CEMBUREAU, Annex II [not printed].
28. UK Presidency of EU. The UK should
use its Presidency of the EU to ensure that action is taken against
non-compliance with the EU Directive, and the Community is in
a position to take a lead in the development of emissions trading
and the other Kyoto mechanisms.
29. The UK should also ensure the development
of firm links between emissions trading and the aspirations within
the Lisbon Agenda.
Question 3. How well understood is climate
change amongst the public at large?
Do many people know of its current
and predicted effects? Do people know of its causes? Do people
know what they can do to reduce greenhouse gas emissions and to
mitigate the effects of climate change?
Is the EU effectively communicating
the urgency of climate change?
30. Anecdotal evidence from local MPs suggests
that global warming and climate change comprise few questions
in their postbag.
31. However, the issue is not whether the
public at large understand climate change or know what they might
do to mitigate its effects. The crucial issue is that they are
engaged in a co-ordinated approach to reduce the emissions for
which they are responsibleapproximately 50 per cent of
the UK emissions result from domestic activity such as transport
and energy usage in the home.
32. It has been politically unacceptable
for government and NGOs to address this issue with their own stakeholdersthe
electorate and their subscribing members respectively.
33. To date, industry has provided a means,
albeit inequitable, of addressing some of the issues raised by
global warming. However, there are finite limits to the reductions
that can be achieved by industry alone, if the UK is to maintain
a domestic cement manufacturing capability.
34. With the prospect of the medium- to
long-term requirement of greenhouse gas reductions in the order
of 60 per cent, all sources of greenhouse gases must be addressed
at an early stage.
Question 4. Are EU policies regarding energy
and renewable technologies compatible with climate change policy?
Should there be more integration between these initiatives?
35. BCA agrees with the need for an increased
level of integration between climate change policy and all other
areas on which this impacts.
36. One area with which there should be
more integration is Defra's Waste Management Strategy, within
which cement kilns provide an environmentally sound route for
the treatment of a number of waste streams: tyres; used solvents;
packaging waste; processed sewage pellets; and waste oils.
37. Energy recovery resulting from the use
of these materials in cement kilns is an alternative to other
disposal options, such as incineration, that result in the generation
of greenhouse gases without the recovery of energy. Nevertheless,
this use in cement kilns is counted against the cap within the
emissions trading scheme.
38. BCA welcomes the principle within the
EU Directive on the Energy Performance of Buildings,
and would support the revision of the building regulation.
Question 5. The EU Emissions Trading Scheme
will come into operation in 2005.
How well are Member States progressing
with the implementation of the scheme?
Has it been well designed?
Is there a role for other economic
instruments to be used alongside emissions trading?
39. Other Member States. Through
the European organization CEMBUREAU, the BCA tracks the implementation
of the emissions trading scheme within other Member States.
40. A major theme that emerges is that insuffient
time has been available to develop a sound basis for establishment
of emissions trading schemes by the Member States. This has resulted
from an unrealistic timetable imposed by the European Commission,
compounded by an overly complicated and bureaucratic allocation
procedure within the UK.
41. Whilst it is clear that the United Kingdom
is in the forefront of implementation, any possible benefits must
be counterbalanced against the limited time available for detailed
consideration by government and industry.
42. Other Economic Instruments.
The UK already has the CCL, and its own Emissions Trading Scheme.
Neither has an easily understood equivalence with the EU ETS,
making transition and comparison difficult.
43. Relationship between EU ETS, UK
CCLA and UK ETS. BCA understands that Defra has changed its
position on how to treat the climate change agreements, CCLA,
for installations that do not opt-out of the first phase of the
EU ETS (2005 to 2007). We do not believe that a partial (electricity
only) CCA is required for an installation within the EU ETS due
to the pressures exerted from rises in electricity prices as the
generators directly account for their CO2. This amounts to double
charging of the users of electricity. We certainly do not agree
that the two regimes should run in parallel. Parallel inclusion
will create unnecessary administration and confusion for no additional
environmental benefit and does not represent the "smooth
transition" between the schemes as indicated by the government.
We believe the correct procedure would be for those joining the
EU ETS to be relieved of all their obligations under climate change
44. As indicated above, all sectors have
a role to play in contributing to the achievement of greenhouse
gas reductions, and here there is clearly an opportunity for the
use of other economic instruments.
45. In addition, other instruments such
as the voluntary agreement between the motor industry and the
European Commission on the reduction of CO2 emissions from new
passenger cars could be used.
46. Question 6. The EU has played a significant
role in international negotiations on climate change.
What role should the EU play in
shaping future international objectives after the 2008-12 commitment
period laid down in Kyoto?
How effective is the EU in international
How could it be more effective
in encouraging those states yet to ratify the Protocol to re-engage
in international discussions?
How can the EU best exert pressure
on developing countries to keep emissions under control whilst
expanding their economies?
47. Unless the EU, whilst maintaining competitiveness,
can manage to achieve its own targets and those of its Member
States, imposing sanction where targets are not met, it cannot
have an authoritative and formative role.
48. In order to have the moral authority
to influence others, not just developing countries but also the
US and Russia, the EU and its Members must demonstrate the social,
environmental and business case for controlling emissions.
1 ie substantially less than the world/EU level of
5 per cent. Back
Joint Implementation, (JI) and the Clean Development Mechanism,
Financial Times, 25 February 2004. Back
On 15 January 2004, the steel firm Arcelor instituted proceedings
at the European Court of Justice seeking that the Emissions Trading
Directive is (partially) declared void on grounds inter alia that
there is little or no technological potential to reduce CO2 emissions
beyond the level achieved since 1990. Back
The production of 1 tonne of cement clinker results in the generation
of: ~535 kg "process" CO2 from the calcination of limestone;
375 kg CO2 from fuel used in the kiln; and 70kg CO2 "indirect"
emissions from the electricity used. Back
Directive 2002/91/EU of the European Parliament and of the Council
of 16 December 2002 on the energy performance of buildings, OJ
 L1/65. Back