Business school teaching case study: who pays for cutting carbon out of making cement?

At a recent Columbia Business School gathering focused on cement decarbonisation, Maher Al-Haffar, chief financial officer at Cemex, one of the world’s largest cement companies, had a message for his peers: “There’s a misconception that for any emitting industry, the cost of transition is value-destructive to shareholders,” he said. “In our industry, we actually think it’s value-creating.”

Many in the sector agree that decarbonisation of cement, one of the world’s most ubiquitous commodities, is possible and potentially even profitable. The question is: who pays for the transition and which strategies should be prioritised?

Cement is responsible for at least 8 per cent of annual global carbon emissions. It is also one of the world’s hard-to-abate industries, in which decarbonisation requires changes to physical infrastructure and supply chains or the adoption of new technologies and energy sources.

Clinker, the primary binding agent in cement, generates about 90 per cent of its manufacturing emissions, partly because its production involves heating limestone to above 1,400C, which consumes large amounts of energy. However, 60 per cent of clinker’s emissions come from a chemical reaction essential to its production: limestone calcination, through which limestone reacts with coal to create burnt lime and carbon dioxide.

Incentives for cement decarbonisation do exist. The EU leads the way with its emissions trading system, which limits carbon emissions, thus assigning a value to emissions reductions, currently at around €80 per tonne. As with other heavy industries, such as steel, cement has received significant free allowances, dampening the effect of the price. If and when these free allocations are phased down, the European cement industry will have significant incentives to cut emissions fast.

The most effective way to cut up to 40 per cent of cement emissions is to substitute a portion of clinker with lower-carbon materials, such as fly ash or slag, known as “supplementary cementitious materials” (SCMs). Unlike many industrial decarbonisation measures, using SCMs also lowers costs, helping to garner widespread support from the cement industry for this method.

Yet SCM substitution with fly ash also faces a paradoxical challenge: electrification. Fly ash and slag are byproducts of the coal and steel industries. As the world phases out coal-fired power plants and decarbonises steel manufacturing, supplies of these materials will dwindle, forcing cement producers to find other ways to source SCMs, such as digging up fly ash from landfills and ash ponds — facilities that store the waste generated by coal-fired power plants.

Carbon capture, utilisation and storage (CCUS) technologies provide another opportunity to mitigate the carbon footprint of existing plants. But CCUS technologies are currently expensive, and adding CCUS on top of traditional production will necessarily add to the cost of producing cement.

The cost of CCUS technologies — plus the fact that cement’s emissions are cut but not eliminated by energy efficiency improvements, switching to alternative fuels, or SCM substitution — have prompted some in the industry to fundamentally rethink the manufacturing process.

Two leading — and competing — methods have emerged. One focuses on replacing limestone as the primary input. The other uses electrochemistry to replace the traditional cement formula.

California-based start-up Brimstone replaces limestone with a naturally abundant non-carbonate silicate. The company, which secured early investment from Bill Gates-backed Breakthrough Energy, bypasses limestone calcination, cutting the 60 per cent of carbon emissions associated with that process.

Critically, its technology produces a low-carbon alternative to a product with which the industry is familiar: cement made with rocks. However, while Brimstone’s method solves the limestone problem, it still relies on high-heat kilns, which are responsible for the other 40 per cent of cement’s emissions.

To provide a solution to both limestone emissions and kiln heat, Massachusetts-based Sublime Systems — whose investors include Swiss cement giant Holcim — uses electricity instead of heat to drive the chemical reaction that extracts calcium from rocks. However, its process does not produce the industry-standard Portland cement.

In the race to commercialise, the two companies are almost neck and neck. Brimstone is now building its pilot plant in Oakland, California, with operations expected to begin soon; Sublime’s pilot plant has been operational since 2023, while its commercial plant in Holyoke, Massachusetts, is under construction.

Yet scaling up these technologies will take time, cash and, potentially, regulatory changes. Cement quality standards are typically based on the recipe used, rather than the cement’s performance.

Sublime’s cement might be indistinguishable from ordinary Portland cement for most uses but, because it uses electrochemistry rather than kilns, it cannot currently be labelled as such. That puts Sublime at a disadvantage vis-à-vis Brimstone, where this distinction is unnecessary.

Displacing the more than 3,000 traditional cement kilns operational worldwide will not happen overnight. This means that, to decarbonise cement, the industry must pursue a mix of answers to the problem, from familiar strategies such as clinker substitution to innovative new processes like those of Brimstone and Sublime.

This leaves incumbents facing the classic innovator’s dilemma: when and how to embrace new production methods, while the old methods remain profitable.