ISSUE BRIEF
Widespread Deployment of Carbon Capture, Utilization, & Storage (CCUS) Technologies in the California Cement Industry
KEY TAKEAWAYS
• Widespread deployment of CCUS technologies is essential to achieving carbon neutrality in the California cement industry.
• Retrofitting a cement plant with CCUS is an exceptionally complicated, costly, long, and uncertain undertaking.
• Regulatory enablers should be put in place with the goal of accelerating timeframes and reducing uncertainty.
• Creating a level playing field by holding imports to a similar environmental standard is essential to ensuring that CCUS investments are not squandered.
An ample supply of locally produced low-carbon cement will be critical to achieving California’s ambitious climate goals. But decarbonizing cement manufacturing is notoriously difficult. More than 60% of the industry’s direct GHG emissions are “process emissions” associated with the chemical reaction that takes place when limestone is calcined at high temperatures to produce cement clinker.1 As a result, even if the industry is successful at reducing its emissions in the near-term and mid-term through measures such as using lower carbon fuels and expanding the production of blended cements, achieving net carbon neutrality by 2045 will certainly require the widespread deployment of CCUS technologies across the industry.
The California cement industry is committed to meeting its carbon neutrality goals and is eager to do its part to make cost-effective CCUS solutions in the cement industry a reality. But, as illustrated in Figure 1, deploying CCUS technologies is an exceptionally complicated, costly, long, and uncertain undertaking. It requires navigating at least a dozen critical steps, any one of which can make the difference between success and failure. It requires a supportive and enabling policy environment to ensure that efforts and investments are not undermined by imported cement that is not held to similar environmental standards. It requires collaboration, cooperation, and alignment between multiple actors (industry, communities, regulators, policymakers, carbon transportation and storage providers, etc.) at the local, state, and federal levels. It requires extraordinary amounts of capital investment that the private sector is unable to afford without significant contributions from the public sector And it requires clear and expedited permitting processes that continue to protect the public interest and safety while providing a navigable path forward for companies attempting to navigate this novel challenge.
The purpose of this CNCA Issue Brief is to illustrate the scope, scale, and complexity associated with CCUS deployment in the California cement industry.2 It highlights the most challenging barriers and
1 See the California Air Resources Board (2024). “GHG Inventory, 2024 Edition: 2000 – 2022”
2 For an extensive technical and economic assessment of CCUS deployment in the cement industry, see U.S. Department of Energy (2023). "Analysis of Carbon Capture Retrofits for Cement Plants"
offers a high-level overview of the long, complicated, and uncertain process required to make CCUS deployment a reality. It also serves as a reminder to all stakeholders that there is much work to do and that every day of delay puts the goal of achieving carbon neutrality by 2045 a little bit more out of reach. Even though it will likely take more than a decade to successfully deploy CCUS across the industry, time is very much of the essence.
Deploying CCUS is exceptionally capital-intensive.
Deploying CCUS across the California cement industry will require a large and unprecedented capital injection into the industry. According to the U.S. Department of Energy (DOE), the “total as-spent cost” (i.e., all capital expenditures including escalation and interest during construction) of retrofitting an average size cement plant in middle America is likely to range from $737 million to more than $1 billion, depending on assumptions regarding CO2 concentrations, fuel type, and heat integration.3 Given that the DOE notes that its estimates are likely conservative and given the above average material, labor, and energy costs in California, the cost of installing CCUS at a California cement plant could easily exceed $1 billion, which would be roughly five times the annual revenue generated by a plant that is similarly sized to the one modeled in the DOE study.4,5
California cement plants will also face substantially higher operating costs due to CCUS deployment. Those incremental costs include but are not limited to additional labor, administrative support, materials for maintenance, and higher fuel, electricity, and water demand. For instance, under a reference case scenario, the DOE study estimates that a CCUS retrofit is likely to increase a plant’s annual operating costs by approximately $68 million per year 6
Combining capital and operating costs, the DOE conservatively estimates that the cost of CO2 captured (COC) will be almost $100 per MT of CO2 captured over the operating life of the CCUS retrofit, excluding the cost of CO2 transportation and storage.7 To put that figure into perspective, it is more than three times the prevailing price of a California cap-and-trade allowance.8
Although recently established and increased federal tax incentives and grant funding, if continued, are likely to accelerate the deployment of CCUS in the cement industry, the technology remains prohibitively costly without substantial public assistance at the state level to effectively de-risk these large-scale investments.
3 Specifically, the study models retrofitting a cement plant kiln in a midwestern state that produces 1.5 million metric tons (MT) of cement per year and emits approximately 1.16 million MT of CO2 per year with an amine-based, post-combustion process that captures 95% of emissions. See U.S. Department of Energy (2023). "Analysis of Carbon Capture Retrofits for Cement Plants"
4 “Thus, it is anticipated that initial deployment of plants based on cases found in this report may incur costs higher than the presented estimates.” See U.S. Department of Energy (2023). "Analysis of Carbon Capture Retrofits for Cement Plants" (Pg. 10)
5 According to the U.S. Geological Survey, the U.S. cement industry produced 110 million MT of cement in 2023 with an estimated value of $16 billion, suggesting an average price of $145 per MT of cement. Accordingly, the hypothetical plant in the DOE study would have generated approximately $218 million (1.5 million MT x $145 per MT) in total revenue. See U.S. Geological Survey (2024) “Mineral Commodity Summary: Cement, 2023”
6 See U.S. Department of Energy (2023). "Analysis of Carbon Capture Retrofits for Cement Plants" (Exhibit 5-15, Pg. 41)
7 See U.S. Department of Energy (2023). "Analysis of Carbon Capture Retrofits for Cement Plants" (Exhibit 5-16, Pg. 42)
8 The settlement price for cap-and-trade allowances during the November 2024 auction was $31.91 per MT CO2e. See California Air Resources Board (2024) “November 2024 Joint Auction #41: Summary Results Report”
Regulatory barriers extend project timeframes and increase uncertainty.
A carbon capture retrofit project requires approval through overlapping federal and state environmental reviews namely, the National Environmental Policy Act (NEPA) and the California Environmental Quality Act (CEQA).9 Both can take several years to complete and often cause cascading delays for other regulatory checkpoints. In addition, California cement plants are often sited at locations that require compliance with additional federal, state, and local regulations that can complicate and extend the process (e.g., Bureau of Land Management right of way for pipeline interconnections on public land; incidental take of California Endangered Species Act designated endangered species).10 Activism via the permitting process can further stretch “standard” permitting timelines, as interest groups often use permitting processes to prevent investment in California’s heavy industry through litigation (or the threat of litigation).11 These sources of uncertainty substantially increase both the risk and costs associated with CCUS deployment, as construction delays not only extend timelines but increase project costs. Finally, the lack of clarity in California regarding the permitting process for CO2 pipelines adds an additional layer of complexity and uncertainty to projects, even if a cement plant is able to successfully navigate its own “inside the fence” permitting.12
CCUS deployment makes CA cement uncompetitive without a level playing field.
Cement producers will need to pass the costs associated with CCUS through to customers just to break even on their investment. Such cost increases will inevitably place California producers at a disadvantage to imported cement from foreign countries or from out-of-state markets with less stringent environmental regulations, even before factoring in increasing compliance costs on the path to carbon neutrality. Establishing a mechanism (e.g., a California border carbon adjustment or similar measure) that holds cement imported to the state to similar environmental standards is essential to enable widespread CCUS deployment. Such a mechanism will close the existing “carbon loophole” for imported cement in California, which is essential to encouraging local producers, policymakers, regulators, investors, taxpayers, and other stakeholders to make the extraordinary efforts and investments needed to make CCUS a reality.
Conclusion
As illustrated in Figure 1, the deployment of CCUS in the California cement industry over the next decade will be a long process with a thin margin for error. Action is needed now to lay the groundwork for a clear, smooth, and predictable long-term pathway to CCUS deployment that inspires confidence and makes it easier and less risky for all stakeholders to invest the time, energy, and capital needed to achieve deep decarbonization in the California cement industry.
9 Only projects receiving federal funding are required to complete the NEPA process including tax credits such as 45Q
10 See California Department of Fish & Wildlife (2024). “California Endangered Species Act (CESA) Permits”
11 See Friedman, D., Hernandez, J.L. (2015) Holland & Knight. “In the Name of the Environment: Litigation Abuse Under CEQA”
12 Although pipelines for CO2 transportation lie outside the control of the cement industry, permitting challenges including a statewide moratorium on pipeline construction and lack of clearly designated lead agency or protocols for approving pipeline applications are preventing timely development of CO2 transport and storage infrastructure in California, which is a necessary condition and for successful and widespread CCUS deployment
Figure 1. CCUS Deployment — An Illustrative Example*
Retrofitting existing cement plants with CCUS technologies is an exceptionally complicated, costly, long, and uncertain undertaking that requires navigating at least a dozen critical steps, any one of which can make the difference between success and failure.
1
Strategic Planning
Conduct initial conversations about the potential role of CCUS in the context of company decarbonization goals and California’s climate policy
Conduct Feasibility Study 2
Evaluate the business case and technological feasibility of retrofitting the plant with CCUS; assess and select options for transporting and storing captured CO2.
Explore Financing Options 3
Retrofitting a cement plant with CCUS is considered very risky by most private investors and, as a result securing financing is notoriously difficult, uncertain, and time intensive.
PREPARATION
4
Conduct Front-end Engineering & Design (FEED) Study
Conduct a FEED study, which maps the technical and budget details of a project, as a precondition to securing private financing and public funding
5
Engage & Coordinate with Stakeholders
CCUS projects require heavy community engagement to educate stakeholders, gain public acceptance, and address concerns throughout the process.
6
Securing Funding from Private & Public Sources
Funding typically comes from multiple sources and public funding requires time-intensive applications. Once funding is secured, management can reach a final decision.
PRE-CONSTRUCTION PERMITTING
7
Apply for Environmental Approval
Prior step must be completed before proceeding
Reliance on federal incentives means that a cement plant will need both federal NEPA and state CEQA approval Completion begins a 2-year clock to begin construction
8
Apply for Relevant Situational Permits
Submit applications for approvals by other federal and state agencies, subject to a plant’s unique circumstances.
Apply for Construction Permits
Obtain relevant building permits from the local Air Quality Management District (AQMD) and other local authorities before proceeding with construction CONSTRUCTION & OPERATION
Begin Construction 10
Break ground on carbon capture facility and (likely) a waste heat recovery facility to offset increased energy demand Requires shutting down operations during construction
Commissioning & Optimization 11
Includes testing and commissioning new equipment in accordance with code, optimizing for environmental benefits, and applying for an operating permit from the AQMD.
12
Begin Capturing CO2
CCUS technologies have the potential to capture ~90% of a cement manufacturer’s CO2 emissions, which would put carbon neutrality within reach.
* This graphic is illustrative in that it aims to show the general sequence of steps, many of which have uncertain timelines. Any unexpected events (e.g., litigation) would only further delay deployment, increase costs, and create additional uncertainty.