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Private Sector & Development PROPARCO'S MAGAZINE

N° 10 / May 2011 Cementing the foundations of growth Michel Folliet

International Finance Corporation

2 Concrete, a solution for sustainable construction Vincent Mages and Jacques Sarrazin

Lafarge

Cement, confronting ecological responsibility and economic imperatives

6 Financing cement achieves sustainable development Philippe Guinet and Jacques van der Meer

European Investment Bank

9 Reducing cement’s CO2 footprint

The cement industry emits high levels of CO2, yet it is essential for the rapid economic development of developing countries. How can the industry curb its climate impact, and how can development institutions help it to do so? EDITORIAL BY ÉTIENNE VIARD CHIEF EXECUTIVE OFFICER OF PROPARCO

Hendrik G. van Oss

U.S. Geological Survey

12 Key data Cement in figures

16 Earthen construction, an additional way to house the planet Romain Anger, Laetitia Fontaine, Thierry Joffroy and Éric Ruiz

CRATerre-ENSAG

18 The positive impacts of a responsible cement industry Pierre-Olivier Boyer

Vicat Group

22 Curb carbon footprint and promote development: a tricky balance Guillaume Mortelier and Denis Sireyjol

Proparco

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As the 21st century gets underway, development institutions are facing a major moral dilemma. Should they be supporting a cement sector that produces such significant amounts of CO2 when their core mission is to combat climate change? It is a question that is troubling the development world, yet it must be asked and debated. It is this tricky problem that is the focus of this tenth issue of Private Sector & Development. The cement sector alone is responsible for 5% of carbon emissions resulting from human activity, a proportion that could well exceed 10% by 2050. Unfortunately there are few alternatives to this material which is available in large quantities and can rapidly fulfil the needs of developing countries. For developing economies, already producers of more than 80% of the cement sector’s carbon emissions, any restrictions imposed on cement financing would be tantamount to having their wings clipped in mid-flight. Cement is absolutely crucial to development. It allows the speedy construction of housing desperately needed by large sections of the populations of developing countries. Domestic markets are frequently hampered by limited production capacity, which results in high import levels, worsening trade balances, a lack of competition - and higher prices. Consequently, critical infrastructure and housing construction projects can be delayed or even thwarted. While the cement industry will continue to produce large quantities of CO2 for many years to come, it can nevertheless reduce its carbon footprint. To do so, it must adopt the most energy-efficient technologies and offer innovative solutions, particularly when it comes to insulating energy-intensive buildings. The increasingly rigorous criteria imposed by development institutions on cement projects can help in this regard. Most importantly, each project funded by these institutions must be carefully scrutinised to ensure that any negative effects on climate are far outweighed by the project’s positive economic impact. —


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Cement, confronting ecological responsibility and economic imperatives

Cementing the foundations of growth The cement sector is evolving rapidly. Consumption is increasing, boosted by demand from emerging countries; consolidation is being scaled up almost everywhere. Production continues to be mainly locally-based, except on fragmented markets like those in Sub-Saharan Africa. It is here that development finance institutions must implement operations to boost the sector, promote innovation and international standards - particularly for the environment. Michel Folliet International Finance Corporation

A

long with aggregates and water, cement is one of the major ingredients used to make concrete, which is second only to water as the most consumed substance on earth. Cement is an essential building material for the construction sector, one of the world’s largest industries and employers. Vitally important to housing and basic infrastructure, it plays a key role in economic development and poverty reduction in emerging countries. Nevertheless, the cement industry is among the largest contributors to CO2 emissions, and its projects usually have great environmental and social impacts. Because the cement industry is capital intensive, it necessitates large investMICHEL FOLLIET ments that require a longterm perspective on financMichel Folliet is the chief industry specialist for ing and returns. In addition, IFC’s Building Materials the industry is energy intenSector. He graduated sive as well as subject to ecofrom École Centrale nomic and construction de Lyon, and received cycles, resulting in volatilan MBA from George Washington University. ity of operating costs and He joined the IFC in 2006 revenues. With this backafter 25 years experience ground, development finanin the cement industry, cial institutions (DFIs) play in France, the U.S., a critical role in supporting Venezuela, Bangladesh, Malaysia, and Cameroon. cement projects in emergHe started his career in ing markets. process engineering and Global cement industry plant production, and has patterns have been changheld positions as project ing rapidly over the last director, technical and industrial director, vice two decades, and this artipresident of international cle focuses on some of the development, and prominent sector trends, country general manager. including worldwide conwww.proparco.fr

sumption, trade flows, industry consolidation, profitability benchmarks, climate change issues, and environmental imperatives. Emerging markets lead cement consumption Global cement consumption more than doubled over the last 15 years, reaching 2.96 billion tons (Bt) in 2009 and an estimated 3.2 Bt in 2010. In the same year, China continued to be the world-dominant producer and consumer at about 1.8 Bt, representing about 56% of the world’s cement consumption, followed by India at about 205 Mt. Emerging markets now account for an estimated 90% of cement consumption worldwide, against 65% twenty years ago. Industry analysts predict that global cement consumption will continue to grow “Emerging steadily and peak at around 5 Bt markets now by 2030-50 (Betts, 2011; Codling, account for 2010). During this period, China’s an estimated consumption may decrease to below 90% of cement 1.4 Bt, and India’s may be reaching consumption close to 800 Mt. Cement consump- worldwide.” tion as a function of time follows a bell curve, peaking in its maturity phase – China may be entering this phase, while India is still in its introductory growing phase – and then decreasing towards an asymptotic consumption level. With the combination of cement’s low valueto-weight ratio and high transportation costs, it remains a predominantly local business, with on average around 95% of global cement consumption consumed in the country where it is produced. Indeed, to be competitive, cement companies as a rule set up their plants next to large limestone and clay reserves with easy access to a reliable energy supply (power and fuels), and usually within 200-300 km of their target market. Nevertheless, in countries at the early stage of their development, especially in


3

small fragmented markets such as sub-Saharan Africa, cement imports may represent around 30 to 40% of domestic consumption. Cement’s Supply- and Demand-side Leaders International cement trade flows, traditionally seaborne and representing about 5 to 6% of global cement consumption, have clearly been impacted by the global financial crisis. Following the drastic decline of cement consumption in most developed countries, in some instances, such as in the U.S. and Spain, by over 40%,1 the volume of cement traded in 2009-10 decreased to about 110115 Mt, or nearly 3.7% of global cement production. Approximately 50% of worldwide trading is carried out by the top five multinational cement groups, with this percentage increasing as the cement industry consolidates. The remainder is done by “Sub-Saharan independent traders, who typiAfrica is expected cally sell below market prices in to add 10 cities of order to take advantage of perimore than three odic regional oversupply or shortmillion inhabitants, ages and low freight rates. tripling their current In 2009, with 18 Mt of cement and population over clinker exported, Turkey overthe next 5 years.” took China as the largest exporter worldwide. The same year, China exported about 16 Mt, followed by Thailand at 14 Mt, Japan at 11 Mt, and Pakistan at 10 Mt. Iraq was the leading cement importer at 8 Mt, followed by Nigeria at 7 Mt, the U.S. at 6 Mt, Bangladesh at 5 Mt, and Angola at 4 Mt (Cembureau, 2010). Cement consumption is driven by construction activity, which in emerging markets comes mainly from residential building (over 60-70%). Residential demand is further driven by high population growth and increasing urbanisation rates. For example,

sub-Saharan Africa, which has a young population growing at a rate of 2.5% per annum and only a 40% urbanization rate, is expected to add 10 cities of more than three million inhabitants, tripling their current population over the next 5 years. In developing countries with a low GDP per capita (below USD 1,500) and a low Per Capita Consumption (below 100  kg), the compound annual growth rate2 for cement consumption is strongly correlated to the country’s GDP growth rate, typically at a beta ratio higher than 1.5. That is, cement consumption in these countries is increasing at an average rate of over 7% per year. Main Industry Players: Room for Further Consolidation The cement industry’s consolidation, which began in Europe in the 1970s and then spread to the Americas in the 1980s, is not yet significant in Asia, Russia, and the Middle East. In 1990 the six largest cement companies controlled close to 10% of the world’s cement output. Currently, they control about 25% of world cement capacity, and 45% in countries excluding China. In China, the government is encouraging consolidation of a very fragmented industry,3 and large players are emerging, such as Anhui Conch and CNBM, each having over 120 Mt of cement capacity (Figure 1). The 2009 financial statistics of the leading global cement companies are indicated in Table 1. They show the stretched finances of the main international groups. Usual industry targets would be EBITDA margin/sales The U.S. and Spain were the largest importers in 2006-07, with over 45 Mt imported jointly. In 2009-10, their joint imports decreased to about 8 Mt. 2 Compound annual growth rate is a business- and investing-specific term for the smoothed annualized gain of an investment over a given time period. 3 Among over 2,000 enterprises, the six largest ones control less than 25% of China’s cement capacity. 1

FIGURE 1: CURRENT SHARE OF CAPACITY OF THE MULTINATIONAL CEMENT MAJORS BY REGION 100%

13

16

80%

27

National player

81

89 87

84

Multinational cement compagnies

22

60%

40%

6

7

94

93 78

73

20%

19

11

0% North America

Western Europe

Australasia

Latin America

Asia

Eastern Europe

Africa

Middle East

Nota bene: Multinational cement majors defined as the 12 largest non-Asian players Source: Cembureau, Jefferies International Ltd. Private Sector & Development


4 Cementing the foundations of growth

Cement, confronting ecological responsibility and economic imperatives

revenues of 25%, net financial debt/ EBITDA of 2.5 or below, and net financial debt/equity of 50% or below. In addition to consolidation, the vertical integration of cement companies towards the ready-mix concrete and aggregates industries will continue. This trend provides more knowledge on clients’ needs and opportunities in designing innovative products and services. It is positive for cement prices, and expands revenues and margins. It also reduces the earnings cyclicality of cement companies. Figure 2 compare typical profitability ratios for different building material segments where large international players have developed activities, with cement remaining the most profitable. Developmental Impact in Emerging Markets DFIs invest in the building materials sector in order to increase the availability of competitive local products that are critical to the development of a thriving construction sector. This links directly to the developing country’s ability to add the physical infrastructure and affordable housing it needs for poverty reduction and economic growth. In turn, better infrastructure drives GDP growth, creates jobs and SME linkages,4 and encourages additional foreign investment. The cement industry is capital-intensive and requires long-term funding, which is not readily available in developing countries. Through their investments, DFIs contribute to the local production of cement, thus reducing the need for costly imports and foreign flows. This also typically enhances competition and helps lower

prices for consumers that highly varies across countries (Figure 3). The International Finance Corporation (IFC) and other DFIs are willing to take considerable risks, including making early investments in the cement sector in post-conflict countries, such as Iraq, Bosnia and Herzegovina, Liberia, Sierra Leone, and Yemen. For example, the IFC and syndication partners financed a Saudiowned cement firm Arabian Yemen Cement Company as it embarked on an ambitious greenfield project in Yemen, where the business risks are perceived as high. Reducing cement’s carbon footprint DFIs’ world-class sustainability standards are also helping client companies reduce their environmental footprints, enhance their social responsibility efforts, and improve governance, all of which contribute to a strong triple bottom line. Indeed, there is a strong business case for sustainability in emerging countries, where politics and authorizations can be volatile, and where manufacturing companies often bear the brunt of harsh criticism from activists concerned about the social and environmental aspects of greenfield or expansion projects. Cement production is energy intensive and accounts for 5 to 6% of man-made CO2 emissions, about 55% of which are inherent to A minimum economical size cement plant of 1.5 to 2 Mt annual capacity would usually require 250 employees and 150 full-time contractors (quarry raw material transportation, cleaning, maintenance, security, truck loading). Cement transportation and distribution would usually double this number, adding an overall large impact in terms of maintenance, energy supply, transportation, and service linkage activities in surrounding communities. 4

TABLE 1: FINANCIAL STATISTICS FOR THE LEADING GLOBAL CEMENT COMPANIES FOR 2009 Revenues 2009

% EBITDA Margin/ Revenues

% Revenues in Cement

Cement Sales (Mt)

Net Debt/ EBITDA (X)

Net Debt/ Equity (%)

Lafarge (France)

EUR 15.9bn

22.7

54

141

3.8

82

Holcim (Switzerland)

CHF 21.9bn

21.9

58

132

3

63

Anhui Conch (China)

USD 3.7bn

27

95

118

1.4

21

Heidelberg Cement (Germany)

EUR 11.1bn

18.9

54

79

4

77

Cemex (Mexico)

USD 14.5bn

18.3

39

65

6.6

119

EUR 5bn

19.4

72

56

2.5

51

Taiheiyo (Japan)

YEN 729bn

0.9

62

32

ns

197

Buzzi-Unicem (Italy)

EUR 2.7bn

20.3

61

26

2.2

45

Cimpor (Portugal)

EUR 2.1bn

29.1

73

28

2.8

47

EUR 16.4bn

11.1

7

20

2.1

38

Company (Country of Incorporation)

Italcementi (Italy)

CRH (Ireland)

Source: Jefferies International, Exane BNP Paribas, Companies data www.proparco.fr


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FIGURE 2: FINANCIAL COMPETITIVENESS OF CEMENT COMPARED WITH OTHER BUILDING MATERIALS Concrete Building Distribution Building Products Gypsum

Concrete Aggregates Building Distribution Gypsum Building Products Cement

Aggregates Cement 0

5

10

15

20

25

30

35

0

EBITDA margin range (%)

5

10

15

20

25

30

EBITDA/Net Operating Assets (%)

Source: J.P. Morgan, Estimates

the limestone calcination process, with the remaining 35% and 10% corresponding to the combustion of fuels in the kiln and to electricity consumption, respectively. Currently, there is no viable alternative to cement, although promising research and development could result in the future commercialization of low-carbon cementitious alternatives (e.g., Novacem, Calera). All DFIs are “DFIs’ world-class increasingly cautious and thus sustainability selective about climate change standards are mitigation and the energy effialso helping client ciency of new projects. As such, companies reduce DFIs systematically analyze the their environmental CO footprints of their projects 2 footprints.” and promote best practices and technologies, benchmarking, and mitigating action to reduce CO2 emissions. The IFC has developed a set of criteria barring inefficient technologies (e.g., wet, vertical shafts and long, dry kilns) and promoting specific actions to limit the carbon emissions of its projects to a maximum of 650-750 kg of CO2 per ton of cement.5 A key one of these actions is to maximize the use of blended cement, thereby lowering the clinker to cement factor, with a target ranging from 0.65 to 0.85, depending on local regulations and specificities. Another set of actions consists of improving the production process to reduce energy consumption via either a minimization of fuel consumption in the clinker production process, targeting a fuel consumption of 2,900 to 3,300 joule per ton of clinker,6 or a minimization of electricity consumption for cement production, with a target of 75 to 105 kWh per ton of cement produced. Finally, the IFC also encourages the use of renewable and alternative fuels wherever they are locally available (e.g. biomass, tyres, municipal waste, solar energy, wind farms).

The strong impact of cement on development, the expected growth of demand for cement in developing countries, and associated long-term capital needs make cement a key industry for DFIs. These should however take into account the significant CO2 emissions associated with cement production in their strategies and include necessary actions to limit such emissions in their investment frameworks. FIGURE 3: CEMENT PRICE RANGE BY COUNTRY IN 2009 USD/ton

250 200 150 100 50 0

l ina India ates apan rkey Iran orea razi nam gypt ssia esia abia land xico Italy ries t B iet K E Ru on i Ar hai Me Tu un -St J V T d Ind aud Co ite er S h Un Ot

Ch

Source: Cembureau, IFC Estimates

In 2008 the average specific CO2 emission level of companies reporting figures to the World Business Council for Sustainable Development/The Cement Sustainability Initiative (WBCSD/CSI) was 745 kg (including electricity emissions). 6 Target matching 2009 European Integrated Pollution Prevention and Control (IPPC) Bureau’s draft Best Available Techniques (BAT) for the cement sector. 5

References

/ Betts, M., 2011, Cement International Industry, Jefferies International Ltd., Note, February. // Codling, A., 2010. European Building Materials Briefing, J.P.Morgan Cazenove, May. // Cembureau, 2010. Activity Report 2009, June. // European Integrated Pollution Prevention and Control (IPPC), 2009. Bureau’s draft Best Available Techniques (BAT) for the cement sector, February. // Exane BNP Paribas, 2010. Industry Outlook and Results, September. // Folliet, M., 2008. IFC’s role in the emerging markets. Emerging Market Report, February. // International Cement Review, 2009. Global Cement Report, February. Private Sector & Development


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Cement, confronting ecological responsibility and economic imperatives

Concrete, a solution for sustainable construction Concrete is being revolutionized in order to contribute to the immense transformation that needs to take place in the construction world, which is a high emitter of CO2. When we consider the global environmental impacts, this material does provide one solution to the challenges of sustainable construction. Alternative fuels are now being used to manufacture concrete and innovative products are being developed, which may in practice prove to save energy. Vincent Mages and Jacques Sarrazin Vice-President Climate Change Initiatives, Lafarge Group Vice-President Strategy, Lafarge

W

hether we are States or companies, we all have a role to play in meeting the future challenges for the planet: 9 billion human beings by 2050, the increasing scarcity of fossil energies, but also of water, and climate disorder. Concrete is the second most consumed product in the world after water. 10 billion m3 of concrete are produced every year, i.e. over 1.5 m3 per person. Just like cement, its main component, roughly 80% of concrete is produced in developing countries. It is, more than any other material, essential for economic and human progress, particularly in developing countries, and has an extremely large number of the qualities that are sought after in construction. Its resistance to fire, adverse weather conditions, pollution, shocks, humidity… guarantees great durability and can even guarantee that structures will last for over 100 years. As it is extremely comVINCENT MAGES Vincent Mages graduated from ESCP (Paris Business School) in 1982 and went on to hold international business responsibilities in the publishing sector, before joining Lafarge in 1988. He has held various positions in the company in marketing, business development and strategy for cement, aggregates and plaster in both France and Japan. He was Director of the Group’s in-house communication prior to becoming Vice-President for Climate Change Initiatives. www.proparco.fr

JACQUES SARRAZIN Jacques Sarrazin has been in charge of strategy at Lafarge since 2000. He joined the Group in 1990 to lead the cement strategy and went on to manage Lafarge’s plaster operations in Europe and the international development of plaster and specialized materials. He graduated as an engineer from MINES ParisTech and holds a Ph.D in management. He previously held responsibilities at Pechiney and was a researcher at Ecole Polytechnique.

pact (2 400 kg/m3), its high level of thermal inertia allows it to store thermal flows and subsequently release them. It is a source of comfort and energy saving. This material can be adapted to all forms of architecture and can be used for foundations, housing, roads, bridges, tunnels, water treatment and distribution networks alike. Finally, concrete can be manufactured locally, which reduces transport and creates local jobs. However, concrete emits high levels of CO2 and is being revolutionized with its own energy consumption being reduced, as well as that of buildings, thanks to improvements to its properties. Measuring environmental impact throughout the product life cycle These qualities obviously do not prevent concrete from having an impact on the environment. High levels of CO2 are emitted during the different manufacturing stages for some of its components. At the end of the manufacturing process, concrete has a carbon footprint of roughly 80 kg of CO2 per ton. Most of this comes from cement, the “hydraulic glue” made of sand and gravel, which are also its components. It is important to emphasize here the limits of comparing the carbon footprints of different construction materials. For example, the footprint of steel use – 2 tons of CO2 per ton produced – cannot be compared to that of concrete. Similarly, wood is no longer neutral in CO2 if we include the carbon weight of its processing, chemical treatments and its transport. Research is currently being conducted on a broader and more comparable definition of the notion of global environmental footprint. This definition will make it possible to assess both the carbon footprint and the other environmental impacts throughout the life cycle of products: contribution to energy saving in buildings, impacts of recycling


7

and possible depositing of each product in a dump at the end of its life cycle. This is a fundamental task for identifying the most efficient materials throughout their life cycle, but also for positioning new innovative solutions in the future. With just over 2 billion tons of cement produced every year, the cement industry causes roughly 5% of global CO2 emissions of anthropic origin. According to growth forecasts, particularly in developing countries, the volumes of concrete – and consequently of cement – consumed in the world are expected to double by 2030. CO2 emissions falling For a group like Lafarge, which manufactures both concrete and cement, the first step in reducing its CO2 emissions involves reducing the carbon content of its cement. The production of clinker,1 the basic component of cement, requires high-temperature transformation in furnaces – limestone decarbonation – which causes up to 60% of emissions. The remaining 40% are due to fossil fuels which are burned to bring the material up to a temperature of around 1,500°C. Ten years ago, Lafarge, in partnership with WWF, set out to reduce its global CO2 emissions by 20% per ton of cement produced for the period 1990-2010. Part of the clinker used to produce cement has conse“Worldwide concrete quently been replaced by indusconsumption is trial coproducts with compatible expected to double properties, such as fly-ash from by 2030.” coal-fired thermal power plants or the so-called “slag” residue from the blast furnaces in the steel industry. As for the fossil fuels burned in the furnaces, manufacturing processes have been optimized. Lafarge has consequently launched a program to replace them with alternative fuels, mainly from industrial, household or plant waste. Today, they account for almost 13% of the Group’s energy mix with a strong variation from country to country depending on available supplies (Figure 1). For example, in the Philippines 30% of furnace firing uses rice hull and in Uganda, coffee hull is used. Finally, in Malaysia the two plants consume FOCUS Lafarge, a global leader in construction materials – cement, aggregates and concrete, plaster – has a headcount of 76,000 staff in 78 countries. In 2010, the Group’s turnover reached EUR 16.2 billion: roughly 29% in Western Europe, 25% in the Middle East and in Africa, 19% in North America, 15% in Asia, 7% in Central and Eastern Europe and 5% in Latin America. Lafarge joined the global Dow Jones Sustainability Index in 2010 for its actions in terms of sustainable development.

FIGURE 1: EVOLUTION OF ENERGY MIX IN CEMENT INDUSTRY total %

1990

2008

2009

2010

Coal

56.1%

44.3%

43.4%

45.4%

Petroleum coke

7.6%

19%

19.9%

19.2%

Petroleum

13.5%

7.5%

8.4%

7%

High-viscose fuels

2.1%

0.7%

0.1%

0.1%

Gas

18.1%

17.9%

17.2%

16.6%

Waste*

1.9%

8.3%

8.3%

9%

Biomass

0.7%

2.3%

2.6%

2.7%

*Oils, solvents and used tyres, solid waste, humidified sawdust. Source: Lafarge, 2011

oil palm nut shells: this project was registered under the Clean Development Mechanism2 (CDM) in 2006 and generates 60,000 tons of carbon credits a year. The target of reducing emissions per ton of cement between 1990 and 2010 has been reached a year in advance: - 20.7% at the end of 2009 and - 21.7% at the end of 2010 (Figure 2). Moreover, research conducted by Lafarge in the field of granular stacking has opened up new avenues for producing cement that is more and more durable. The principle involves replacing part of the water used in the composition of concrete by fine and ultra-fine grains that are intercalated with the larger grains. This process makes concrete even more compact, more resistant and more durable; it uses less water and has a lower carbon footprint. Reducing energy consumption in buildings Buildings today consume almost 40% of global energy supplies in the form of heating, ventilation, air-conditioning, lighting, hot water production, etc. More than the emissions from manufacturing materials, the climate change challenge for the construction industry lies in reducing energy “Buildings today consumption in buildings dur- consume nearly ing their utilization phase. 40% of global Improving energy efficiency in energy supplies.” buildings is the main challenge of what we call sustainable construction. This concept must be based on integrated policies for land-use, city and neighbourhood planning. This approach is necessarily extremely broad and leads us to conduct reflection beyond our core business: from raw material extraction to recycling after demolition, from the thermal efficiency of structures to renewable energy production programmed right from the Clinker is the main component of industrial cement and is obtained by firing mixtures of limestone and clay. 2 The Kyoto Protocol’s Clean Development Mechanism allows industrialized countries to finance projects that reduce greenhouse gas (GHG) emissions in developing countries. In exchange, the investor obtains emission credits. 1

Private Sector & Development


8 Concrete, a solution for sustainable construction

Cement, confronting ecological responsibility and economic imperatives

design stage, from occupants’ living comfort to reducing negative effects during construction works, and of course, the social and environmental responsibility of the company itself. Today, the implementation of sustainable construction is notably demonstrated by the creation of certifications and labels (HEQ – High Environmental Quality, Habitat and Environment, Minergy, LEED – Leadership in Energy and Environmental Design, BREEAM – BRE Environmental Assessment Method…), the number of which has been constantly increasing all over the world in the last few years, giving all actors in the construction chain incentives to meet the new challenges. Solutions for tomorrow In order to ensure that these new products meet the challenges of sustainable construction, Lafarge uses the Life Cycle Assessment (LCA) method. It involves quantifying the environmental impact using several criteria (primary energy consumption, greenhouse gas emissions, air pollution, water consumption, transport, waste production…) and factors in the complete life cycle of a material, from raw material extraction to it being recycled or deposited in a dump. LCA is the only method to allow a truly scientific approach to the issue. It is also the most objective method, as it relies on a standardized methodology – ISO 14040 – and factors in all the key environmental indicators. Its relevance also stems from the fact that it applies to the entire life cycle of the product or building being assessed.

FIGURE 2: NET CO2 EMISSIONS PER TON OF CEMENT PRODUCED In CO2 Kg 774 647

1990

2007

631

2008

614

606

2009

2010

The aim of this is to enhance the environmental balance of products and also to offer more efficient construction systems. When we speak about sustainable construction, there is little point in taking each material separately. One must think in terms of the extremely close links that exist between them, but also factor in the needs and trends in architecture and the parameters related to urban planning policies (density, organization of mobility…). There are, in addition, geographical specificities and local customs. One does not build in the same manner in Europe, Asia, America or Africa: climate (more or less cold or humid), the type of construction (wood, steel, concrete, brick), the availability of natural resources and the level of development of the country also have an extremely considerable impact on the behavior of buildings or on the performance of a specific construction method. There is not one single solution applicable to all and everywhere. The systematic approach of LCA, along with research on construction systems, challenge a large number of preconceived ideas. Concrete can improve thermal inertia, airtightness and compactness, which are three fundamental factors for energy efficiency in buildings, while guaranteeing the latter a longer life cycle and greater resistance. In two years, energy savings during the utilization phase offset any additional costs for above-standard insulation and airtightness. One of the direct consequences of this global and integrated approach to sustainable construction is that Lafarge is developing new generation concrete solutions. The Group has notably just designed a structural ready-to-use concrete in partnership with Bouygues, which reduces thermal losses, or again a new thermal bridge breaker based on ultra-high performance fiber-reinforced concrete that reduces thermal bridges by up to 70%. The latter alone account for between 10% and 20% of energy losses in a building. Concrete may have a considerable carbon footprint due to its production method, but it can, thanks to properties that reduce CO2 emissions related to the utilization of residential units, be part of the global process for sustainable construction.

Nota bene: Net CO2 emissions are the gross emissions less the emissions that come from burning waste. Source: Lafarge, 2011

References / Lafarge, 2011, Annual report. www.proparco.fr


9

Financing cement achieves sustainable development Cement production plays an important role in the development of a country, but it is also energy-guzzling and polluting. EIB has implemented selection criteria that promote environmental and social responsibility in projects. The operations that are supported are located in Europe or elsewhere in the world and meet the same requirements. One of the main aims is to promote the “best available techniques”, energy efficiency and reduce CO2 emissions. Philippe Guinet and Jacques van der Meer European Investment Bank

1

T

he European Investment mission Bank's is to further the objectives of the European Union (EU) by making long-term finance available for sound investments. It does this inside the EU, but also beyond, where its lending is governed by a series of mandates from the EU in support of the EU development and cooperation policies in partner countries, like those in Latin America and Asia (ALA), Eastern Partner Countries under the EU Neighbourhood Policy, selected MENA countries under its Mediterranean Neighbourhood Mandate or African, Caribbean and Pacific countries in line with the ACP–EC Partnership Agreement (Cotonou Agreement). While the EIB lends to the cement sector in the EU, projects typically have to meet environmental and energy-efficiency objectives – its primary aim is to aid sustainable, economic development. Financing foreign direct investment (FDI) receives particular emphasis, since transfers of both capital and know-how are strong drivers for economic modernisation, Philippe Guinet

Jacques van der Meer

Philippe Guinet joined the European Investment Bank in 1993, where he is presently Technical Advisor for Heavy industries in the Projects Directorate. From 1974 to 1993, he held various operational and managerial positions in the private sector in and beyond Europe. He holds an engineering degree from École Nationale Supérieure des Télécommunications (ENST) and a management diploma from MIT, USA.

Jacques van der Meer works as deputy economic adviser at the European Investment Bank’s Project Directorate, where he is in charge of the appraisal of R&D projects. Before joining the EIB in 1991, he lectured strategic management at the Rotterdam School of Management of the Erasmus University and the École Supérieure de Commerce de Lyon. He holds a PhD from the Twente University of Technology, Netherlands.

exports and higher productivity. It also supports public sector projects, typically in infrastructure, that are critical for private sector development and the creation of a competitive business environment. Recipient project overview Between 2000 and 2010, the EIB financed 14 cement projects, totalling EUR 770 million (Table 1). Total associated investment costs for these projects amounted to EUR 3,200 million. Of this, EUR 210 million (27% of lending) went to three projects in EU member states, and the remaining EUR 560 million (73%) went to 11 projects under the Cotonou mandate. Lending in the EU is typically geared towards energy efficiency and environmental protection, whereas lending under the external mandates is geared towards construction in line with lending objectives to promote sustainable, economic development. For industrial projects, like cement plants, this involves facilitating FDI and import substitution by local producers. Meeting EIB’s sustainable development objectives EIB financing of industrial investments inside the EU has to be consistent with EU objectives. In the context of energy efficiency, this is achieved by financing projects that reduce energy consumption by at least 20%. Projects are also considered eligible for financing if they significantly reduce industrial pollution. Finally, R&D investments or pilot plants are eligible if they involve new materials, drastic reductions in environmental pollution, or energy consumption. The International Energy Agency (IEA, 2007) demonstrates that in manufacturing industries, there is a potential to save 18-25% The opinions expressed in this article are those of the authors, and not necessarily those of the EIB. 1

Private Sector & Development


10 Financing cement achieves sustainable development

Cement, confronting ecological responsibility and economic imperatives

in primary energy consumption (roughly 750 Mtoe/yr) and 19-32% in CO2 emissions (an average 2650 Mt of CO2/yr) from adoption of best practice technologies. Whereas this IEA study illustrates the potential for energy efficiency investments and CO2 abatement, the EIB looks at the economic performance of the investments. For instance, although it may seem cheaper to invest in emission reductions from power plants rather than investing in energy efficient buildings, the cost over the latter’s life may be much lower, resulting in the latter being more attractive. By promoting and supporting these higher-cost investments, multilateral financiers like the EIB can play a catalytic role. With the EIB’s external mandates, efforts are directed at fostering private sector-led development that promotes economic growth and has a positive economic and social impact on the wider community and region. And this has been the main justification financing cement projects outside the EU. In the stages of a country’s economic development, production shifts from mainly unskilled, manual activities to basic industrial activities that cater for the expanding infrastructure – construction sectors and heavy industries. Local cement production is therefore important to regional infrastructure development, which is essential in reducing poverty, promoting social equity and enhancing a nation or a region’s industrial competitiveness. This justifies international financing in support of expanding local cement-producing capacity. The relation between GDP and cement demand is clearly illustrated in the Figure 1, showing the steep increase in developing economies and the stabilisation of demand in Western economies. When countries achieve

higher levels of economic development, production and therefore capital investment shifts to higher-value added goods (machinery, transport equipment), and economies become more service-oriented. Technical and economic considerations Once the EIB’s lending criteria have been met, a due diligence is undertaken, which takes into account the characteristics of the industry and addresses the technical and economic underpinnings of the project. For projects outside the EU, the due diligence incorporates social and economic development effects. Given the EIB’s commitment to protecting the environment and promoting sustainable development, it places an emphasis on the use of best available technologies2 (BAT) in choosing processes and equipment. It also encourages using alternative fuels such as waste fuels (spent oils, tyres, animal feeds, pet coke, biomass, etc.) and reducing the CO2 component of the electricity used to operate the plant. A lot of consideration is given to using alternative cementitious materials as a substitute for clinker. The EIB has instances of this in its portfolio, with up to 50% of steel slags being used in the Cementir plant in Taranto (Italy), and the promotion of modifications of the national technical specifications for cement by the Syrian plant, in order to allow the incorporation of up to 25% of puzolan. The EIB has defined an internal methodology (based on international greenhouse gas accounting standards) to assess the carbon footprint of its industrial projects, by calculating baseline emissions and absolute project emissions. Best available technology (BAT) is the advanced method used in industrial production that limits the emission of pollutants. 2

TABLEAU 1: EIB LENDING OPERATIONS IN CEMENT SECTOR (2000-2010) Year

Country

Project name

2000

Bangladesh

Lafarge Suma Cement Plant

Construction of a cement plant near Chhatak

247

2002

BosniaHerzegovina

Lukavac Cement Factory

Modernisation and new production line at Lukavac, nord of Sarajevo

75

2002

Algeria

Algerian Cement Company

Construction of cement plant near M’sila

284

2002

Tunisia

Cimenterie CAT

Modernisation and capacity extension of a cement plant near Tunis

43

2003

Portugal

CIMPOR Cimentos Modernizaçao

Modernisation of three cement plant in Portugal

120

2004

Algeria

Algerian Cement Company

Capacity extension of cement plant near M’sila

157

2005

Nigeria

Dangote Cement

Construction of a cement plant

605

2006

Pakistan

DG Khan cement

Construction of a cement plant near Chakwal

208

2008

Ethiopia

Derba Midroc Cement

Construction of a cement plant at 70km from Addis Abeba

251

2009

Turkey

CIMPOR Yibitas Ankara

Construction of a clinker line near Ankara

127

2009

Namibia

Ohorongo Cement

Construction of a small cement plant near Addis Abeba

242

2009

Syria

Syrian Cement Company

Construction of a cement plant near Aleppo

127

2009

Spain

Cementos Molins

Energy Efficiency project at a cement plant near Sant Vincenç

506

2010

Italy

Cementir Taranto

Energy Efficiency project at a cement plant in Taranto

208

Source : BEI, 2011 www.proparco.fr

Cost (M EUR)


11

FIGURE 1: LINK BETWEEN GDP GROWTH AND CEMENT CONSUMPTION 800

00

1950-2008 CAGR: 1950-2008 CAGR: 700 Gross Domectic Product: 3.4% Gross Domectic Product: 3.4% Cement consumption: 2.4% Cement consumption: 600 2.4%

00

EU15, USA and Japan500

00

400

00

300

00

200

00

100

0

0

5 000

4 000

EU15, USA and Japan

1980 = 100

1980 = 100

50 53 56 59 62 65 68 71 74 77 80 5803 5836 5869 5992 6925 6958 6801 7014 7047 77 80 83 86 89 92 95 98 01 04 07

00

6 000

6 000

1950-2008 CAGR: 1950-2008 CAGR: 000 Gross Domectic Product: 4.5% Gross Domectic5 Product: 4.5% Cement consumption: 7% Cement consumption: 7%

Rest of the world

4 000

3 000

3 000

2 000

2 000

1 000

1 000

0

0

Rest of the world

50 53 56 59 62 65 68 71 74 77 80 83 5806 5839 5962 5995 6928 6501 6084 7017 74 77 80 83 86 89 92 95 98 01 04

00

Nota bene: CAGR means Compound Annual Growth Rate Source: Italcimenti

For the construction and equipment used in the plant, the EIB has established criteria in terms of cost of investment, timely implementation and reliability of operation, to ensure that design, procurement and management are effectively carried out in the project. These criteria have resulted in the Bank financing projects using Chinese technology. This may seem controversial, as it does not promote EU technology, and some Chinese equipment incorporates copied Western technology; however, in some instances, these choices of technology have proved favourable to projects. For instance, without compromising on the quality of equipment supplied, the low-cost delivery of equipment has permitted the improved profitability of a project in undertaken in difficult circumstances in Ethiopia. For greenfield cement plants in the EU a full social and environmental impact assessment, including public consultations has to be undertaken. The EIB applies this criterion to all its operations worldwide, on all plant aspects. This results in choosing best available technologies in the design of projects. The social impacts of projects are consistently taken into account; in particular, issues such as resettlements of previous occupants of the sites, occupational health and safety, and engagement with communities are carefully monitored. Examples of this in EIB-financed projects can be found in Syria and Ethiopia. Cement is the principal material used in construction (buildings and large infrastructure), and demand for cement is tightly linked to the social and economic development of countries. Investments in local cement production stimulate competition and often create surpluses, reducing local prices and improving References / IEA, 2007. Tracking Industrial Energy Efficiency and CO

2

product quality. In developing countries, due to deficient local capacity, it may release pentup demand, resulting in development. Examples of significant cement price reduction (of up to 30%) and an immediate increase in demand (of up to 10%) were the results of projects financed in Bangladesh, Nigeria and Ethiopia. Thus, in addition to the financial underpinnings, such direct externalities are incorporated as the economic returns of a project. Simultaneously, the EIB evaluates the environmental impact in its economic assessment, including a shadow price for greenhouse gas (GHG) emissions in the calculation of the project’s economic rate of return. The Bank’s current shadow prices for carbon are based upon an economic price of carbon proposed in 2006 by the Stockholm Environment Institute (SEI) to the Bank for its economic analysis of projects. SEI recommended values start from EUR 25/t of CO2 emitted in 2010 - increasing by EUR 1 every year - to reach EUR 45/t of CO2 in 2030 for the central range (baseline). The shadow prices of other GHG is based upon their global warming potential factors (where CO2 = 1), as proposed by the Intergovernmental Panel on Climate Change. The EIB has continued its financial support of the cement industry, an energy- and carbon emissions-intensive sector, by considering its important impact on the economic development of countries. However, EIB-financing is increasingly being challenged because of its imperative to calculate the absolute and relative footprints of projects.

Emissions, report. Private Sector & Development


12

Cement, confronting ecological responsibility and economic imperatives

Reducing cement’s CO2 footprint The manufacturing process for Portland cement causes high levels of greenhouse gas emissions. However, environmental impacts can be reduced by using more energy-efficient kilns and replacing fossil energy with alternative fuels. Although carbon capture and new cements with less CO2 emission are still in the experimental phase, all these innovations can help develop a cleaner cement industry. Hendrik G. van Oss U.S. Geological Survey

H

ydraulic cement, chiefly Portland cement or similar cement having Portland cement as a base, is the binding agent in concrete and most mortars, and is thus a key component of construction activity worldwide (van Oss and Padovani, 2002). Hydraulic cements derive their strength through the hydration (chemical combination with water) of their component cement compounds or minerals. World output of cement in 2009 of about 3 Gt was sufficient for about 24 Gt of concrete, or about 3.5 metric tons (t) of concrete annually per person on the planet. Worldwide, concrete is thus the most abundantly manufactured material. Most of the environmental issues surrounding cement production concern the manufacture of clinker, the dominant issue of global concern being emissions of carbon dioxide (CO2), an important greenhouse gas (GHG). Manufacturing Portland cement involves converting limestone and a variety of other raw materials into clinker, and then grinding this with about 5% of calcium sulphate and other additives into a fine powder. The composition of clinker does not vary much worldwide, and most production involves rotary kilns that share a similar technology. Thus, the manufacturing process for HENDRIK G. VAN OSS Hendrik van Oss is an economic geologist who since 1996 has worked for the U.S. Geological Survey’s National Minerals Information Center as a commodity specialist covering cement, ferrous slags, and coal combustion byproducts. Between 1988-1995, he was a country specialist with the U.S. Bureau of Mines, and prior to that, he spent a decade in the mineral (chiefly gold) exploration industry in the western United States.

www.proparco.fr

cement, and the associated environmental issues, are common worldwide. Calcination and heating requirements, highly CO2-emissive Clinker is composed mainly of four oxides: about 65% calcium oxide or lime (CaO), 22% silicon dioxide (SiO2), 6% aluminum oxide (Al2O3), and 3% ferric (iron) oxide (Fe2O3). The remaining 4% is made up of minor amounts of oxides of magnesium (MgO), usually less than 2%, and various alka- “Most of the lis. In ‘straight’ Portland cement, environmental issues the major oxides are combined surrounding cement within four hydraulically reactive production concern cement minerals in the clinker the manufacture component – tricalcium silicate of clinker.” or ‘alite’ (C3S, typically 50-55%), dicalcium silicate or ‘belite’ (C2S, 19-24%), tricalcium aluminate (C3A, 6-10%), and tetracalcium aluminoferrite (C4AF, about 7-11%), to which about 5% gypsum is added. Because of the predominance of calcium oxide (C), raw materials must include an abundant and inexpensive supply of it for clinker manufacture to be practicable. Traditionally, calcium oxide has been supplied by limestone or similar rocks. Limestone is mainly composed of calcite, which is calcium carbonate (CaCO3). This reliance on limestone is the root of most of the environmental problems associated with cement manufacture. Calcium carbonate in the raw material mix is thermally decomposed in the kiln to make its calcium oxide available, via a reaction called calcination. Because calcium carbonate is composed of 56% CaO and 44% CO2, calcination releases a great deal of this GHG. If calcium carbonate is the only source of CaO available to the kiln, the plant will need to calcine 1.16 metric tons (t) of CaCO3 to yield 1 t of clinker of 65% CaO content, and this calcination will release 0.51 t of CO2.


13

The energy required for calcination is enormous. Because most limestones are not pure calcite, the mass ratio of limestone to clinker will actually be more like 1.5 instead of 1.16, and along with some other materials such as clay and silica sand, it takes about 1.7 t of total raw materials to make 1 t of clinker. Calcination of the raw material takes place at 7501,000°C, with the heat being supplied by the combustion of fossil fuels, chiefly coal and petroleum coke, which releases more CO2. Once calcination is complete, the subsequent formation of C3S, C2S, C3A, and C4AF requires only a little extra heat, even though the reactions occur at higher temperatures (1,0001,450°C). This is in part because some of their formational reactions, especially “Developing that to form C3S (via the reaction countries have more C2S + C à C3S), actually release modern cement heat (are exothermic). plants than many Overall, to make 1 t of clinker, developed countries.” about 3.9 billion joules (GJ) of heat are required. This is for a dry kiln, which takes its raw materials in a dry state. Some older plants, however, operate wet kilns, which take their raw material mix in the form of a slurry containing about 35-40% water. For wet kilns, evaporation of this water ahead of the preheating step will require an additional 1.6-1.8 GJ/t of clinker. Kiln technology determines fuel needs These heat requirements are notional; in reality, it is usually higher because of varying amounts of heat loss from equipment (particularly the enormous kiln tubes). But there are opportunities for saving heat, particularly relating to the combustion air/exhaust and the air used to cool the clinker. On the latter, clinker emerges from the kiln red hot and must be cooled in a dedicated apparatus to 100-200°C before it can be ground into cement. This superheated air can be rerouted to the kiln burner or be used for preheating raw material, saving fuel. Most kilns built in recent years are modern preheater-precalciner kilns. The majority of new cement plants in recent years have been built in developing countries, leading to developing countries typically having more modern cement plants than many developed countries. However, because of ongoing plant FOCUS The U.S. Geological Survey (USGS), established in 1879, is the major scientific agency within the U.S. Department of the Interior, and conducts studies of the overall geological and biological framework of the United States (and overseas), with the emphasis on mineral resources; geological, biological, and topographical mapping; geological hazards; and water resources.

upgrades, installed kiln technology varies worldwide. Abandoning wet kilns in favour of dry kilns, and upgrading or replacing older dry kilns with more modern dry technology, improve fuel efficiency. Data from the U.S. illustrates this: in 2007 wet kilns required an average of 6.5 GJ/t of clinker; long, dry kilns averaged 5.3 GJ/t; preheater kilns averaged 4.1  GJ/t, and preheater-precalciner kilns averaged 3.6 GJ/t. Preheater kilns use a separate apparatus for preheating rather than the less efficient kiln tube, and the heating is from hot ‘waste’ air. Preheater-precalciner kilns also use an independently fueled calciner apparatus that is far more efficient than a kiln tube for the calcination task; the kiln tube only has to perform the final stage of clinker mineral formation. Efficiencies of scale were also evident: larger plants tended to be more fuel efficient. Additionally, most plants offer opportunities to achieve smaller improvements in efficiency through upgrades or ‘tweakings’ of existing systems, especially for electricity savings. The results can be cumulatively significant. Reducing fuel consumption or using alternative fuels CO2 emissions from fuel combustion are typically around 0.40-0.45 t CO2 per 1 t of clinker, and with calcination emissions added, the total becomes about 0.91-0.96 t of CO2, unless lowercarbon fuels and/or non-carbonate sources of calcium oxide are used. Some hydraulic cements have a lower clinker content than Portland cement; still, it is estimated that at current manufacturing rates, the world cement industry releases about 2.2-2.6 Gt of CO2 annually. To save fuel , the cement industry has long been on a trend of lowering its per-unit (per ton of product) energy consumption, by installing modern technology. Ongoing modernisation is part of the industry’s strategy to further reduce CO2 emissions (U.S. Environmental Protection Agency, 2010). Cement plants can also burn a wide variety of alternative fuels (AF), including a variety of industrial wastes, some hazardous. Many of these have a lower carbon content than conventional fuels. In carbon-emissions-reporting protocols, deductions may be allowed for AF use. Likewise, deductions may be allowed for biofuels (including the natural rubber content of used tyres). Biofuels are generally considered to be carbon-neutral in climate change modelling. Constraints on the use of AFs include environmental permission (especially for hazardous waste fuels); availability in sufficient quantity; cost of procurement, storage, and blending; and quality, as they are commonly more variable Private Sector & Development


14 Reducing cement’s CO2 footprint

Cement, confronting ecological responsibility and economic imperatives

in their heat and moisture contents than conventional fuels. Three other current practices are also part of the emission reduction strategy; two of these reduce overall plant emissions, and all three reduce emissions on a per-ton of cement basis. Towards a greener cement mix Cement plants can make use of a wide variety of alternative raw materials (ARM), in addition to traditionally used materials, such as limestone. Among the ARMs in common use are the industrial ‘wastes’, such as coal ashes from power plants, iron and steel slags, and industrial residues. Of particular interest are the slags and coal ashes, many of which have a similar composition to clinker. Most importantly, certain ARMs (but especially ferrous slags) can be significant non-carbonate sources of CaO, reducing limestone consumption and attendant calcination emissions of CO2 during clinker production. These ARMs require less heat for combustion, reducing fuel consumption and fuel emissions of CO2. Limits on ARM use revolve around availability and cost (especially for transport), environmental permission for their use, and their oxide balances. Within these limits, by consuming ARMs, the U.S. industry in recent years has reduced its calcination emissions of CO2 by about 0.7-1.3 million tons per year (or about 2.4-3%); reductions at the ARM-using plants themselves have been in the range of 2-10% or so. It is harder to gauge the reduction of fuel-related emissions, but ARM-consuming plants typically have energy consumption levels 3-30% lower than U.S. industry averages for the kiln technologies concerned. The clinker content of finished cement can be reduced by incorporating supplementary cementitious materials (SCM), such as fly ash, ground granulated blast furnace slag, silica fume, metakaolin, and pozzolanic volcanic ash, to make blended cements. These have many of the same uses in concrete manufacture as Portland cement. The use of SCM reduces the carbon ‘footprint’ attributable to the cement industry, but most SCMs derive from industries that also emit CO2. SCMs develop their cementitious properties by reacting with the CaO released during the hydration of Portland cement. Concrete producers can also directly introduce SCMs into the concrete mix to reduce the Portland cement (hence clinker) content. In either case, the use of SCMs commonly improves the quality of the concrete. Typical SCM contents in blended cements worldwide,

www.proparco.fr

and substitution ratios for Portland cement in concrete, are in the range of 5-50%, but can be higher for some applications. Limitations on the use of SCMs mainly revolve around availability and whether local building codes allow their use. The clinker proportion of cement can be further reduced, where allowed, by incorporating relatively inert bulking agents or extenders, the most common of which is (uncalcined) ground limestone. Incorporation can be as high as 20% or more in some Portland-limestone cements, but is typically less than 10%. Between inert extenders and SCMs, the world average clinker content of hydraulic cement is currently around 75-80%, compared with about 95% for traditional ‘straight’ Portland cements. Importantly, although using SCM or other extenders in cement and concrete does not reduce the cement industry’s emissions of CO2, overall, it reduces unit emissions and thus allows more cement (and concrete) to be made from the same amount of clinker. Carbon sequestration at experimental stage Because they are large stationary emitters of CO2, cement plants are considered good candidates for the future incorporation of carbon sequestration technology, especially if the CO2 content of the exhaust stream can be concentrated through using oxygen, rather than air, for combustion. A concentrated CO2 stream reduces the overall volume of gas to be processed, and may reduce the size of the sequestration facility needed as well as the consumption of any absorptive reagents. Proposed sequestration methods include producing a CO2 gas or liquid stream for use elsewhere or for permanent underground injection, absorption by some reagent, which would need to be disposed of, and the formation of a marketable product such as sodium bicarbonate. Overall, carbon sequestration technologies for cement “Cement plants can plants are presently perceived burn a wide variety as being largely experimental, of alternative fuels.” costly, and, for some proposed systems, requiring a facility of similar size to the cement plant itself. Very few plants have as yet installed carbon sequestration technology and, indeed, it may be unaffordable for many smaller or older plants. Also, with few exceptions, cement plants are situated next to limestone quarries, and these locations may not be conducive to future CO2 transport piping infrastructure. Cement plants have been cited as potential consumers of the calcium carbonate formed


15

by some new CO2 sequestration technologies or by so-called calcium-looping circuits proposed for thermal power plants. The use of such calcium carbonate by cement plants would, of course, return the CO2 to the atmosphere, but would at least reduce the need for the plant to burn its own limestone. New cements to be considered in the medium to long term Although made today in tiny quantities, a number of new cements have been developed in recent years that could be suitable for at least some forms of construction. “The few new Among these are geopolymer cements are several cements and several MgO-based hundred dollars binders. Advantages claimed for per ton more these cements include a lower expensive than energy (heat) required for manuPortland cement.” facture and hence lower CO2 emissions, and for MgO binders, that they actually absorb CO2 from the air and may thus be CO2-neutral or even net-negative. MgO binders develop strength through ‘carbonation’. Apart from issues in getting any new cement accepted into local and national building codes, there are constraints on the widespread use of binders (CaO or MgO) that work via carbonation. Carbonation (hence strength-development) requires sustained exposure to the atmosphere, and although suitable for some high

surface area applications (such as stuccos, thin slabs, and small blocks), this may not occur sufficiently rapidly in bulk concrete applications where CO2 permeability could be problematic, and raw materials of sufficient purity for MgO binder manufacture may be more limited in this regard than for Portland cement. Even where shown to have suitable strength, durability, and applicability, to significantly reduce CO2 emissions, billions of tons of these new cements will have to be manufactured annually. The new cements will have to compete against an established output from thousands of Portland cement plants worldwide, representing billions of dollars in investment. And the few new cements are several hundred dollars per ton more expensive than Portland cement. Yet the cost of Portland cement has been increasing over the years, largely because of fuel cost increases, and is likely to continue to increase over the long term. If some of the new cements could be manufactured in large quantities, economies of scale would be realised in their production costs, and within the next 30-50 years, some may become cost-competitive with Portland cement. During that time, many existing Portland cement plants may have exhausted their local limestone reserves, or their equipment may be in need of replacement, and the original cost of the plants will have been fully amortised. At that time, the world may enter a post-Portland cement age.

References

/ U.S. Environmental Protection Agency, 2010. Available and emerging technologies for reducing GHG emissions from the Portland cement industry, rapport, October. // U.S. Environmental Protection Agency, 2011. Inventory of U.S. greenhouse gas emissions and sinks-1990-2009, report April 15. // van Oss, H.G, 2011. Cement: chapter in the U.S. Geological Survey Minerals Yearbook. // van Oss, H.G., and Padovani, A.C., 2002. Cement and the environment-Part 1, Chemistry and technology, Journal of Industrial Ecology, volume 6, n°1, January, 89-105. // van Oss, H.G., and Padovani, A.C., 2003. Cement and the environment-Part 2, Environmental challenges and opportunities, Journal of Industrial Ecology, volume 7, n°1, January, 93-126. Private Sector & Development


16

Cement, confronting ecological responsibility and economic imperatives

Cement consumption, bolstered by residential construction, has seen a sharp increase in emerging countries over the past twenty years. This impetus leads to an often high level of per capita consumption and is expected to continue of the next two decades. The cement industry may support economic development, but its manufacturing process is responsible for a considerable amount of CO2 emissions. The efforts that have been made since the 1990s have, however, reduced CO2 emissions per ton of manufactured cement.

Global fuel-related CO2 emissions from cement production (in Mt) 184

52 49

12 15

25

Europe

North America

22

14

Latin America

1987

6

3 6

Japan

34

5

Middle-East 8

China

23

9

10 9

13

India

Asia

16

Africa

Brazil

1 1

2007

Oceania TOTAL : 143 thousand metric tons of CO2 in 1987 375 thousand metric tons of CO2 in 2007

Source: Proparco - Private Sector & Development, 2011

Evolution of cement production together with global absolute net CO2 emissions

World estimated cement consumption (in Mt)

60

6,000

Emerging countries

50

4,916 4,000

3,000

+4.8% 2,000

Net CO2 emissions

53

TOTAL +4.1%

2,217

Percentage change from 1990

5,000

Cement production

Developed countries

40

44

30

20

23

1,000 -0.5%

10

CAGR

0

35

34

17

0 2005

2025

-1,000 Nota bene: CAGR means Compound annual growth rate Source: Proparco - Private Sector & Development, 2011 www.proparco.fr

2000

2005

2006

Nota bene: This figure shows the partial decoupling of cement production from net CO2 emissions over time. Source: World Business Council for Sustainable Development, 2009


17

World emission of CO2 by sector in 2009 (Mt CO2)

Emission of CO2 from cement industry in 2005

10%

10%

16% 16%

16% 16%

19% 19%

32%32%7%

7%

35%35%

Transportation Transportation Cement Cement ElectricityElectricity and Heat and Heat Industry Industry Other sectors Other sectors Land Use Change Land Use Change

Fuel Fuel Process-related Process-related Electricity and site transport Electricity and site transport

55%55% 10% 10%

TOTAL:TOTAL: 34 Gt CO 342Gt CO2 Nota bene: “Other sectors” means Other Fuel Combustion (9.76%), Fugitive Emission (0.57%) and Industrial Processes (0.15%) Source: Proparco - Private Sector & Development, 2011, World Resources Institute

Source: SFI, WBCSD / CSI

Cement consumption per capita in 2009 (in Kg)

Breakdown of cement consumption by type of work

1,600

100%

1,400 80%

1,200 1,000

60%

800 40%

600 400

20%

200 0%

0 ia

rab

A di

u Sa

ina

Ch

rea Ko

n

Ira

ly

Ita

t yp

Eg

United States

y m otal pan and ssia ico azil tes ries dia sia x Br l rke na In one ta nt Ru Me Tu Viet rld T Ja Thaï d S ou Ind ite er C Wo n U h t O

Source: Cembureau, IFC Estimates, International Cement Review, Proparco – Private Sector & Development, 2011

Europe

Emerging Markets

New houses

Housing renovation

Non residential

Civil engineering

Source: Aurel BGC, Cembureau, PCA, Proparco - Private Sector & Development, 2011

World cement production by region 100% 90% 80% 70%

CIS

60%

Africa

50%

America

40%

Europe

30%

Asia + Oceania

20% 10% 0% 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Nota bene: CIS means Commonwealth of Independent States Source: Proparco – Private Sector & Development, 2011 Private Sector & Development


18

Cement, confronting ecological responsibility and economic imperatives

Earthen construction, an additional way to house the planet Building locally using earth could be one solution to the construction needs of the world’s population. Raw earth is available in many places on the planet and answers the major contemporary ecological, cultural, social and economic issues. This “ready-to-build” material fosters local development by promoting local culture and know-how, while creating employment and wealth. It opens up an avenue that should be seriously reconsidered. Romain Anger, Laetitia Fontaine, Thierry Joffroy and Éric Ruiz CRATerre-ENSAG

A

ccording to UN Habitat’s estimations, three billion human beings will be poorly housed by 2050, in poor and rich countries alike (UN News Centre, 2005). In order to meet needs, “Over half of the 4,000 high-quality dwellings will world’s population need to “emerge from the ground” live in dwellings every hour over the next twentymade of raw earth”. five years. Raw earth is a readyto-build material; it is available in many places on the planet and offers one of the most viable alternatives for meeting this demand. In addition, given the importance of the construction sector in the entire economy, earth-based building must be considered as a major lever for local development, as it boosts employment and wealth creation without overconsuming energy (Box 1). There is consequently a pressing need for earth to have the ROMAIN ANGER, LAETITIA FONTAINE, THIERRY JOFFROY AND ERIC RUIZ Romain Anger and Laetitia Fontaine are engineers specialized in construction materials and lecture and conduct research at the CRATerre-ENSAG laboratory. They are jointly responsible for the research topic, Matter/ Materials and are also co-authors of the exhibition about earthen construction “Ma terre première, pour construire demain” (Cité des sciences et de l’industrie, Paris) and the book on the same topic “Bâtir en terre, du grain de sable à l’architecture” (Belin). Thierry Joffroy is an architect at the CRAterre-ENSAG laboratory. He is responsible for the Heritage topic of the scientific program and has conducted over 250 study and consulting missions in over 40 countries. Éric Ruiz is an urban planning architect and researcher at the CRAterre-ENSAG laboratory. He has been involved in major social housing construction programs, both on the side of the contracting authorities and in construction management. www.proparco.fr

share it deserves in the range of construction materials used by contemporary builders. Building with what is underfoot The Great Wall of China is the greatest architectural work ever to be achieved. And yet, contrary to popular belief, it is not completely made of stone. Thousands of kilometers of the wall are made of earth. The rule that dictated the choice of materials is simple: to build using what was underfoot, stone on stone, earth on earth, and sometimes even sand on sand. This link between the geology and pedology1 of an area and its architecture is universal. Men and women use local materials to build their homes in all world regions. Today, it is estimated that over half of the world’s population live in dwellings made of raw earth, on all the continents and in all climates (Anger et Fontaine, 2009). A hundred and thirty-five architectural monuments on the UNESCO World Heritage List, i.e. roughly 15%, are made of earth (Gandreau et Delboy, 2010) – Figure 1. More than ever before, earthen construction offers real solutions for meeting energy and climate challenges. With all the advantages it offers, this architecture deserves to be once again recognized for the place it has in reality. Indeed, science has developed theoretical tools that are essential to gaining a better understanding of this material: by shedding new light on the know-how of traditional builders, the intimate knowledge of the most common substance now carries innovations for the future (Anger and Fontaine, 2009). Branch of applied geology that studies the chemical, physical and biological features of soil, its evolution and its distribution. 1


19

FIGURE 1: EARTHEN CONSTRUCTION AROUND THE WORLD

World Heritage Sites built with earth Area of earthen construction Source: Gandreau and Delboy, 2010

Earth is concrete clay How is it possible to build with a material that would initially appear to be so fragile and sensitive to water? In order to understand how, its composition must be considered. Earth is a mixture of grains that have different names depending on their size: stones for the largest (between 20 and 2 cm), gravel (between 2 cm and 2 mm), sand (between 2 mm and 60 μm), silt (between 60 μm and 2 μm) and clay (below 2 μm). Stones, gravel, sand and silt, which make up the granular skeleton of earth, provide the material with structure. Clay, mixed with water, acts like glue. It is consequently the binder for earth, exactly like cement is the binder for concrete. “Concrete” is, in reality, a generic term. It refers to a composite construction material made using aggregates agglomerated with a

BOX 1

ENVIRONMENTAL IMPACT AND ECONOMIC WEIGHT: THE BUILDING INDUSTRY IN FIGURES The building sector currently accounts for between 25 and 40% of energy consumed in the world, produces 30 to 40% of solid waste and is responsible for 30 to 40% of greenhouse gas emissions. At the same time, it employs 111 million people worldwide (UN Department of Economic and Social Affairs, 2010), including 75% in developing countries and 90% in micro-enterprises.

binder. Earth is consequently just one form of concrete among others, but it is natural and ready-to-use. The wide range of construction techniques for earth (rammed earth, clay mortar, cob, adobe…) is partly related to the great diversity of the material mix. Using these elements, a solid material is obtained that makes it possible to build edifices up to 30 meters high, such as in the City of Shibam2 in Yemen. When it is properly protected against rain and capillary ascent, there is no risk of chemical alteration to “earthen” material and it does not burn. It has an exceptional durability, as can be seen with the Great Wall of China and certain Egyptian, Chinese or Peruvian pyramids. Practically no environmental impact Housing is a major ecological, geostrategic and political issue. Buildings consume energy and emit CO2 at every stage of their construction, their use and, finally, their demolition. This begins with the production of construction materials: cement manufacturing alone causes 5% of global CO2 emissions. Then comes the transportation of materials and the construction in itself. Heating and air-conditioning needs account for the bulk of the The City of Shibam is listed as a World Heritage Site as mankind’s most ancient skyscraper city (most of the buildings date back to the XVIth century): it was built entirely using bricks moulded in raw earth. 2

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20 Earthen construction, an additional way to house the planet

Cement, confronting ecological responsibility and economic imperatives

energy bill. Finally, the demolition, storage and recycling phase for materials completes the cycle of a production industry that poses a problem due to the strong impact it has on the environment. Earth is a natural resource that is often widely available. Practically all mineral earth containing clay can be used for construction (Guillaud and Houben, 2006). It only uses a very low amount of gray energy at every stage of its use.3 Earth can be used on the spot, requires no transport, no conversion or energy-guzzling firing. It is easy to maintain and repair. At the end of its life, the building is demolished and the earth can be reused or returned to the ground it came from. It is consequently recyclable and does not generate waste. It has practically no ecological footprint, which is an enormous advantage in the face of climate change and the need to reduce energy consumption. Earth can consequently provide a good substitute for cement concrete constructions in a number of cases, particularly for individual low-level dwellings. When it is used, earth can help make substantial savings on heating in winter and on airconditioning in summer thanks to its thermal regulation properties. Earthen walls regulate temperature differences between night and day, which helps maintain the temperature at a pleasant and constant level. This is due to thermal inertia, fostered by the high density of the earthen material. The thermal inertia of an earthen wall and that of a cement wall are similar, for equivalent densities. In hot climates, earth naturally brings air-conditioning to homes. When the temperature rises, liquid water, condensed on the surface of the clay, evaporates. The wall consequently “perspires” in order to remain cool, in the same way that sweat evaporates to allow the human body to maintain its temperature constant. In cold and temperate regions, earth stores and diffuses the heat transmitted by the sun’s rays. The wall is optimal because it combines additional thermal properties: the insulation prevents the heat from escaping, the earth’s inertia absorbs the temperature fluctuations.

BOX 2

MAYOTTE: 500 BUSINESSES PRODUCE 20,000 HOUSING UNITS. In the 1980s, the French island of Mayotte (150,000 inhabitants) decided to make social housing production an engine of local development. Over 20,000 housing units have been produced, structuring the entire production industry (from the manufacturing of raw earth blocks stabilized with cement in small units, to the training of craftsmen and management within a cooperative framework), and allowing a fabric made up of over 500 small businesses to develop at the local level.

www.proparco.fr

Finally, clay, thanks to its absorption and evaporation capacity, regulates the humidity in the air, which helps keep the climate inside healthy: it absorbs the excess humidity and releases it when the air is drier. This natural hygrometric regulation does not exist with concrete or cement. Give priority to the local approach, a vehicle for development According to the Organisation for Economic Cooperation and Development (OECD), “the building sector has major impacts not only on economic and social life, but also on the natural and built environment” (OECD, 2003). A local approach makes it possible to give priority to short, low energy consuming industries, while exploiting know-how and the local labor force’s capacity to learn the techniques. The aim is consequently to take advantage of “constructive cultures” (knowledge and knowhow) in order to factor in the local environment, the culture of inhabitants and their history. By relying on local potential and know-how, an experience, sometimes dating back a thousand years, can be exploited and have a fully-fledged place alongside industrial production. The objective is to produce a “situated architecture”, based on economic development and local culture, in opposition to a so-called modern conception of “international architecture” (Fathy, 1999). It is essential to give priority to local diversity over the increasingly imposed global solutions. Local decision-makers and peoples increasingly expect architecture to emerge from the regions and cultures of inhabitants. The examples of Mayotte or El Salvador have now proved their relevance. They have led to the construction of several thousand housing units by small businesses or local jobbers (Box 2). The building industry, when it is developed on the basis of a planned policy, easily fits in with attractive “turnkey” solutions. These solutions offer efficiency and meet specifications that set ambitious objectives in terms of quantity and time scales. Creating a scale effect attracts major industrial groups, whose processes and technologies can indeed offer efficient solutions in terms of production volumes. However, all too often they also bring architectural solutions that are not sufficiently adapted in terms of climate, social and cultural aspects. These technology transfers are, indeed, dictated by major industrial groups’ own logics and their international priorities. Their Gray energy corresponds to the sum of all the energy required for production (extraction, transport and conversion of raw materials), manufacturing, implementation, use (including maintenance and repairs) and, finally, for recycling materials or products. 3


21

development strategies are based on their interests and do not depend on local interests, but on internal results. They can be factors of imbalance in countries where “The housing the economy is not based on a problem will not be diversified corporate fabric. solved by one The need to develop and the material alone”. concern for effectiveness may prompt public authorities in emerging countries to call on imported solutions. Although this may prove to be necessary for major infrastructure, it ignores the fact that the building industry can also be structured at the level of the craft industry and create local production industries. Earth is available, often ready-to-use, and can be used without the need for complex and costly industrial processes. There is no need for energy-guzzling kilns, or extraction quarries requiring machines with a value that is completely disproportionate to the level of income of inhabitants. This material often also uses know-how that is shared by all. It has numerous and diversified technical possibilities (solid walls, bricks, filling…), which correspond to know-how and organizational methods that are in line with the objectives of any development policy: to find the seed that will bear fruit for the economy, making the best possible use of local material and human resources. Certain social organization systems make it possible to build durable and comfortable constructions at extremely low costs that can be up to 25% cheaper than conventional constructions.4 From rustic uses to more elaborate technical solutions, there is a potential for an entrepreneurial fabric, first and foremost made up of craftsmen, to develop. The craft industry offers a great deal of flexibility in the choice of technical solutions and the distribution of investments. Moreover, it places the individual at the center of the economic system. It is time to fully exploit entrepreneurs’ capacities to work for a development process, which is made even more sustainable by the fact that it is based locally and, therefore, on the local economy. The choice of local materials, particularly earth, and production methods based on a local entrepreneurial network is not in contradiction with ambitious quantitative objectives. When the entire building industry is taken into account, it has a formidable effectiveness. The fragility caused by a too limited number of players, with a size that can sometimes be a

handicap, is thus greatly reduced. The fact that this corporate fabric is locally-established and by nature flexible de facto makes it sustainable and ensures that it creates wealth. Exploiting the complementarity of materials In view of the housing challenge, which is notably related to exponential population growth, particularly in developing countries, earth is a material that cannot be ignored. Its cost and the way it can be adapted to economic and cultural developments make it a material that is complementary to heavier industrial solutions. The global housing problem will not by resolved by giving preference to one single material. Cement and earth are inextricably linked and are complementary to each other. This virtuous circle may be slower to implement – this is its main handicap. However, it is less costly and offers infinitely more guarantees in terms of its capacity to be sustainably established in a region and to make the building sector a core engine of development. This close link between an available material, a constructive culture and local know-how that can support a technical skill and, finally, the local wealth that can be created, make earth a coherent solution for local development. It offers a solid alternative to heavy industrial solutions. The over-systematic use of the latter makes us forget that technology is the sociology of the technique, i.e. the capacity to use local know-how and resources and turn them into production methods, and therefore to use the local economy. However, it is still important to recognize the complementarities and intelligence of mixed solutions that allow the greatest possible benefit to be gained from the intrinsic qualities of different types of material.

For example, in 2010, the post-flood reconstruction program in Bandiagara, Mali, financed by the Abbé Pierre Foundation and Misereor was implemented at a cost of EUR 40/m², whereas “classic” social housing programs cost over EUR 160/m². 4

FOCUS CRATerre-ENSAG was set up in 1979 and was accredited as a research laboratory in 1986, under the supervision of the Ministry of Culture and Communication’s Architecture and Heritage Department. The 25-member team works with UNESCO’s World Heritage Centre, UNHabitat, international development aid nongovernmental organizations (Caritas, Red Cross, Misereor…), as well as on development actions supported by the European Union.

References

/ Anger, R., Fontaine, L., 2009. Bâtir en terre, du grain de sable à l’architecture, éditions Belin, Paris // Fathy, H., 1999. Construire avec le peuple, éditions Actes Sud, Arles. // Gandreau D., Delboy L., sous la direction de Joffroy T., CRAterre-ENSAG, 2010. Patrimoine mondial, Inventaire et situation des biens construits en terre, UNESCO/CH/CPM, Paris Guillaud, H., Houben, H., CRAterre, 2006. Traité de construction en terre, éditions Parenthèses, Marseille. // OCDE, 2003. Environmentally Sustainable Buildings: Challenges and Policies, OECD publications, Paris. // UN Department of Economic and Social Affairs, Division for Sustainable Development, 2010. Buildings and construction as tools for promoting more sustainable patterns of consumption and production, Sustainable Development, Innovation Briefs, Issue 9, March. // UN News Centre, 2005. World Habitat Day: By 2050, 3 billion human beings face the prospect of living in slums, press release, October 3. Private Sector & Development


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Cement, confronting ecological responsibility and economic imperatives

The positive impacts of a responsible cement industry Growing urbanization creates ever-increasing needs for cement. The cement industry holds some advantages that can allow it to meet this demand, limit its carbon footprint and participate in the development of the regions where it is established. Cement is cheap, adaptable and in strong demand. It can be manufactured while improving its environmental impact. The sector also creates a lot of employment, promotes education and helps improve the health status of local populations. Pierre-Olivier Boyer Human Relations Manager, Vicat Group

W

ith economic growth in emerging countries, rural exodus and demographic dynamism, the planet is experiencing unprecedented urban development. As Lewis Mumford predicted back in 1961,1 the planet is turning into a city. In 2008, for the first time in the history of humankind, the number of urban dwellers overtook the number of rural dwellers. Over 3.3 billion people now live in cities. The urbanization rate continues to rise every year; according to United Nations’ forecasts it is expected to reach 59.7% by 2030 and 69.6% by 2050 (UN, 2008). This urban growth is particularly strong in Asia and Africa. The urban population in Africa is consequently PIERRE-OLIVIER BOYER expected to rise from 373 million people today (33 million Pierre-Olivier Boyer graduated from the in 1950) to 1.2 billion by 2050. École du commissariat It is in these regions that there de la marine (Naval are the greatest needs – both Administrator's College); present and future – for infrahe also holds a Master’s structure and housing. In in Economic Science. He joined Vicat Group March 2011, the new Egypin 2001 where he holds tian authorities consequently the position of Human announced that one million Relations Manager. He has social housing units would be also been President of the built within the next five years “Constructive Innovations Hub” in the Rhône-Alpes in order to both meet the region since 2007. This needs of disadvantaged popupole of excellence gathers lations and support the buildpublic and private players ing sector, which creates a lot from the construction of employment. industry and promotes the dissemination of The economic and financial innovations in this sector. crisis has not slowed down global cement consumption. www.proparco.fr

It rose from 2,830 million tons in 2008 to 2,998 million in 2009 and to 3,294 million in 2010 (International Cement Review, 2011). Almost 80% of the cement has been used in emerging countries. The cement industry has considerably scaled up its production capacities in developing countries in order to meet this demand and support urbanization. However, a purely quantitative approach is now no longer sufficient to succeed on these markets. In the age of sustainable development and with the Millennium Development Goals being reaffirmed at the UN summit in New York in September 2010, the cement industry must see itself as a partner of the regions where it is established. It has its own way of investing in order to tackle the challenge of urbanization via two main approaches. The first one concerns the intrinsic quality of cement material which, given the latest technical developments in this field, can provide a better response to the challenges of sustainable cities in emerging countries. The second approach seeks to foster the positive impacts that the cement industry has on the economic, social and environmental development of the regions where it is present. Proven value The success of cement in developing countries is not new. What held true right back at the end of the XIXth century for countries that are today developed also currently holds true in developing countries. Indeed, cement makes it possible to build “solid” constructions at affordable prices and for the masses. It has become essential for water conveyance and purification, for the development of highways, urban spaces and leisure spaces; it is essential The American historian specialized in urban planning published one of his most important works in that year: The City in History. 1


23

for public transport requiring major infrastructure (railway lines, tramways, canals, etc.). The concrete road that Vicat Group will soon be testing in Senegal would appear to be well-adapted to extremely hot areas, where it is difficult to envisage regular maintenance operations. According to the tests conducted in North America, this road will also have the advantage of reducing the consumption of the vehicles – particularly the heavy trucks – that use it by roughly 4% (Maillard and Smith, 2007). In the housing construction sector, there is a demand for cement from both building professionals and individuals, which are very often self-builders. For example, if there has been a good harvest in Senegal, a farmer’s primary concern will be to build a “solid” construction using cement. A city dweller will do exactly the same thing once he has the means to do so (see Box). Cement is a material that will be used for many years to come; it benefits from a positive image that earth material in Senegal, for example, does not have. Densifying construction would provide a partial solution to the problems of urban sprawl observed in the major emerging megapolises; this requires building high-rise constructions, therefore made of concrete in most cases, and pushing for a collective approach to real estate construction. An innovative material for sustainable cities The “sustainable” dimension of cement is more recent. It is linked with contemporary debates on the notion of “sustainable cities” – cities which, at the very least, must limit their ecological footprint. Cement emits high levels of carbon dioxide due to the very nature of its manufacturing process (limestone decarbonation). It can, however, improve its environmental balance, firstly in terms of energy efficiency. In France, the latest innovations in concrete construction now make it possible to comply with “Low Consumption Building”

THE CEMENT MARKET IN SENEGAL In Senegal, according to Vicat Group estimations 95% of cement consumed is sold in bags and 5% in bulk form (major building companies). The bags are mainly marketed through national or regional “wholesalers” that supply a network of small stores, hardware stores and paint stores. Cement is considered as a staple product and the wholesalers that market it are also those that sell rice and sugar. The brand is extremely important for the final customer for whom it is a guarantee of quality and safety. The areas with the highest consumption are the urban areas of Dakar, Touba and Sally-Thiès – which are estimated to account for roughly 65% of the Senegalese market.

(LCB) standards. They could provide a solution that could be transposed to developing countries, where one of the main concerns is the energy cost of air-conditioning. The empirically observed inertia that is specific to concrete can give extremely interesting results in hot countries. Moreover, when cement is used in the form of concrete (mixture of cement, aggregates and water) “The economic – its normal use –, its carbon foot- and financial crisis print must be measured. Cement has not slowed has a carbon footprint that is com- down global cement pletely competitive in comparison consumption.” with other materials. This is demonstrated by the methodological guide, Bilan carbone® (carbon balance) applied to buildings, published by the French Environment and Energy Management Agency and by the Scientific and Technical Center for Building. Finally, producing cement locally for a given market further reduces its carbon footprint by removing carbon dioxide emissions from transport. Cement can provide a partial response to the challenges of sustainable construction if it is correctly manufactured; the use of new manufacturing technologies over the past twenty years has helped reduce its carbon footprint. Dry-process kilns have consequently replaced wet or semi-wet process kilns,2 thus reducing energy consumption by 40% and carbon dioxide emissions by 20%. Vicat Group also fires its kilns using alternative fuels that emit less CO2. Experiments with growing Jatropha3 have, for example, been conducted in Senegal. The nut from this bush produces an agrofuel which can replace coal imports. Moreover, this hardy plant does not require the use of agricultural land and provides work for a labor force neighboring the cement plant. The project submitted to the United Nations Framework Convention on Climate Change consequently aims, when fully operational, to produce 70,000 tons of nuts a year over an area of 11,000 hectares. This production could replace 56,000 tons of coal imports. It should, in addition, eventually create the equivalent of 2,600 full-time jobs. Moreover, the limestone or clay quarries – which in many cases are integrated into the urban fabric as a result of soaring urbanization – are often replanted with trees and become green spaces within city centers. This is the case in Konya, Turkey, at the heart of the Anatolian plateau. The use of secondary fuels, made of waste On this topic, see the article by Hendrik G. van Oss, p.12 in this issue of Private Sector & Development. 3 Jatropha curcas (or Curcas curcas) is a type of bush from the Euphorbiaceae family, which comes from Brazil. 2

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24 The positive impacts of a responsible cement industry

Cement, confronting ecological responsibility and economic imperatives

produced by man, is another avenue that is worth exploring. In Senegal, Sococim Industries, a subsidiary of Vicat Group, has for example formed a partnership with a new dump in order to install a sorting center on it, with a capacity to collect 22,000 tons of plastic waste, and transform it into fuel. It will be added to the groundnut shells that are already burned in the cement plant kilns. These solutions complete the other waste disposal systems that have still seen little development in urban areas in emerging countries. A player in economic and social development A cement plant can be a powerful factor in economic and social development, provided it integrates these objectives right from the design stage and that its owners are aware of their social responsibility. The cement industry is a long-term industry since an extremely high amount of capital is invested in the production equipment. For example, a new cement plant with a capacity of 1.5 million tons established in an emerging country might cost USD 250 millions. The cement industry supports the creation and development of local job-creating companies, just as it does in developed countries. It is in this spirit that the Sococim Foundation has just been set up in Senegal: to create and develop VSEs.4 It is also recognized in developed countries that one job in the cement industry creates ten times more indirect jobs in both upstream and downstream economic sectors. This figure may be four to five times higher in developing countries. A cement plant does, therefore, have a real impact on employment in a given region. The activities that are consequently boosted locally do not only concern services; they also concern technical fields such as the boilermaking industry, electromechanical engineering and automatic systems. They allow skills and know-how to be developed that are useful for the establishment of other industries; they contribute to

the general development of the region concerned. This knock-on effect is by no means insignificant. The cement industry is also a powerful vehicle for social progress in these countries. It offers a wide range of employment for all types of skills. It very often helps educate its employees “When correctly or future employees by support- manufactured, ing the development of schools cement can provide or higher education establish- a partial response ments. In Rufisque, Vicat Group to the challenges is supporting Senegal’s first pri- of sustainable vate multimedia library; in construction.” Egypt, it grants scholarships to students registered at El-Arish University, which is located near its Sinai Cement Company cement plant. Similar programs are currently being implemented in Kazakhstan and India. Finally, any company that is responsible also pays close attention to the health of its employees. Where required, health centers are opened to treat employees or their families. In Senegal, for example, Vicat has developed a program to combat HIV and malaria. In order to promote these positive developmental impacts, it must be ensured – and this is the responsibility of public authorities – that production overcapacities are not generated in a given region. Indeed, a high level of competition would put pressure on employment, salaries and suppliers in the short term. It would also lead to the development of export, and therefore to a greater carbon footprint due to transport, whereas cement is a material with a low value-to-weight ratio. Moreover, in the medium term, establishments that could no longer manage to break even would be forced to close down and this would discourage private investors. Sustainable construction, employment, education, health: the impact that the cement industry has on the countries where it is established is consequently not restricted to simply manufacturing building materials – which is, moreover, essential. This is where its strength lies, as well as its legitimacy to be present on these markets.

FOCUS Vicat Group employs over 7,200 people and had a consolidated turnover of over EUR 2 billion in 2010. The Group is established in eleven countries – France, Switzerland, Italy, United States, Turkey, Egypt, Senegal, Mali, Mauritania, Kazakhstan and India – and has made almost 59% of its turnover outside France. It was founded in 1853 and is today specialized in the cement, ready-mixed concrete and aggregate industries.

References

Sococim Industries Foundation, whose article of association were published in the Official Gazette of the Republic of Senegal dated 29th January 2011, aims to “support, on a not-for-profit basis, the projects of small enterprises or private individuals on the territory of Senegal, in order to develop sustainable self-employment, commercial, industrial or service activities that foster job creation”. 4

/ International Cement Review, 2011. Global Cement Report. 9th edition. // Maillard, P-L., Smith, T., 2007. The Sustainable Benefits of Concrete Pavement, Cement Association of Canada, article, april. // Mumford, L., 1961. The City in history. Its origins, its transformations, and its prospects, New York, Harcourt, Brace and World. // UN, 2008. World urbanization prospects. The 2007 revision population database, Department of Economic and Social Affairs, New York. www.proparco.fr


25

Curb carbon footprint and promote development: a tricky balance The cement industry is both a driver for economic expansion in developing countries and a large CO2 emitter. What approach should development finance institutions adopt in order to curb the carbon footprint and at the same time boost the economy? Rely on the Kyoto Protocol’s Clean Development Mechanism? It is a complex issue requiring action to be taken both on existing industrial facilities and with regard to future projects. Guillaume Mortelier and Denis Sireyjol Proparco

A

local cement industry has a positive impact on a country’s development but emits large amounts of CO2. Since one of the main objectives of Development Finance Institutions (DFIs) is to combat climate change, particularly by reducing global CO2 emissions, DFIs are questioning the appropriateness of supporting this industry. It is a matter of balancing the boost given to local employment, revenues and housing quality against global greenhouse gas emissions. Weighing the positives versus the negatives should make it possible to define an intervention strategy for the cement industry, which is vital given the developing countries’ strong economic and demographic growth. This is putting pressure on housing and infrastructure needs, resulting in a substantial growth of the demand for cement. GUILLAUME MORTELIER Engineer Guillaume Mortelier is a graduate from the École polytechnique and the École nationale des ponts et chausses (civil engineering school). In 2008, after five years’ experience in strategy consulting (Bain & Company) and private equity investment (Astorg Partners), he joined Proparco where he makes equity investments, particularly in the industrial sector. Guillaume Mortelier is also a research supervisor at the French Institute for the Economic Perspective of the Mediterranean World.

DENIS SIREYJOL Graduated from the ESSEC business school and the ENSEEIHT engineering school, Denis Sireyjol holds a Master degree in artificial intelligence. After two years as an investment officer for Allied Irish Banks, in 2007 he moved to the Agence française de Développement where he was responsible for private-sector financing in Madagascar. He joined Proparco in 2009 as an investment officer specialising in the agri-food, construction, services and tourism industries.

At the country level, there is a close correlation between economic growth and cement demand. In the wealthiest economies, most of which are no longer experiencing demographic expansion, cement demand is confined to refurbishing existing constructions. Studies show that when the level of development corresponds to an annual GDP of over USD 25,000 per capita, annual cement consumption falls to 200 kg per capita (Figure 1). The key point illustrated by Figure 1 is that as the poorest countries develop, their cement consumption will considerably increase, potentially reaching extremely high levels (up to 1,000 kg per capita per year), as is the case in China today. The figures for Sub-Saharan Africa are still very low – 70 kg per capita per year, against the global “Developing average of 340 kg (Lafarge, 2011). countries alone However, with an urban popula- already account tion set to rise by at last one bil- for over 80% of CO2 lion over the next fifty years, com- emissions in the bined with the forecast economic cement industry.” growth rate, this region is likely to be one of tomorrow’s biggest cement consumers. More generally, the developing countries’ share in global cement consumption is expected to rise from 80% today to over 90% by 2025 (PS&D, 2011). Key stage in economic development Beyond the cement needs essential to economic growth in developing countries, establishing a local cement industry is a major stage of their economic expansion. This has a significant impact, resulting, for example, in domestic power generation capacities being stepped up in order to meet the very considerable needs of cement plants, as well as public infrastructure improvements (roads, airports) and the training of technical personnel. Furthermore, a large number of indirect Private Sector & Development


26 Curb carbon footprint and promote development: a tricky balance

Cement, confronting ecological responsibility and economic imperatives

jobs are created by a cement plant. There is a multiplier effect greater than 10 between the direct jobs at a cement plant (between 200 and 400 employees for an average-sized cement plant) and indirect jobs. Another major benefit of establishing a cement plant is that it brings production centres (limestone resources) closer to consumption centres, thus bringing down sale prices; the low price per tonne makes land transport for cement relatively expensive. The radius covered by a cement plant generally does not exceed 300Â km. Beyond this, the transport cost (roughly USD 10 per 100 km) causes a steep rise in the price of cement, which is generally sold at between USD 50 and USD 100 a tonne. In some countries, particularly the least industrialised and/or the most landlocked, the price can exceed USD 200. Investing in local production can therefore help avoid costly imports, which push prices up and thus limit housing construction. A case in point is Nigeria, where the 2006 production deficit was considerable: annual domestic demand was estimated at 10 million tonnes, whereas domestic production attained only 3.7 million, i.e. 63% was imported (World Bank/CF Assist, 2009). This is a major challenge in that the economic and social development of the poorest countries requires cheaper cement. Developing countries: main cement industry CO2 emitters The developing countries alone already account for over 80% of CO2 emissions from the cement industry (which is responsible for between 5 and 7% of global emissions); Asia is the chief culprit with over 66% (CDIAC, 2007). Sub-

Saharan Africa, where the cement industry is embryonic, today only accounts for 3% of global cement CO2 emissions. Judging by the economic development witnessed over the past decade, these levels are expected to rise sharply. In the future, developing countries’ share in global cement production is expected to rise further, and these countries will be responsible for the bulk of additional CO2 emissions. However, contrary to generally held assumptions, analyses on cement production performance in emerging countries show that the efficiency of production processes in terms of carbon emissions is comparable to that of developed countries, sometimes even better. For example, China and India produce an average of 638 kg of CO2 per tonne of cement and Africa/Middle East 667 kg per tonne. These levels are only slightly higher than those in Europe (619 kg/tonne) and are much lower than in North America (760 kg/tonne) (WBCSD-CSI, 2009). Emerging countries have benefited from major improvements to production processes since 1990. A large number of cement plants built in these countries in recent years are equipped with efficient, state-of-the-art energy technologies, whereas cement plants in developed countries are often older. However, these average figures only partially reflect the situation in the cement industry. Recent cement plants with better standards operate alongside plants that are much older and less efficient, with levels of CO2 emissions per tonne of cement produced that sometimes exceed 1,000 kg/tonne. For example, in 2002 only 66% of cement plants in Africa were On this topic, see the article by Hendrik G. van Oss, p. 12 in this issue of Private Sector & Development. 1

FIGURE 1: PER CAPITA CEMENT CONSUMPTION CURVE IN 2010 Cement consumption per cap (kg) 1,400

China

1,200 1,000 South Korea Singapore

800 Turkey

Egypt

600

Jordan

Thailand Ecuador

Moldova Honduras Sri Lanka

200

Romania

South Africa

India

Ukraine Pakistan Kenya Philippines Nigeria Cameroun Bangladesh Zambia Tanzania Benin Indonesia Malawi Uganda

Austria

Portugal

Mexico Serbia

Ireland

Italy Spain

Malaysia

Morocco Syria

400

Greece

Algeria

Vietnam

Poland

Croatia

Slovenia Slovakia Czech Republic

Russia Brazil

Argentina

France Germany

Chile

Colombia

Japan

Netherlands Canada United States

United Kingdom

0

0

5,000

Source: Cembureau, IMF and UN, 2010 www.proparco.fr

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000 50,000 GDP per capita (USD)


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TABLEAU 1: COSTS RELATED TO THE IMPLEMENTATION OF CDM PROJECTS IN THE CEMENT INDUSTRY Project Type

Opportunites

Cost Estimate for CO2 Abatement

Waste Heat Recovery

Interesting, especially in a context where energy costs are high and supply is unreliable 1 MW results in a redction of 5,000 tonnes of CO2 per annum

Ranging from USD 15 to 50/tCO2

Alternative Fuels

Potential for substituting small percentages of fossil fuel by biomass Use of solid wastes, waste tires, non hazardous industrial waste, sludge

Changing Blending/Mix of Cement Energy Efficiency

1 tonne of Pozzolane Portland Cement reduces gross CO2 emissions by 20%

Option 1 (Biomass residues): USD 4/tCO2 Option 2 (Biomass plantations): USD 12/tCO2

Ranging from USD 4.38 to 6.24/tCO2

1 tonne of Portland Slag Cement reduces CO2 emissions by 45% Directly or indirectly reduces the consumption of fossil fuels

USD 24/tCO2 (for pre-heater upgrade)

Source: Gonnet, 2010

operating using the dry process,1 which consumes between 30% and 40% less energy than the wet process, whereas by contrast the proportion in India was nearly 98% in 2008 (World Bank/CF Assist, 2009). Clean Development Mechanism, a suitable framework? A cement plant’s CO2 footprint can be improved under the Clean Development Mechanism (CDM) introduced by the Kyoto Protocol. It specifically provides for the transfer of certificates that can be sold to developed countries, which will use them to meet their emission reduction targets. Cement projects may be eligible in three cases: the partial replacement of fossil energies by alternative or low-carbon fuels, the increase in the proportion of non-clinker2 components in cement and the use of cogeneration for power generation. These CO2-emission reducing technologies do, however, come with a high price tag (Table 1). This cost constraint is so high that only 4% of CDM projects in the cement industry have been approved, i.e. 52 out of a total of 1,300 registered projects (World Bank/ CF Assist, 2009). Most of these are located in China and India (respectively 25 and 17 projects). Africa has only received one approval for a wind farm project in Morocco. A few projects are currently being certified, such as schemes to replace combustible fuel by biomass in Egypt and jatropha in Senegal.3 There is no shortage of biomass projects in Africa, but CDM certification is very rarely requested. The main obstacles are the high transaction costs for project development, a difficult business environment and the low

level of access to financing in a context where the returns on investments from CDM projects are more long-term than those of a cement plant. Furthermore, financial brokers and consultants lack awareness of this mechanism, and lastly there is little support from local authorities (no CDM authority appointed, no training in place). Given the sharp growth in demand, many entrepreneurs do not bother about the restrictive problem of carbon emissions. Helping to curb carbon footprint In order to reduce CO2 emissions, it is necessary to invest in developing countries, which will be the main cement producers and consumers in the coming decades. This means upgrading existing cement plants and imposing higher production standards with regard to energy efficiency and respecting optimal clinker/cement ratios on both new and existing facilities. With climate change a core concern for DFIs, in addition to providing financing, they must enter into a dialogue on the issue of carbon footprint with cement producers for each of their operations. DFIs are a vehicle for disseminating the potential of CDM in Africa. They should systematically do this for the projects they finance, through support in the form of technical assistance, particularly in the least developed countries.

Clinker is the basic component of cement obtained by calcinating a mixture of silicic acid, alumina, iron oxide and lime. The calcination process for clinker production emits high levels of CO2. 3 On this topic, see the article by Pierre-Alain Boyer, p. 22 in this issue of Private Sector & Development. 2

References / Carbon Dioxide Information Analysis Center, 2007. Database // Gonnet, J., 2010. Carbon footprint of cement industry, report, October. // Lafarge, 2011. Annual Report. // Private Sector & Development, 2011. Cement, confronting ecological responsibility and economic imperatives, n°10, p.16, May. // World Bank/CF Assist, 2009. Cement Sector Program in Sub-Saharan Africa: barriers analysis to CDM and solutions, report, April. // World Business Council for Sustainable Development – Cement Sustainability Initiative, 2009. Cement Industry Energy and CO2 performance "Getting the numbers Right", report. Private Sector & Development


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Lessons learned from this issue BY BENJAMIN NEUMANN EDITOR IN CHIEF

Although a major emitter of CO2, cement production is crucial to the growth of developing countries. In the coming years, the key challenge for the cement sector will be learning how to reduce its carbon footprint while continuing to contribute to economic development. Addressing this challenge will be no mean feat. By the second half of the 21st century, the planet’s population will have increased by three billion, and a similar number will lack adequate housing. If there is to be enough housing for all, 4,000 homes will need to “break ground” every hour for the next twenty-five years. Further complicating this situation is the fact that since 2008, more people are living in cities than in rural areas – a trend set to continue, particularly in Asia and Africa. These growth regions require massive quantities of cement. By 2025, developing countries will account for more than 90% of the world’s cement consumption. With their huge appetite for cement, developing countries already generate more than 80% of the cement sector’s total carbon emissions (5% to 7% of global carbon emissions). It is also highly likely that these countries will be responsible for producing the bulk of any additional CO2. Yet it is difficult to do without cement, at least without impeding the growth of developing countries. Essential for construction, cement is one of the world’s leading industries. In numerous countries it plays a key role in economic development, employment and poverty reduction. A local cement industry may well require additional power generation, but it will in return stimulate infrastructure construction, the training of technicians and the creation of a large numbers of jobs. Moreover, the industry bolsters small and medium businesses and encourages foreign investment. Last but not least, locally-produced cement increases competition and brings production facilities nearer to construction sites, resulting in lower prices and fewer costly imports. The industry has been able to come up with some technical solutions to reduce the carbon footprint generated by cement production and use. There are

other possibilities, such as earthen construction for low-rise housing, and new, more energy-efficient cement, although this is still at the experimental stage. Short of replacing cement, manufacturers are trying to offer products with more sustainable features. Some cement products, for example, provide more effective insulation of buildings, the heating and cooling of which consume 40% of the world’s energy supply. Meanwhile, the cement production process has undergone considerable change. Wet-process kilns have gradually been replaced by more energy-efficient dryprocess ones. Fossil fuels are increasingly being replaced by alternative fuels, primarily industrial, household or plant waste. Similarly, some of the clinker used in cement manufacture has been replaced by industrial by-products, such as fly ash from coal-fired power plants or residue from blast furnaces used in the steel industry. These solutions are now among the selection criteria used by international financial institutions – which play a crucial role in supporting cement projects in emerging markets – when deciding on investments in the industry. The Kyoto Protocol’s Clean Development Mechanism (CDM) seems particularly well suited to making the cement industry less emission-intensive and addressing the lack of local production in developing countries. With the additional funding it generates from carbon credits, the CDM could eventually become the keystone of all cement sector funding in developing countries, and particularly in sub-Saharan Africa which has not benefited from CDM-related funding yet.

In our next issue Technical assistance, achieving a sustainable private sector

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PRIVATE SECTOR DEVELOPMENT is published by Proparco, Agence Française de Développement Group, a company having a share capital of €420,048,000, 151, rue Saint-Honoré 75001 Paris, Tel: 33 1 53 44 31 07, E-mail: revue_spd@afd.fr, Website: www.proparco.fr • Publications Director Etienne Viard • Founder Julien Lefilleur • Editor in chief Benjamin Neumann • Deputy Editor in Chief Charlotte Durand • Editorial committee Laurent Demey, Alan Follmar, Adeline Lemaire, Elodie Parent, Véronique Pescatori, Denis Sireyjol, Aglaé Touchard • This issue was coordinated by Guillaume Mortelier (Proparco) and Denis Sireyjol (Proparco) • Contributors to this issue Romain Anger (CRATerre-ENSAG), Pierre-Olivier Boyer (Vicat), Michel Folliet (International Finance Corporation), Laetitia Fontaine (CRATerre-ENSAG), Philippe Guinet (Banque européenne d’investissement), Thierry Joffroy (CRATerre-ENSAG), Vincent Mages (Lafarge), Guillaume Mortelier (Proparco), Éric Ruiz (CRATerre-ENSAG), Jacques Sarrazin (Lafarge), Denis Sireyjol (Proparco), Jacques van der Meer (European Investment Bank), Hendrik G. van Oss (U.S. Geological Survey) • Graphic design and creation 28, rue du Fbg Poissonnière - 75010 Paris, Tel: 33 1 40 34 67 09, www.noise.fr / Publishing: Jeanne-Sophie Camuset / Layout: Xavier Péron • Traduction Warren O’Connell, Christine Mercier • Editorial office ( : ? ! ; ) D O U B L E P O N C T U A T I O N www.double-ponctuation.com • Printing Burlet Graphics Tel: 33 1 45 17 09 00 • ISSN : 2103 334x • Legal deposit at publication: 23 June 2009.

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