Potential Impacts of Climate Change on Cement Industry
PCA MTC Steering Committee, May 2008

Climate Change Impact
Among other things, we have to face the fact that whether we agree that a crisis of rapid climate change exists, the political drive is pushing this to reality and regulation is eminent.
We have to be prepared!
What do we need to Know?
•What is coming requirements
•What are our emissions
•What are our options , specific to our operations and location
•How much will it cost
•Which is the best application
•How easy is implementation

But first, where is it coming from? Sources of CO2 Emissions
Agricultural byproducts
1%
Fossil fuel retrieval, processing/distribution
8.4%
12.9%
19.2%
19.2%
Residential,
Commercial,
Other
Land
Use/Biomass
Combustion
1%
20.6%
29.5%
Power Stations
Waste
Disposal

What about my house? Sources of CO2 Emissions
18%
Waste
5%
26%
51%
Vehicles

What is coming – Definitions and requirements
Definitions
• Greenhouse gases (GHG) Not Just CO2 :
•Carbon dioxide (CO2), Methane, Nitrous oxide (N2O, not NOx), hydrofluorocarbons, perfluorocarbons and Sulfur hexafluoride
• Carbon Credits – Tons of carbon emissions “granted” to each facility, similar to a permitted emission limit except it decreases over time
Carbon Credits Example :
A Cement operation emits 2,000,000 tons of carbon Dioxide per year
If the law says they will reduce CO2 by 25% over time :
Plant receives 1,500,000 carbon credits -
2,000,000 tons CO2 per year X 75% = 1,500,000 carbon credits

What is coming – Definitions and requirements
Definitions
•Carbon credit allocation vs. auction
• Auction - govt. gets money, consumer pays
Industry (or speculators) buy CO2 credits at auction

What is coming – Definitions and requirements
Definitions
• Carbon credit allocation vs. auction
• Allocation - Industry is given carbon credits to sell and reinvest
Industry is given CO2 credits
Industry sells CO2 credits on market
Industry invests $$ on CO2 reduction technology

What is coming – Definitions and requirements
Definitions
• Cap and trade
•Maximum emissions ( cap ) set for facilities with reductions over time
•Carbon credits granted (or auctioned) to company to be sold as commodity
( trade ). Seller uses money to invest in CO2 reduction technology
Carbon Trade Example :
Brand X receives 1,500,000 carbon credits can reduce CO2 by 30%.
The Market price is $30 per carbon credit when Brand X sells :
1,500,000 carbon credits X 30% reduction = 450,000 credits for sale
$30 per credit X 450,000 x 3 years = $40,500,000
$40.5 Million to invest in CO2 reduction technology

What is coming – Definitions and requirements
Definitions
• Leakage – guarantees the export of business, an increase in global GHG emissions and a life threatening competitive disadvantage for US cement industry
Leakage is a serious concern for the cement industry!
If not properly legislated, leakage could give foreign companies a clear competitive advantage

What is coming – Definitions and requirements
Requirements - Legislation
•Currently there are over twelve proposed bills in Congress
•Most will be “Cap and Trade” type legislation, some with auctioning of carbon credits, some with allocation, some a combo
•Progressive GHG emission reductions from 2012 to 2050
•Most will regulate 6 specific sectors of our economy :
• Power Generation
• Industry/Manufacturing
• Transportation
• Oil & gas
• Forestry
• Agriculture

8000
7000
6000
5000
4000
3000
2000
1000
0
2005
What is coming – Definitions and requirements
Legislation
Greenhouse Gas Reductions By Proposed Legislation
Bingaman/Specter
Feinstein
Lieberman/McCain
Kerry/Snowe
Sanders/Boxer
We are here
2012
Law wants us here!
2020 2030
Year of Com pliance
2040 2050

What are your emissions ?
• Sources of GHG’s to be Counted :
Direct Emissions
•Mobile combustion (heavy equipment, etc.), stationary combustion
•Non-combustion manufacturing, chemical processes, fugitive releases
Indirect Emissions
•Energy purchased/consumed : electricity, steam, heating/cooling
Other indirect emissions
•Business travel, employee commute
•Product use

What are our options ?
•More blended cements – Type IP, slag blends, other additions
•Carbon neutral fuels, renewable fuels (bio mass, bio fuels)
•Energy efficiency measures – Pyro-process and electrical efficiencies
•Carbon dioxide capture and storage (CCS) – complex process to capture CO2 from fuel process or stack and put it underground
•Hybrid cement energy facilities – utilization of waste heat
•Use of non-cement binders (e.g. geopolymers), with lower specific CO2 emissions
Last 3 items are expensive, not practical right now – short-term measures will have to be used while new technologies are being developed

What are our options (contd.)?
Blended cements :
• Limestone, Slags, Fly Ash, Silica Fume and other additives
Caution :
• DOT / customer acceptance, Consistent product, Added metals, Color and quality variations
Carbon dioxide capture and storage (CCS) :
•Goodbye CO2, Site considerations based on capability to sequester
CO2, Experience from enhanced oil recovery
Caution :
•Co$$$$t to capture, CO2 – Hello again?, Who owns the rights?, Public acceptance, Regulations and regulatory authority?

What are our options (contd.)?
Carbon Neutral and Renewable Fuels : Bio-Fuels are considered zero or low
CO2 emissions since all of the carbon in biofuels came from the earth’s atmosphere
•Fuel crops, Bio mass, Wood wastes, Refuse derived fuels
Caution :
•High moisture or low BTU content, Consistency of fuels,
Special handling - low bulk density, Hurdles for feeding and transport
Energy efficiency measures :
•Plant upgrades – conversions, Grinding and pyroprocessing improvements, Technology/software tools,
Building and site energy measures
Caution :
•Expen$e, Discard good equipment? Timing,
Limitations - equipment and product demand,
Regulatory – permit possible in reasonable time?

Assembly Bill 32 (AB 32) - California Climate Change Regulation
• Very Aggressive and Stand Alone
• California producers are vulnerable to a competitive disadvantage if implemented before other states are under similar regulation
• Preventing leakage difficult or impossible with international law
Goals :
• Reduce GHG emissions to 1990 levels by 2020 (25% reduction)
• 80 % reduction below 1990 levels by 2050

300
200
100
0
700
600
500
1990 Emissions
Baseline
400
Magnitude of the Challenge For California
Current Trend Versus AB32 Targets
~ 173 MMton CO2
EQ Reduction
80% reduction,
~ 340 MMT
CO2 EQ
1990 2000 2004 2020 2050

California AB 32 - Sectors
Sectors
• Agriculture
• Forests
• Business/Industry
•Cement
•Semiconductor manufacturing
•Oil and Gas/Refining
•General Combustion
• Energy (Electricity/Natural Gas)
• Water
Sectors
•
Transportation
•Land Use/VMT
•Vehicles
•Fuels
• High GWP Gases
• Recycling and Waste
Management
• State Gov’t
•Green buildings
•State fleet

AB 32 Timeline
2007
Publish list of early actions
2008 2009 2010 2011 2012 2020
Adopt scoping plan
Adopt GHG reduction measures
Identification/ implementation of further emission reduction strategies
Mandatory reporting &
1990 Baseline
Early action regulations enforceable
GHG reduction measures enforceable
Adopt enforceable early action regulations
Reduce GHG emissions to
1990 levels

Both cement and concrete operations considered
 Energy use
 Fuel types and efficiencies
 Transportation and material use
 Product waste
 End of life consideration

Cement operations :
 11 cement plants, cement 14 kilns in CA
 3 in Northern CA, 8 in Southern CA
 Over 1,700 employees
 11.3 MMT Clinker, 11.6 MMT Cement
Concrete Operations :
•Over 400 - 500 established concrete batch plants in CA
•Many more temporary batch plants
•75% of cement distributed to concrete batch plants
•25% distributed to other businesses

Cement :
• Convert to clean alternative fuels
• Improve energy efficiency practices/technology in cement production
• Use blending cements

Concrete :
• Reduce concrete waste
• Use less cement
• Universal GHG emission standard
• Blend SCM at batch plants

How Will Climate Change Impact The Cement Industry?
Conclusion
• We have to be prepared – Don’t wait for law, start now!
• Get involved and provide input into regulations (PCA, etc.)
• Know your emissions – Carbon Inventory, don’t stop at the plant
• Know your options for each facility
– find the best fit
• Long –range planning starts now

Potential Impacts of Climate Change on Our Industry
PCA MTC Steering Committee, May 2008