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In this special joint episode of the World Cement Podcast, and Cementing Europe’s future, the podcast of CEMBUREAU, David Bizley, Senior Editor of World Cement is joined by Koen Coppenholle, CEO of CEMBUREAU, for a deep dive into the Clean Industrial Deal and a discussion of what it means for the European cement industry.
Topics covered, include:
Topics covered, include:
- Financing & State Aid
- CBAM
- Net Zero Roadmaps
- The need for new infrastructure
- Energy prices, and more...
If you like this episode, then make sure to subscribe to both podcasts if you haven’t already done so!
And please do make sure to show your support by rating and reviewing.
And please do make sure to show your support by rating and reviewing.
Creators and Guests
What is World Cement Podcast?
The World Cement podcast: a podcast series for professionals in the cement industry.
Hello, everyone. My name is David Bizley, senior editor of World Cement, and welcome to a special joint episode of the World Cement podcast and Cementing Europe's future, the podcast of CEMBUREAU, the European Cement Association. If you're listening via World Cement, make sure to also follow Cementing Europe's Future on Spotify or at cembureau.eu for more conversations on policy, innovation, and sustainability in the European cement industry. And if you're tuning in from CEMBUREAU's channels, don't forget to subscribe to the World Cement Podcast, available on all major podcast platforms and featuring interviews and discussions on key topics with leaders from across the cement industry. I just wanted to take a moment to remind you to register for WorldCement.
David Bizley:It's free of charge and gives you access to the latest issues of World Cement, both in print and online. Every issue comes packed full of regional analysis, technical articles, project case studies, and the latest industry news. Simply head over to worldcement.com, click the Magazine tab, and register today. It's as simple as that. Happy reading!
David Bizley:Today I'm delighted to be joined by CEMBUREAU's CEO, Koen Coppenholle, and we're going to be diving into the details of the clean industrial deal, and exploring what it means for the cement industry in Europe. Glad to have you with us, Kohn.
Koen Coppenholle:Okay, thank you for having me, and happy to shed some light on the clean industrial deal.
David Bizley:Excellent. Now, we get into the complicated topics of the clean industrial deals, CBAM and so on, for our audience from around the world, can you give us a brief intro into SEMBURO? What exactly is your role within the cement industry?
Koen Coppenholle:CEMBUREAU is the European Cement Association and we are having members, and these members are national associations, or in the countries where there are only one company or a few companies that don't allow for a national association, it's directly companies, and we have them in 29 countries, which means 26 EU Member States, but then also non EU countries Norway, Switzerland and The UK. And our role is to represent the cement industry with the European institutions, and also to make sure that we promote the industry, we do studies for the industry, and we engage in a policy discussion on the main items that affect the bottom line of the companies.
David Bizley:Okay, makes sense. So getting into the core of today's topic then, what exactly is the Clean Industrial Deal or CID? And in very broad terms, we'll go into more detail in a moment, what does it mean for cement production in Europe?
Koen Coppenholle:Okay, well of all about the Clean Industrial Deal, in the text itself, the Commission labels the Clean Industrial Deal as a transformational business plan for Europe, and that means that the Commission recognises that the industrial base is essential for the competitiveness of Europe, but it also sees that indeed in the current situation we have geopolitical tensions, we have slow economic growth, high energy prices, and therefore the Commission considers that competitiveness and decarbonisation are both part of the security imperative for Europe, and are also under one overarching growth strategy. That's the idea of the Clean Industrial Deal, and then you have specific chapters on financing, on skills, on lead markets, on the operation of CBEM, etc. The reason why it is important for us is that indeed it's that complement to the decarbonisation agenda. We have, as a cement industry, we have published our roadmap towards net zero emissions by 02/1950, we have updated that roadmap on the basis of the projects we have, but we need a business case for these projects, and that's where the discussion about the competitiveness drivers and the enabling conditions for the transition of our industry come in, and that's where we find the Clean Industrial Deal as an essential instrument to make sure that we have a business case for these investments.
David Bizley:Okay, excellent. Now, one of the major challenges facing cement producers when it comes to meeting their decarbonisation goals is the cost of investing in new and emerging technologies. Tell us a bit about the Clean Industrial Deal's approach to industrial financing and how it can benefit the cement sector.
Koen Coppenholle:Well, the interesting concept that has been put forward in the Clean Industrial Deal is the Industrial Decarbonisation Bank. Now, the proof of the pudding will be in the eating in its 100,000,000,000 fund, but there we will see it's already consisting of a lot of instruments that are there. The Innovation Fund is there as one of the components of the Industrial Decarbonisation Bank, invest in EU which is more leveraging private financing, but then important as well is the ETS revenues, as a sector and the energy intensive sectors and the ETS will all be paying their ETS allowances going forward, and actually what we ask for also in our roadmap, is that if we pay in the future, 75% of these revenues should be front loaded in a specific fund that helps to decarbonise the industry. So returning the ETS money to the sectors for the decarbonization of these sectors is essential. For the moment, we don't really see that money coming back, and we don't because that is coming back through member states, and we would like to see that coming back.
Koen Coppenholle:All these funding will be coordinated under the Competitiveness Fund, but we would like to see the Innovation Fund continue to be earmarked for the decarbonisation of the sector, so that specific character of the Innovation Fund is essential. It's true that we have benefited as a sector from the Innovation Fund, but not to the extent that allows us to have the projects funded in full or the projects funded to an extent that there is indeed a business case even in some cases, because the innovation fund is largely oversubscribed. So we would like to see that also combined with other funding mechanisms, and maybe as a last point, we like to explore the concept of the contracts for difference because that's an instrument that also allows to address OPEX, not only CAPEX, and that also allows to address the risk and the de risking of the operation. So these are the elements that we see as crucial in the whole financing structure of the EU.
David Bizley:Okay, so the Clean Industrial Deal also includes a draft state aid framework as an acknowledgement of the need to de risk the kind of CapEx intensive projects that are going to be required for the decarbonisation process. Do you think this framework is effective in its current state, or will it need to go further?
Koen Coppenholle:Well, for the moment it's a draft, so we've been submitting comments into the draft. Let me say that I'm cautiously optimistic about the way the draft has indeed been put together, in the sense that State Aid is, it used to be an area where we were confronted with a lot of you can't do this and you can't do that, and these are the compatibility discussions which are pretty strict, but we see a State Aid framework now that really looks at State Aid as an instrument to help enhancing the investments and making sure that it facilitates that investment environment. That's the positive side of the State Aid Framework. There is a special chapter that also allows for State Aid for de galvanisation purposes. There is an area where we talk about the de risking.
Koen Coppenholle:I must say the combination in the State Aid draft framework between what can happen and what can be given under the Innovation Fund, which is EU funding, and how it can be combined through an almost automatic stated compatibility assessment with national funding is an interesting concept. Now that is a positive side. Of course we do have comments on the proposed framework. I think there is still a lot questions around accumulation rules and how different state aid instruments can be accumulated. There is a lot of questions around the scope, carbon capture is included, but then the transport and the storage, not because there's different instruments.
Koen Coppenholle:So there are a number of issues there that we see as problematic, and also for instance the timing from grant till the completion of a project, thirty six months, seems extremely short to us, but these are points that I think we can discuss, and we have also submitted our comments into the Commission's proposal, but there are positive elements in the publication.
David Bizley:So another one of the major components of the clean industrial deal is the Carbon Border Adjustment Mechanism, or CBAM. What role does CBAM play in enabling the decarbonisation of cement production in Europe?
Koen Coppenholle:We've always been supportive of the CBEM, and the main reason is that we see the CBEM as a core condition to create a level playing field for doing investments in Europe, and then we're talking about a level playing field because we do have a watertight and an effective CBAM. CBAM is meant to indeed make sure that there is a sort of mirror of the ETS for country operators, which means that there is a level playing field, they will pay a charge which is not higher than European operators, but which is at the same level, and I think that's essential to have that level playing field to make sure that we can operate in Europe against investment conditions that are comparable.
David Bizley:Okay, and according to SENBIRO's own Net Zero Roadmap, carbon capture technologies will need to handle as much as 43% of the sector's CO2 emissions by 02/1950, with some 14,000,000 tonnes needing to be captured, transported and stored or used by 02/1930, which is just five years away now. And all of that, in turn, is going to necessitate a wave of new infrastructure across the continent, pipelines and so on. What kind of support are you seeing from the EU to make that achievable, and does more need to be done?
Koen Coppenholle:Well, I mean, starting from the last point, I think yes, more needs to be done. What has been done so far is that there have been mapping exercises on the infrastructure, but it's true that if we capture the CO2 without projects, and we don't have the pipelines or access to the pipelines, we don't have the storage sites, that is indeed putting a little bit of a break on the projects, I would say. This infrastructure is essential. Now progress is being made. We know that DG Energy is working on a plan and on an infrastructure plan, we hope that that will go fast.
Koen Coppenholle:That requires also financing of course, but it's not only financing of the infrastructure, it's also practical questions in relation to how will the financing be divided between the EU and the Member States? How do you access these facilities at fair and reasonable conditions? And I think the Net Zero Industry Act has been a helpful instrument in that regard, but again, it needs implementation at national level, so we need a fast rollout of the CO two infrastructure, and that's gonna be one of the major points for the years to come, because indeed, as you say, if we wanna make sure that we realize the 14,000,000 tonnes of CO two captured by 02/1930, then we will need to make sure that CO two can be going through the pipelines and going into the storage sites at fair conditions, and that includes also standardization, for instance, on the CO two specificities. So these are important issues to tackle in the years to come and the near future, I would say.
David Bizley:And moving to the topic of energy, over recent years, and particularly since Russia's invasion of Ukraine in 2022, energy intensive industries like cement have struggled with energy price rises, impacting competitiveness and limiting the resources available for things like innovation. From SEMBURA's perspective, sort of at a European level, what needs to be done to resolve this issue?
Koen Coppenholle:Well, think indeed energy prices is a major issue for our industry also because as we decarbonise, our electricity demand will increase depending on the technology between two and five times, so that's going to be a major issue for us, and the prices have been 1.5, two times higher in Europe than in other parts of the world, and are also set to stay at that level. So yes, that is a crucial issue. What needs to be done? I think that again, what needs to be addressed is the marginal pricing in Europe, pricing system where the gas prices are determining the prices on the electricity markets, but apart from that, it's again an infrastructure issue. And that's also recognised by the Commission, we need investments in interoperability, interconnection of grids, that's going to be essential going forward.
Koen Coppenholle:I do not think that the focus that is now in the Commission documents on PPAs, long term agreements, is indeed the only solution to the problem. So access to affordable electricity and energy, in addition to that also low carbon, is going to be essential going forward.
David Bizley:And of course the green transition is going to struggle to succeed as well without buy in from end users and consumers of low carbon products. How exactly can the clean industrial deal play a role in generating new markets and demand for these kinds of products?
Koen Coppenholle:That's indeed where the lead markets initiatives come in, and that's where you need to see how we can take up low carbon products through the markets. I think we, as a cement industry, we provide and we supply the construction market, and I think the construction market also for a large part is public procurement. Public procurement is not the only area where you need to put the rules in place, but I think it's an important area to drive the uptake of low carbon products, and that's the whole discussion that we have also in the Clean Industrial Deal about the lead markets initiatives that are also deployed sometimes at national level, so there again it's cooperation between European and national level that will be crucial.
David Bizley:We've talked about a lot of different policies, items of legislation and so on already today, and mostly in terms of how they can be beneficial to the cement industry's net zero efforts. In contrast, are there any policies or legal barriers that are blocking the decarbonisation Anything that needs reforming or removing altogether, do you think?
Koen Coppenholle:Well, I think hindering the decarbonization process is especially the facilitating elements that need to be there, and that's what we discussed in terms of financing and infrastructure, but I think what we aim at more when we look at legislation is that we want to make sure that Europe goes back to the root when it is adopting legislation to say what is the objective of this legislation and are the means that we deploy proportionate to these objectives. There is indeed this whole simplification wave right now, and let me take one example. We have the taxonomy rules that have been put in place. I must admit that it has been extremely difficult sometimes to interpret the taxonomy rules. Our companies also as a result have reporting requirements that are extremely difficult to comply with, but at the same time it's also imposing a lot of investment from the companies in terms of FTEs just for reporting purposes, and it's not very clear to what it really serves in terms of a purpose.
Koen Coppenholle:So I think the better regulation issue has been on the European agenda for as long as I'm active in Brussels, that's a pretty long time, and it has never really been addressed in terms of let's make sure that the legislation is focused and targeted to the right objective and is proportionate, and then indeed also subsidiarity principle, making sure that what can be done at national level is done at that level and is executed at national level. So I think that's a little bit of the area where I think simplification of legislation can free up the necessary investments, FTEs, to make sure that we move and transform the sector going forward.
David Bizley:Okay, and out of everything we've discussed today, what would you say is the most urgent issue for the EU to prioritise when it comes to making the cement industry's net zero goals achievable?
Koen Coppenholle:I think the infrastructure, and by infrastructure I mean both CO2 and electricity. This is essential for us, and I think for many sectors, it's interconnecting, it's making sure that there is interoperability, and that there is a link between whatever we do in terms of decarbonising, but also the needs in terms of electricity, the needs in terms of CO2 pipelines and storage, that's going to be essential going forward.
David Bizley:Excellent, and lastly before we wrap up, do you have any final thoughts for our audience today?
Koen Coppenholle:Well I think what the clean industrial deal teaches us is basically that indeed it's the competitiveness which is essential, and that has also prompted ourselves as a trade association to say, okay, we have issued now our roadmap, and we're not going away from the objectives and from our commitment to what we put in the roadmap. We stay committed to the Green Deal, we stay committed to our roadmap. That needs to be very clear, But we also are now working on our own cement action plan. There have been some action plans announced in the Clean Industrial Deal for steel, chemicals, and also automotive. We're working on our own plan because we do think that it is essential to highlight the competitiveness drivers that we need just to make sure that we have the access to biomass waste, have the access to electricity, we have a level playing field through CBEM, we have a well functioning ETS, but also to make sure that we have the enablers to transform industry.
Koen Coppenholle:And then indeed, I'm talking about infrastructure for CO2, I'm talking about financing. So the combination of both these competitiveness drivers and the enabling conditions for the transition are going to be part of our own cement action plan. So I think stay tuned for us to publish that. We're going to have an event on the October 15 that will focus on that, but that's our strong focus going forward in the framework of the clean industrial deal.
David Bizley:Okay. Excellent. Well, that is all the time we have for today. Koen, thank you so much for joining me and exploring the clean industrial deal and what it means for the cement industry in Europe.
Koen Coppenholle:Thank you for having me.
David Bizley:I hope you enjoyed this special joint episode of the World Cement Podcast and Cementing Europe's Future. If you like this episode, then make sure to subscribe to both podcasts if you haven't already done so. And please do make sure to show your support by rating and reviewing. Your feedback is really helpful and lets us know that we're going in the right direction. Thank you all, and goodbye for now.
David Bizley:I just wanted to take a moment to remind you to register for World Cement. It's free of charge and gives you access to the latest issues of World Cement, both in print and online. Every issue comes packed full of regional analysis, technical articles, project case studies, and the latest industry news. Simply head over to worldcement.com, click the Magazine tab, and register today. It's as simple as that.
David Bizley:Happy reading!