Greening India’s cement sector

June 09, 2021 5:10 AM

The govt can incentivise high-cost green cement through tax-rebates to manufacturers and subsidies to consumers

In order to incentivise the transition, the government may consider introducing fiscal incentives by way of tax rebates for producers and subsidies for consumers of green cement.In order to incentivise the transition, the government may consider introducing fiscal incentives by way of tax rebates for producers and subsidies for consumers of green cement.

By Diya Dasgupta

India is the second-largest producer of cement in the world, with an overall production capacity of 500 MTPA that contributes to roughly 30% of the emissions accruing from the country’s manufacturing sector. As a result of rising population, urbanisation and infrastructural development by way of government targets and programmes such as the Smart Cities Mission, Housing for All, road development projects, etc, cement demand is expected to grow multi-fold in the coming years. With countries across the globe setting their eyes on achieving their net zero ambitions, the time is ripe for India to shift towards green cement production thereby paving the way for decarbonising one of its hard-to-abate sectors.

Cement manufacturing generates emissions resulting from chemical processes (60-70%) and fossil fuel burning (30-40%). Thus, it becomes imperative to explore opportunities for minimising emissions and optimising energy use. The initiatives undertaken by the Indian cement sector so far to curb emissions have been restricted to operational advances such as energy efficiency, alternative fuel use, clinker substitution, etc. The sector was included under the PAT scheme in 2012 and, till date, a total of 175 Designated Consumers have been covered under the six cycles.

Outcomes of PAT II indicate that the sector exceeded its energy saving target by 41.82 %. As per a WBCSD (2018) report, the share of blended cement in the Indian production mix has gradually increased from 68% in 2010 to 73% in 2017. The overall clinker factor has also reduced from 0.74 to 0.71 during the same period. Based on estimates by CII, the thermal substitution rate with alternative fuel use has increased from less than 1% to 4% between 2010 and 2016.

Unlocking further emission reduction potential calls for adoption of technological innovations aimed at greening the industry. While the talk of ‘green cement’ in the Indian context is not new and the initial ground work has already been laid out by a few cement giants, at present, there exists no comprehensive framework for certifying what makes cement a green product. Dalmia Cement had announced in 2018 its ambition of becoming carbon-negative by 2040 and has since then undertaken several measures including augmenting the share of renewable energy used, conducting pilot projects experimenting with CCU and so on. Early this year, ACC Limited launched ‘ECOPact’ (originally introduced by LafargeHolcim in 2020), a ready-to-use green concrete mix that involves 30-50% lower embodied carbon content as compared to the conventional Ordinary Portland Cement.

What is preventing the shift to green cement for the other cement producers? One obvious barrier is the potential high costs and the resulting disruptions in value chains, which perhaps the larger players can endure. However, for the smaller players it may be cheaper to continue producing using conventional methods and raw materials. In order to incentivise the transition, the government may consider introducing fiscal incentives by way of tax rebates for producers and subsidies for consumers of green cement.

Further, one way to partly circumvent the demand-side constraint is by ensuring minimum procurement of green cement under government-mandated infrastructure projects and private construction projects. This would be similar to the Renewable Purchase Obligation that requires discoms to procure a percentage of their energy from renewable sources. India may consider introducing grades of green cement that vary based on their “greenness”, CO2 reduction potential and production costs. This would need to be accompanied by standard-setting in terms of product quality to ensure comparability across variants, thereby easing in the transition in a phased manner.

Thus, the country should consider a tailored approach for decarbonising its cement sector by pushing the envelope beyond picking the low hanging fruits of energy efficiency and fuel switching. The Indian cement sector is among the most energy-efficient industries in the world, and unlocking further decarbonisation potential would entail a shift to green cement.

Research assistant, ICRIER

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