Reaping the carbon rent: Abatement and overallocation profits in the European cement industry, insights from an LMDI decomposition analysis

Abstract

We analyse variations of carbon emissions in the European cement industry from 1990 to 2011, at the European level (EU 27), and at the national level for six major producers (Germany, France, Spain, United Kingdom, Italy and Poland). We apply a Log-Mean Divisia Index (LMDI) method, crossing data from three databases: the Getting the Numbers Right (GNR) database developed by the Cement Sustainability Initiative, the European Union Transaction Log (EUTL), and the Eurostat International Trade database.Our decomposition method allows disentangling seven channels of emissions change: activity, clinker trade, clinker share, alternative fuels, thermal and electric energy efficiency, and electricity decarbonisation. We find that, apart from a slow trend of emissions reductions coming from technological improvements (first from a decrease in the clinker share, then from an increase in alternative fuels), most of the emissions changes can be attributed to the activity effect.Using counterfactual scenarios, we estimate that the introduction of the EU ETS brought small but positive technological abatement (2.0% ± 1.1% between 2005 and 2011). Moreover, we find that the European cement industry have gained 3.5 billion euros of "overallocation profits", mostly due to the slowdown of production.Based on these findings, we advocate for output-based allocations, based on a stringent hybrid clinker and cement benchmarking.

Exploring the driving forces of energy consumption and environmental pollution in China's cement industry at the provincial level

“…They also found that the contribution of urbanization to CO 2 emissions has large variations among provinces (Ding and Li, 2017). Branger and Quirion (2015) found that CO 2 emission reductions are partly attributed to the technological improvements (i.e. to decrease the clinker share and increase in alternative fuels) and clinker trade, while the activity effect significantly contributes to the emission increase (Branger and Quirion, 2015).…”

“…Branger and Quirion (2015) found that CO 2 emission reductions are partly attributed to the technological improvements (i.e. to decrease the clinker share and increase in alternative fuels) and clinker trade, while the activity effect significantly contributes to the emission increase (Branger and Quirion, 2015). With growing interest in spatial and temporal analysis and considering the difference of performance assessment, Ang et al (2016) proposed three broad categories of decomposition analysis, namely single-country temporal analysis, multi-country temporal analysis, and cross-country analysis, while the spatial index decomposition analysis models are further divided into bilateral-region, radial-region, and multi-region models (Ang et al, 2016).…”

The European Union Emissions Trading Scheme: should we throw the flagship out with the bathwater?

“…For the cement sector alone, these 'overallocation profits' are estimated at €3.5 billion. 27 EITE sectors have suffered from the crisis through reduced sales and low margins, but their financial situation would have been worse had the EU ETS not existed. Presented as a threat to competitiveness, the EU ETS has actually improved competitiveness, when defined as ability to earn.…”

The effect of industry delocalization on global energy use: A global sectoral perspective

“…In the same vein, the introduction of EU ETS has not led to measurable effects for the overall economy (Dechezleprêtre and Sato, 2017). In specific cases, environmental legislation can also increase firm profits, as Branger and Quirion (2015) show for the European cement industry. Nevertheless, considering the findings of Carbone and Rivers (2017), it is conceivable that unilateral climate policy can negatively affect EITE-sectors and hence be relevant for delocalization of production capacities.…”