Cement and concrete are the linchpins of the built environment. Its global demand has nearly tripled over the past 20 years. Yet despite cement’s ubiquity, its surrounding economy is a major contributor to global carbon dioxide emissions.1 Furthermore, 30 to 40 percent of today’s solid waste is created through the construction and maintenance of the built environment.2
With a growing number of industries and sectors moving toward net-zero emissions, a significant amount of value is at stake in cement. General EU Emissions Trading System (ETS) carbon prices have reached nearly €100 per metric ton of carbon dioxide,3 a level that could become the norm by 2030. At the same time, the cost of landfill from construction and demolition waste (CDW) affects the entire building ecosystem, exceeding €100 per metric ton.4 Combined, the total value at risk from carbon dioxide and landfill could reach approximately €210 billion by 2050.
The demand for cement in the upcoming decades will likely remain consistent, which means there will be no additional value created from traditional approaches to cement production. As a result, players across the built environment must act now and explore alternative options to decrease both costs and carbon dioxide emissions. Circular technologies, such as alternative fuels, carbon curing, recarbonation, and carbon capture and storage (CCS),5 will be much more than niche solutions for decarbonizing the built environment. In fact, our research shows that they could help to decarbonize roughly 80 percent of total cement and concrete emissions by 2050.6
This article shows how the recirculation of carbon dioxide, materials and minerals, and energy can add €110 billion of annual net value gain to the built environment by 2050, therefore mitigating almost half of the stated value at risk. Moving forward, stakeholders across the value chain can seize the opportunity by engaging in circular business building and using circular technologies to react to evolving financial risks.
How circularity can work in cement
The cement value chain is well positioned to create closed loops, or automatically regulated systems, for carbon dioxide, materials and minerals, and energy (see sidebar “Three categories of circular technologies in cement”). This entails circular economies, which are based on the principles of eliminating waste and pollution, circulating products and materials, and regenerating nature (Exhibit 1).7
With these points in mind, circularity can work jointly with reducing carbon emissions in cement production because circular technologies follow the paradigm of three crucial decarbonization strategies: redesign, reduce, and repurpose.8 To begin, addressing the total volume of materials needed—or redesigning materials, buildings, and infrastructure—can play a critical role in changing how industry leaders approach projects. Next, shifting from fossil to alternative fuels can help reduce emissions of materials. Finally, repurposing, repairing, and refurbishing existing assets and infrastructure can help limit the need for new products by utilizing captured carbon dioxide emissions and reinserting them into the value chain.
According to our estimates, and expected carbon prices, each of these circularity technologies will be value-positive by 2050, with some already more profitable than today’s business-as-usual solutions. That said, a few solutions were not factored into our analysis despite being critical to reaching net-zero emissions, including the reduction of clinker in cement through substitutes and low binder intensity, the reduction of cement in concrete through less overspecification by design, and the overall reduction of concrete in the built environment through alternative building materials. Thus, these solutions should be considered part of a broader definition of circularity.9
Circularity in cement is an opportunity to create additional value by 2050
Our estimates show that an increased adoption of circular technologies could be linked to the emergence of new financial net-value pools worth up to roughly €110 billion by 2050, providing a new growth avenue for cement players that would otherwise face shrinking demand for their core business and significant external costs (Exhibit 2). Adopting circularity is required to mitigate at least 50 percent of this value at risk. Emerging new technologies and business models will create additional value to mitigate the residual value at risk.
The annual net impact of recirculating carbon is estimated at €6 billion on a global average by 2050 (estimated at 2022 prices, disregarding inflation). This is driven mainly by the growing importance of global carbon markets, with expected carbon dioxide prices either mitigating or outweighing the costs of technology. In fact, our research shows that technologies utilizing carbon dioxide, such as curing ready-mix or precast concrete, can create positive economic value at carbon prices of approximately €80 per metric ton of carbon dioxide. It’s likely that technologies offering high carbon dioxide offtake will be implemented first in regions with rapid growth in carbon pricing mechanisms, such as Europe and North America.
Recirculating materials and minerals will be the largest driver of financial impact, reaching nearly €80 billion of annual EBITDA added to the industry by 2050. This includes the use of CDW as aggregates for concrete production, thus avoiding landfill costs, which are estimated at €20 per metric ton in 2050, and the costs of virgin material. In addition, CDW can be processed through Smartcrushing, which extracts unhydrated cement “fines” and helps reduce the amount of virgin cement needed for concrete. Reusing concrete modules and structures is the second-largest value driver, at an estimated €24 billion by 2050.
Finally, the greatest value potential for energy—specifically alternative fuels from waste material—arises in countries and regions with high availability and high landfill costs. In addition, cement and concrete production can provide an offtake opportunity for waste material, which could be supplied for free or even at a negative cost by the producing industries. The total annual net value gain from recirculating energy is expected to be €24 billion by 2050.
Cement emissions can be reduced or mitigated by 80 percent, though local differences apply
Based on the financial attractiveness of circular technologies in cement, there is significant potential for carbon dioxide abatement through circularity over the next 20 years. In fact, our estimates show that roughly two billion metric tons of carbon dioxide emissions could be avoided or mitigated through the application of these technologies by 2050 (Exhibit 3).
External factors, especially carbon dioxide prices, decarbonization subsidies, and costs of landfill, can potentially accelerate the time it takes to unlock the value of circular technologies. Therefore, the uptake of these technologies will differ from region to region. For example, mineralization for carbon reinsertion technologies is driven by regions with high carbon dioxide prices, such as Europe or North America (see sidebar “The case for circularity in Europe”).
These regional cost differences illustrate the importance and impact of regulatory frameworks, which can facilitate circularity in the built environment from two angles: financial incentives and standardization.
For financial incentives, regulators directly influence the cost benefit of abated carbon dioxide emissions through carbon dioxide pricing schemes, such as the EU ETS.10 Further incentives, such as carbon-credit systems and permits that allow owners to emit certain levels of carbon dioxide or other greenhouse gases, can stimulate players to lower their emission levels. In the same manner, pricing of CDW through landfill taxation can drive opportunity costs and therefore make the recycling of waste materials even more attractive. In fact, our calculations show that an increase of landfill tax by €5 per metric ton of CDW can reduce the carbon dioxide abatement cost of technologies that use CDW as feedstock by up to 60 percent.
New business models for all players in the built environment are expected to evolve from actions that facilitate circularity along the value chain.
For standardization, regulations directly affect the amount of waste material that can be used in the cement and concrete mix. As an example, the draft version of the cement standard addition in European countries, EN197-6, limits the use of recycled-concrete fines in cement to 20 percent.11
What stakeholders can do to seize the opportunity
Cement players and other ecosystem players should double down on circularity now to secure a stake in untapped value pools. Winning will require stakeholders to think along two dimensions: engaging in circular business building and using circular technologies to react to evolving financial risks.
Engage in circular business building
New business models for all players in the built environment—not only cement and concrete manufacturers—are expected to evolve from actions that facilitate circularity along the value chain as well as actions that deliver the value of circularity to consumers.
Consider recycling, repairing, or supply chain services. Construction companies, waste providers, new players, and building materials manufacturers alike can consider digital marketplaces for waste materials. At the same time, technologies that facilitate design and standardization are expected to increase potential value pools even further, enabling technology providers and designers to secure a significant stake in the overall value pools.
Pursue new opportunities for building green businesses. Increasing customer centricity will likely create new opportunities across the built environment. For example, a growing number of people—including construction players and building residents—are increasingly interested in affordable housing or structures that have “housing flexibility,” which allows residents to participate in the design of their homes. Precast building modules can also be provided to customers in a lease-like mechanism, which can be facilitated either directly by cement and concrete players or through construction companies that have direct offtake agreements with materials producers.
Build new business models related to carbon dioxide offtake. Reducing carbon dioxide emissions while creating value pools can be accomplished by exploring carbon dioxide offtake opportunities in other industries. Captured and concentrated carbon dioxide can be transported—by pipeline or by trucks—to places where it can be used as an input. For example, carbon dioxide can be used as a feedstock for processes in the plastics and chemicals industry or in hydrogen production. The challenge is to create viable business models for both the cement industry and offtakers, which highlights the need for increased collaboration across industries.
Use circular technologies to react to the evolving financial risks
Given local and strategic constraints, different stakeholders will have different approaches to adopting and implementing circular technologies to respond to risks in the built environment.
Build a cost-benefit position with existing carbon dioxide prices, landfill costs, and regulatory frameworks. Individually assessing externalities and selecting the most beneficial technologies by region and location of plants will secure a cost-benefit position. Starting with technologies with the lowest carbon dioxide abatement cost on a global average, players can assess the impact of the selection of technologies based on region and the location of plants on their individual business case and identify the most easily adoptable solutions.
Determine if sufficient waste material for recirculation is available and accessible. Availability refers to the amount of waste material created by one region. For example, in countries with high waste leakage, such as most parts of Asia (China, India, Indonesia, Thailand, and Vietnam account for about 85 percent of mismanaged plastic waste globally), the cement and concrete value chain can serve as a real offtake opportunity for other industries even today. In terms of accessibility, circularity is already feasible in developed countries and could be in other parts of the world by 2050. Thus, players across the entire building and construction value chain can accelerate this transition by planning to locate facilities together in industrial hubs.
Ensure offtake agreements for circular products. Offtake agreements for low-carbon building materials will likely soon become available across the world. In fact, more than 100 small and medium-size construction companies across ten countries joined the Race to Zero campaign by the United Nations Framework Convention on Climate Change.12 In addition, the Paris 2024 Olympics recently announced that building materials used in its construction must meet sustainable criteria.13
In the long term, new value pools could arise by shifting from selling cement not as a material but as a sustainable solution and service. This approach requires a customer-centric posture to explore new opportunities for green-business building, especially as builders and house owners increasingly request sustainable, affordable, durable, and flexible structures rather than focusing on cement and concrete as a standard material.