Expanding Climate Bonds Standard in Transition — Public Consultation on Cement Criteria Now Open

First stage in 2022 of the Climate Bonds transition program, focusing on certification pathways for heavy industry

Climate Bonds takes a major step in expanding the Climate Bonds Standard into hard-to-reduce industry sectors.

Last week, we opened a public consultation on our standard criteria for climate bonds for cement, marking a major milestone in best practice for climate-ready and climate-resilient investments in industry.

The draft criteria were developed by a Technical Working Group (TWG), with an Industry Working Group (IWG) providing consultation and advice. They will provide a succinct set of decision rules for determining when cement assets and operations are compatible with a low-carbon, climate-resilient economy, and are eligible for certification under the Climate Bonds Standard.

The development of criteria is underway in other industrial sectors under the Climate Bonds 2022 program, including the basic chemicals and steel sectors.

Why Cement?

Cement is the most used construction material in the world, the second most consumed material on earth after water and its production accounts for nearly 8% of global CO2 emissions. Demand for cement is expected to increase 12-23% by 2050 compared to 2014 as economies around the world continue to grow.

Public consultation now open

The draft criteria were launched last week, accompanied by an introduction online seminar. The public comment period will last 60 days and will end on April 23, 2022.

We invite feedback from a wide range of stakeholders, including industry, civil society and investors.

If you would like to provide feedback on the draft criteria, you can find more information on the Cement Resources page on our website, including:

Certification requirements

Generally, debt-based investments are eligible for certification under the Climate Bonds Standard when the use of the proceeds:

• Promote greenhouse gas (GHG) mitigation by reducing emissions or increasing carbon sequestration; and
• Promote adaptation to climate change and facilitate increased climate resilience in the systems in which they are found.

The road to net zero — the role of cement

Cement production is responsible for a quarter of all industry CO2 emissions, generating nearly 8% of man-made greenhouse gas emissions. This is not because the material is carbon intensive per unit of production, but rather because of the large quantities used: in 2020, 4.3 Gt of cement was produced.

Meanwhile, cement is one of the hardest sectors to decarbonize. It combines the problem of unavoidable chemical emissions from limestone decarbonation (about two-thirds of total emissions) and the high heat requirements of the process.

In addition, large-scale replacement is very difficult to achieve due to the relatively low carbon intensity of cement per unit of production. Cement is also a key ingredient to allow other sectors to move to a low-carbon economy: it is necessary for wind power and nuclear power, it is a necessary ingredient in infrastructure, it will be used in large quantities for building the cities of tomorrow.

Because cement is inherently difficult to decarbonise, there is considerable industry interest in developing carbon capture solutions to manage carbon emissions in a different way.

Cement is a largely local product, but the few carbon capture projects in operation today rely on the proximity of depleted oil and gas fields (or salt formations) and all the industrial infrastructure that surrounds them.

Although there are currently no viable options to completely decarbonize cement, adopting the latest technologies and approaches offers the possibility of achieving 80-85% decarbonization.

The new Climate Bonds for Cement Criteria standards will support these efforts. The evaluation of new technologies, alternative fuels and clinker substitution options requires significant investments.

The objective of the Climate Bonds Standard is to support credible transition investments to decarbonize the cement industry through the Certification process.

Extension of the standard in 2022

In 2021, five new certification criteria were launched as part of the standard, including grids and storage, hydroelectricity, bioenergy and maritime transport.

The launch of the Cement Criteria marks a major expansion of the Climate Bonds Standard into heavy industry sectors and is the first step in Climate Bonds’ 2022 expansion program for the global standard.

Climate Bonds has developed credible transition principles that will guide efforts to align hard-to-reduce industries with net zero goals.

Following the launch of the Cement Criteria consultation, Climate Bonds will gradually publish draft criteria for other industries, extending the scope of the standard and providing a pathway for certification of transition investments in high-emitting sectors.

Next: Credible transitions for the chemical industry

Tuesday, March 29, 2022

9:00 a.m. New York / 2:00 p.m. London / 3:00 p.m. Paris / 7:30 p.m. Delhi

Climate Bonds Standard is about to expand to commodity chemicals and invites you to Register for the launch of the Public Consultation on March 29.

The Core Chemicals Criteria establishes the requirements that commodity chemical production assets, projects must meet to be eligible for inclusion in a Certified Climate Bond and for companies on a credible transition path to emit a debt labeled transition.

The criteria contain mitigation requirements, adaptation and resilience requirements, and transition requirements.

Bonds and loans related to these qualifying assets and projects will be aligned with the 1.5 degree Celsius limit of the Paris Agreement.

The last word – thank you and thanks

Climate Bonds extends its sincere thanks to the dedicated members of the TWG and IWG for their instrumental role in developing the Cement Criteria. The full list of TWG and IWG representatives is available here.

Until next time,

Climate bonds.

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