Holcim: ETS has concrete drawbacks, Australia

Holcim: ETS has concrete drawbacks, Australia
Published: 12 October 2009

Holcim, fresh from its $2 billion takeover of Cemex Australia, is bullish about its prospects in Australia, but remains critical of the Federal Government’s proposed emissions trading scheme.

The new company, trading as Holcim Australia, also includes a 25 per cent increase in Cement Australia, in which Holcim already owns a 50 per cent stake.

Holcim’s chief executive, Markus Akermann, speaking in Melbourne, said the $2.02 billion acquisition gave Holcim a commanding presence in Australia’s cement, aggregates (crushed stone, gravel and sand) and ready-mix concrete market.

Cemex Australia had sales of $1.86 billion in 2008 and employs about 2800 people, while Cement Australia had sales of $995 million in the same year and has 1300 employees. ’’Australia is a growing mature market with high population growth,’’ he told BusinessDay.

However, Mr Akermann said Australia’s proposed carbon pollution reduction scheme (CPRS), like the existing European emissions trading scheme, had flaws that disadvantaged the cement industry.

Both schemes were based on clinker, not cement. ’’If you reduce clinker in the cement you can drive down CO2 emissions,’’ he said. ’’If the baseline is clinker, there is no incentive to innovate so that the product has less clinker.’’

By using cement as the base for emissions trading, different mineral components such as ash or alternative fuels could be used to lessen the amount of clinker and thus CO2 emissions.
With clinker as the benchmark, Mr Akermann said, it was cheaper and easier to import clinker from China. ’’There is no obligation for China clinker producers to reduce CO2 emissions,’’ he said. This clearly distorted trade and disadvantaged Australian producers. It also ended up creating a net increase in carbon dioxide due to higher Chinese emissions and a greater use of shipping to import clinker from China.

Mr Akermann said this situation created uncertainty about future decisions to build new cement capacity in Australia. ’’It is a very capital intensive industry,’’ he said, and to be economic, plants were increasingly bigger. ’’New cement capacity will be needed in Australia by 2011 or 2012.’’

Mr Akermann said the European and Australian schemes also did not recognise the emissions reductions that Holcim had already made voluntarily. In 2000, Holcim had pledged a 20 per cent cut in emissions by 2010 from the 1990 baseline and was on track to achieve that. ’’This is not taken into consideration and is a basic flaw of the ETS [emissions trading scheme] in Europe and Australia,’’ he said.