Cementing our role in the low carbon future – lessons from Canada: Michael McSweeney, President and CEO, Cement Association of Canada
Filmed at Cemtech Americas 2015, 7-10 December, Ritz-Carlton Grande Lakes, Orlando, Florida, USA.
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And I'm delighted to follow my friend Carey Coors, who I learned last night is also from Canada, born and raised in Picton so it's nice to have two Canadians on the panel this morning. So on behalf of the Cement Association in Canada, and its members and concrete partners across Canada it's a real pleasure to be here with you this morning.
I know that Canada does not often figure prominently in the US or in the global news cycle. But you may have heard we've recently completed our longest political national election campaign in Canadian history. It took a staggering 78 days, compared to 37 days that it normally takes now.
This is something for you Americans and the audience as you contemplate the home stretch of your election, a mere 336 days away, so we're certainly much more efficient and cost effective at running elections in Canada. Our Canadian election was also significant in other ways that are very important to the cement sector domestically, and I believe in the North American context. After many years of political back and forth, we now have a federal parliament which is essentially the equivalent of the American congress, that has committed to take concrete steps in tackling climate change.
And while this may not be the first time such a commitment has been expressed in Canada or elsewhere, there is a good reason to believe we are on the cusp of significant efforts towards transitioning to a low-carbon economy. In about one year's time, the vast majority of Canadians and all but one of Canada's cement facilities will live and operate in an economy that has put a price on carbon.
Either through a carbon tax or as part of a larger cap-and-trade system under the Western climate initiative. Our federal government has promised to support these efforts and match them with the historic general investment in green infrastructure. This is truly an exciting time for the cement industry in Canada, but I often get puzzled looks from political officials, regulators, environmental groups and even some of our industry when I say that.
You know they say that cement is responsible for 5% of global greenhouse emissions, don't you? Why aren't you worried as the Canadian cement industry? Well, my answer is simple. First, throughout our history, concrete has been an essential material in the building and modernisation of economies around the world, and concrete will, I believe, become an even more valuable commodity as society marches toward a more sustainable, more resilient and a more prosperous low-carbon future.
Clearly a massive investment in the renewal and modernisation of our infrastructure presents an important economic opportunity for our industry, in a very traditional sense. But more than that I believe the climate agenda is an opportunity we should really lean in to greet. It is our moral imperative.
It is our corporate social responsibility, as an industry that offers a host of expertise, solutions and innovations for the low-carbon and climate-resilient communities of the future. Second, I believe in the tremendous innovative power of our sector that collective investments in low-carbon technologies, will dramatically and drastically reduce our carbon footprint.
It's a story that we need to communicate with conviction and with passion. We're diligently working towards carbon-neutral or near carbon-neutral concrete. Now this will not happen quickly and it is by no means a guaranteed outcome. But we should not be shy about celebrating our success and innovations in moving towards this goal.
Lastly, I know from experience that collaborative solutions-oriented partnerships with governments, environmental groups and other stakeholders actually work. By earning a seat at the table as a credible partner, we will ultimately ensure that the policy the world needs to keep our planet below two degrees Celsius or 3.6 degrees Fahrenheit of warming, including a price on carbon, are policies that we can work with government, and need to be designed to protect the competitiveness of our industry and support our GHG reduction ambitions.
This is not to say that there won't be bumps along the road, or along the way. For example, when the Canadian province of British Columbia, five years ago introduced a carbon tax of $30/t of C02 and the actual price to ask was $ 55/t ofcoal, the domestic cement manufactures lost some 40% market share to imports from market without recovering pricing system, primarily China.
The result, lost jobs in British Columbia and 25% more emissions of greenhouse gases from shipping from plants with unknown environmental performance records, through the Pacific Northwest and then by truck to BC's lower mainland. It's a classic case of carbon leakage that I know we're addressing or trying to address around the world.
Only after years of consistent outreach, third-party research and validation and constant meetings with the province of British Columbia, have we seen movement to address these competitive impacts and a recognition by British Columbia that the cement industry is actually an energy-intensive and trade-exposed industry, that needs to be dealt with in a different manner than other industries.
For example, this past May, the government of British Columbia gave the cement companies in British Columbia a grant of $27m to help them develop more technologies, to process low-carbon or carbon-neutral fuels in the kiln to replace coal. At the same time our positive patient and solutions-oriented disposition towards the challenges in British Columbia has earned us deep respect and a seat at the table with governments, environmental groups and other important stakeholders.
Our industry is now helping chart the Canadian cement industry's course to a truly low-carbon future. Nevertheless, even in Canada where the relationship between government and environmental groups and industry is already less confrontational than here in the United States, there exists a certain amount of bewilderment at the positive role the cement industry is playing on the climate change agenda across the provincial governments in Canada and especially for the cement industry support for carbon pricing in Canada.
Let me take a few moments to share with you how the Cement Association of Canada has evolved to navigate the complexities of the rapidly -developing climate change agenda in Canada. And the guiding questions we're asking our stakeholders and ourselves about the role of cement and concrete in our country, and how we can play a role in that agenda.
As was mentioned, I began my career as an elected municipal official in Ottawa in my early 20s and have for decades now been an active and public and environmental affairs professional at the federal provincial and municipal level. Over the years I have come to appreciate the power of building trust and credibility with the stakeholders.
And when the directors of the Cement Association of Canada hired me to lead a bold repositioning of the cement sector eight years ago, the Cement Association of Canada began to invest deeply in reaching out to and working in a consistent, coordinated and constant way with governments, environment, health groups and other key influencers and decision makers across our country.
In all of these corners we began to articulate our story and to assert the vital role that cement and concrete play in our world. We began the long process of changing people's perception of concrete. We invited them to rediscover concrete, and most importantly, the solutions concrete can bring to society's greatest challenges, including climate change, resiliency and sustainability.
We've a lot of stories to tell and as a good marketing friend of mine once told me, if we don't tell our story, who is gonna tell it for us? The audience is familiar with the statistics, twice as much concrete is used than all other building materials combined. Three tonnes of concrete per year is consumed for every man, woman and child on earth.
Water is the only commodity consumed in greater quantity than concrete. And while we enjoy relatively light footprint on many environmental metrics, the sheer volume of cement and concrete production means we can't ignore those impacts, especially when it comes to greenhouse gas emissions. Globally our industry has invested billions of dollars to become more efficient, cleaner, more transparent and increasingly focussed on product-based solutions to sustainability challenges.
We are, and deservedly so, proud of the progress we've made in the cement and concrete industry. A modern cement plant today is significantly cleaner, 20% more energy efficient and produces 20% less GHGs than technologies widely used only a couple of decades ago. We are much more active and engaged in the communities where our plants are located.
We are heavily invested in research, low-carbon energy projects that promise to lead the next wave of environmental progress in our industry. And there is a raft of innovations that we are very excited about. Pervious pavement, ultra-high performance concrete, air purifying concrete panels and carbon capture and re-use technologies, using algae, carbonated concrete, and other membrane insolvent-based technologies.
Many of these developments, and it's funny to say, are unknown even to those in our industry, which is why in Canada we've developed the tagline "Concrete even smarter than you think". Our reference in telling the story in Canada are working. Our most recent marketing survey clearly shows an increase in positive attitudes towards our industry and our products, except among those architects who continue to be wooed by the wood industry, and I'll touch on that in a few minutes.
Despite all this progress we openly acknowledge that there are still many many questions we struggle with to answer. How do we measure the economic, social and environmental value of a substance like concrete that is so essential, so fundamental to modern economies and modern living? What role will concrete play in building a sustainable and resilient future. How do we participate in advancing key policy decisions, like carbon pricing while always being mindful, that we must secure, the ongoing competitiveness of our industry.
We know that these are difficult questions with no easy answers but also that our social licence to operate depends on our ability to respond and work with all stakeholders. These questions also help us understand that the sustainability and resiliency of cement in the concrete sector is larger than our industry.
It is more than incremental progress in efficiency and environmental technologies. It's truly about our role to partner with others. Governments, environmental groups, health groups, community groups, all to better understand the cement and concrete's place in a more sustainable and resilient future.
A few years ago I came across a quote by American philosopher Eric Hoffer and it struck me as an eloquent expression, of the choice we all face in shaping and adapting to the future. Hoffer said that and I quote, " In times of change, learners inherit the earth and the learned find themselves beautifully equipped to deal with a world that no longer exists".
While the cement industry and our history is ancient, we are an industry that has learned, and adapted, and modernised and still continues to be active learners along the way. One of the most important lessons that we've learned in Canada, is that sustainability is a fundamentally collective challenge.
One that is larger than any one sector. And one that demands collective solution. It is a journey that we will fail, if we take that journey alone. This is all more true for a sector such as ours whose product is so ubiquitous and touches so many sectors' interests. In fact, government is one of our largest single customers so it only makes sense that we work closely together to support broad progress on public policy.
Let me share with you a specific success story, we all know that the use of alternative and low-carbon fuels is one of the best opportunities our sector has to reduce greenhouse gases. Yet the regulatory and permitting regime around fuel substitution are less than permissive, especially in Canada, as I'm sure it is in some regions here in the United States and perhaps even globally. It has been a sticking point for our sector for years and a source for conflict for our stake holders.
But recently in Ontario, the members of Cement Association in Canada undertook a concerted effort to engage openly, transparently and patiently with environmental groups in the problems of Ontario on the issue of low-carbon fuels. We funded independent research, we hosted workshops, we addressed concerns about air quality and waste management, and over a five -year period we secured the support of many, not all environmental groups, to reassure the political leaders in our province that low-carbon or no-carbon fuels were the right thing to do for the environment and our economy. It took five, almost six years, to do that. Meanwhile in Ontario, the government of Ontario banned the burning of coal for electricity generation.
But they just couldn't understand that we use coal, and we can reduce our coal use through the use of low-carbon, or no-carbon fuels. It bewildered me and mystified me that the government who brought up Al Gore to Toronto and heralded the end of coal in the production of electricity couldn't understand why and what we could do to reduce coal in our industry. So we asked the premier, we put this to the premier, Kathleen Wynne, and Ontario's Minister of Climate Change and Environment to help us reduce our coal by modernising the regulatory and permitting regime for low-carbon alternative fuels.
I'm happy to report after five or six years that they delivered and that we have a new regulation that will allow us to use less coal. We were successful not only because we engaged our partners in the science behind using waste-like fuels as low-carbon alternatives , but because we demonstrated willingness to engage transparently and credibly in broader efforts to implement a low-carbon agenda across the province.
We are adopting this same approach to advance low-carbon fuels agenda across the country but also when it comes to the emerging carbon pricing regimes across our country. On these broader efforts, the Canadian cement industry has staked out a clear and consistent position: our environment and our economy need a price on carbon and we can all become more competitive when we do have a carbon pricing system.
Cement is energy- and GHG intensive so carbon pricing is clearly not without its challenges. Cement is recognised globally as an energy-intensive trade exposed industry. So designing a pricing system that is protective of the competitive imbalances in both export and import markets where no equivalent pricing regime exists is absolutely key as I pointed out earlier with the leakage we saw in British Colombia to China. The threats are real and as our experience clearly demonstrates, they are solvable.
And with our strong record of proactive engagement and collaboration with governments, environmental groups, academics and other industry leaders who want to work with us on these solutions. At the same time our products are themselves the solution to both climate change mitigation and climate change adaptation.
Concrete is fundamental for urban densification, public transit, energy-efficient buildings, renewable energy, and durable underground and above-ground infrastructure. So while we are strong proponents of carbon pricing, we're equally forthright that putting a price on carbon is not enough, and that much deeper government commitment to re-thinking the built environment is also required.
We need to think in entirely new and more integrated ways about how we plan, build and power our communities. The good news is though, if we take a comprehensive economy -wide approach, there are plenty of opportunities where we can collectively reduce greenhouse gases. Putting a price on carbon and integrating climate change as core element of political and policy decision making, will help us unearth these opportunities and support the business in making near-, medium- and long-term investments in reducing emissions.
Crucially, however, the success of these efforts will hinge almost entirely on our capacity to design a pricing and policy regime that turns potential competitiveness threats into opportunities for sectors like the cement industry. And now back to that wood issue. Those who promote wood and taller wood buildings that I alluded to earlier when I talked about our most recent marketing survey and the perceptions of many architects.
Tall wood buildings is an emerging threat for us here in Canada as it is here in the United States and the Cement Association is working with the leadership of the Portland Cement Association, The National Ready Mix Concrete Association so that we can tackle this problem of tall wood buildings both in the United States and in Canada.
In British Columbia, a 12-storey building, wood building with cross laminated timber, has been approved and is under construction. I'm happy to share I think it's a $50 million building, 50% of the cost is being provided by government. So that's an indication of just how successful these buildings will be.
They can only be successful if government partners with them. In Quebec, there's a 13-storey building that has been proposed. So we're working a way at this. In Canada, our country was founded on lumber, fur and fish, and so whenever you talked about wood it goes to the heart of politicians, and what we are finding is that politicians are not following codes and standards.
What they are doing is responding to the political interests in their own constituencies. So our strategy, while nascent in many ways, must be to challenge governments to adopt a deeper commitment to life cycle assessment, as a means to testing and validating the claims that are made by the wood industry, or any material or technology that claims to reduce greenhouse gases.
Collectively we've developed tremendous science and user friendly life-cycle based tools, that definitively demonstrate the greenhouse gas benefits of concrete versus asphalt pavements. We need to make the same investments in the building sector, to ensure that when wood is used, it's done with a true life cycle accounting of its impact on the global warming potential of the ultimate building.
This means cradle-to-cradle accounting for the carbon and other environmental costs of deforestation that the current wood life cycle assessments conveniently ignore or downplay, as well as the impact on the operational performance of the structure over its lifetime, and not just when it's built.
Here again, I have reason to be optimistic. Governments in Canada understand that buildings represent between 30 and 40% of the greenhouse gas emissions and appear to be seriously contemplating stricter energy codes. We need to look at merging the building codes and the energy codes in order to have a full understanding of how buildings contribute to climate change.
Here, we're fortunate with concrete and its thermal mass properties, we do have a clear advantage when using concrete. As an example, a developer in my hometown of Ottawa with a deep commitment to sustainability recently attempted to design a lead platinum building out of cross-laminated timber.
But then he abandoned the project because they couldn't do it economically, they weren't able to get any government grant, and so we reverted to his tried and true lead platinum concrete design. Again and again, when robust life cycle assessment are used, the economic, social and environmental value and proposition of concrete becomes crystal clear.
Climate change is among the greatest challenges that society faces today. As a northern country that stands to experience some of the greatest challenges, in a warming world, Canada is on the front lines of climate change. What we need now most of all, to protect not only our environment but the cement and concrete industry competitiveness, is for provincial governments, the Canadian governments, the US governments and our trading partners, is to get on the same page and work to a harmonised climate change policy.
In order for our industry to thrive in this tumultuous economic climate, the industry needs certainty and a coordinated approach among different levels of government. So we don't have to pay multiple carbon prices in the different communities and jurisdictions where our facilities are located.
This is the best and most robust way to secure long-term competitiveness, while delivering needed GHG reductions. The goal for someone like myself or anyone who practices public affairs is to get to get a seat at the table with government. I often say government is our largest competitor.
They're the ones who hold our social licence to operate, those are the ones who give us the permits. We need to work with governments. In Canada I'm proud to say that the cement industry has gained a seat at the table and we are using that privilege to credibly demonstrate that the cement concrete industry, taxpayers and our economy as a whole, can thrive in a carbon-constrained world.
We are actually out to prove that when we build it once, when we build it right, and when we build it to last, we are all much better of. Thank you very much for your attention and I look forward to the rest of the conference.