Cement Industry and Climate Change What we (can) do Holcim Group Support Dr. Bruno Vanderborght Vice President Climate Protection Cement Presidents Meeting Montreal, Canada 10 July 2007

2 Holcim Group Support Presidents Meeting July 10 th, 2007 Agenda  Business realities  « Political realities »  Getting the Numbers Right  Invitation for Participation

3 Holcim Group Support Presidents Meeting July 10 th, 2007 “Political realities”: Emissions continue to grow (faster)  Increasing political awareness of the need to combine socio- economic development with reduction of CO 2 emissions and energy consumption, world-wide  Global growth of CO 2 emission: 1990 – 2000: 1,0 % / year 2000 – 2005: 3,3 % / year  Global energy intensity of GDP and CO 2 intensity of energy mix have not improved anymore since 2000  Actual growth of CO 2 emission since 2000 is faster than the most energy intensive scenario of the IPCC Source: National Academy of Sciences of USA, May 22,

4 Holcim Group Support Presidents Meeting July 10 th, 2007 “Political realities”: Differentiated responsibilities Status 2004PopulationCO 2 cumulCO 2 emissionCO 2 growth Annex 120 %78 %60 %27 % Non Annex 180 %22 %40 %73 % Annex 1 + China40 %85 %78 %71 % Annex 1 includes FSU Source: National Academy of Sciences of USA, May 22,  Annex 1 world accountable for large majority of historical accumulated CO 2 in atmosphere and current emissions  Emerging economies cause majority of emission growth  Annex 1 plus China are dominant in current and future emissions

5 Holcim Group Support Presidents Meeting July 10 th, 2007 “Political realities”: Tendencies for post 2012 Global geopolitical pressures & tendencies for post 2012: 1. Annex-1 countries and companies are expected to demonstrate action first, and contribute financially for the clean(er) development of non-Annex 1 countries and companies 2. Largest non-Annex 1 countries (China, India, Brazil, Mexico, South Africa) to accept efficiency objectives / commitments for post Annex-1 countries are expected to further contribute financially for adaptation and clean development in other non-Annex 1 countries

6 Holcim Group Support Presidents Meeting July 10 th, 2007 Agenda  Business realities  « Political realities »  Getting the Numbers Right  Invitation for Participation

7 Holcim Group Support Presidents Meeting July 10 th, 2007 Business realities for emission reduction  Companies & society can improve average CO2 intensity (CO2 per unit product, production or consumption) through using new, more efficient installations, products and services  But can only reduce absolute emissions through closing existing, CO2 and energy intensive installations and building new ones with an improvement of efficiency that exceeds the growth of production.  Closing existing assets affects the (depreciated) “cash cows”, causes stranded assets and impacts asset value  This will only happen with the adequate economic and financial incentives that inevitably must go “beyond business-as-usual” mechanisms.  These incentives can only come from mandatory, government regulated market mechanisms.

8 Holcim Group Support Presidents Meeting July 10 th, 2007 Business realities: The basis of the incentives  The ultimate basis for the incentives to reduce is:  the regulatory scarcity of emission rights in Annex 1 countries,  the flexibility and the price created through Emissions Allowance Trading  the opportunity to create additional emission rights in non-Annex 1 countries  The Business impact, risks and opportunities are defined by:  The total cap on Emission Allowances (to countries via the Kyoto Targets, for companies via ETS total cap)  The Allowance Allocation to companies in any ETS  The regulatory tools to demonstrate Additionality and the Baseline in CDM Plus  The possibility to pass the cost to the consumer  And law enforcement

9 Holcim Group Support Presidents Meeting July 10 th, 2007 Business Future: Performance Based Systems  The total cap on Emission Allowances (to countries and companies)  The Allowance Allocation to companies in any ETS  The demonstration of Additionality  and the definition of the Baseline in CDM Should all be based on Sectoral Performance Standards (CO2 per unit of product(ion)), i.e. a Sectoral Approach, or sectoral benchmarking. This is currently not yet the case, notably due to a lack of reliable, representative information on CO2 and energy Performance of products and production. Hence the project: “Getting the Numbers Right”

10 Holcim Group Support Presidents Meeting July 10 th, 2007 Agenda  Business realities  « Political realities »  Getting the Numbers Right  Invitation for Participation

11 Holcim Group Support Presidents Meeting July 10 th, 2007 The cement industry needs to know The cement industry world-wide, regionally, locally needs to know: Where are we? From where do we come? Where can we go? Where do external stakeholders expect us to go? In CO2 emission and energy performance (CO2 / ton product) In Absolute CO2 emissions (ton CO2 / year) With existing and with new technologies At what cost and at what value? But the cement industry does not (yet) have the information to answer those questions, And others (IEA, IPCC, academia) assert to know and as such risk defining our future obligations

12 Holcim Group Support Presidents Meeting July 10 th, 2007 Cement Sustainability Initiative: Climate Protection 1. Global harmonization of monitoring and reporting of CO2 emissions and energy consumption: WBCSD-WRI-CSI cement protocol 2. CSI members: Corporate public reporting, commitment & verification (as of 2006) 3. “Getting the Numbers Right”: World-wide Cement Industry CO2 and Energy Information System for: I. Need to know II. Communication III. Improvement of Clean Development Mechanism (CDM): Performance Standards for demonstration of additionality and definition of baselines IV. Improvement of Emissions Trading System (ETS): Performance Standards for allowance allocation V. Scenario analyses

13 Holcim Group Support Presidents Meeting July 10 th, 2007 GNR Objective  The objective of the CSI project “Getting the CO2 numbers right” is to develop representative statistical information on the energy and CO2 performance of clinker and cement production worldwide and regionally to serve the need of internal and external stakeholders.  CO2, Thermal energy, Electric Energy, Clinker / Cement, Fuel mix, AFR, production, kiln type & capacity  Know where we are, Communication, Credibility, National & Regional initiatives, CDM, Policy shaping, post Kyoto  CSI – CEO approved October 2006  CSI – Expansion with regional federations and other companies

14 Holcim Group Support Presidents Meeting July 10 th, 2007 From Data to Information, Knowledge, Action  Basis of the system =  Data at plant level (clinker, grinding, clinker substitutes)  Data at national company level (including all clinker substitute material inputs)  Data aggregation to information  Global, regional, national  Technology  Time (1990, 2000, 2005, … updates)  Different statistical analyses

15 Holcim Group Support Presidents Meeting July 10 th, 2007 Key concerns  Quality of information, and data  Complete for each participant (all plants, all parameters)  Full compliance with CSI Cement Protocol = Standard  Accurate  Representative  In the future: external assurance  Guarantee of confidentiality of sensitive information  Guarantee of compliance with anti-trust legislation  Compliance with “Code of Conduct”  Outsourcing to International Service Provider

16 Holcim Group Support Presidents Meeting July 10 th, 2007 Data collection: Plant level (clinker / cement)

17 Holcim Group Support Presidents Meeting July 10 th, 2007 Data collection: Plant level (clinker / cement)

18 Holcim Group Support Presidents Meeting July 10 th, 2007 Data collection: Country - company level (cement)

19 Holcim Group Support Presidents Meeting July 10 th, 2007 Project Planning  Service Provider = PriceWaterhouseCoopers  IT systems are developed and in test period. Launch end of this week  Contracts: Final editing: Ready for signature end of this week  July 2007: data entry for CSI member companies  October 10 th : first reporting to CEOs of CSI member companies  Expansion to all European countries through Cembureau imminent  Invitation for expansion of participation to all cement federations world- wide  Periodic update, expansion and further development

20 Holcim Group Support Presidents Meeting July 10 th, 2007 CSI Members (with headquarters country) Original Members 1.CEMEX (Mexico) 2.Cimpor (Portugal) 3.HeidelbergCement (Germany) 4.Holcim (Switzerland) 5.Italcementi (Italy) 6.Lafarge (France) 7.Siam Cement (Thailand) 8.Taiheiyo (Japan) 9.Votorantim (Brazil) Additional Members since Ash Grove Cement (USA) 2.Cimentos Liz (Brazil) 3.Cementos Molins (Spain) 4.CRH (Ireland) 5.Grasim Cement (India) 6.Portland Valderrivas (Spain) 7.Secil (Portugal) 8.Shree Cement (India) 9.Titan (Greece) Communicating Organizations 1.Cembureau (Europe) 2.VDZ (Germany) 3.PCA (USA) 4.CIF (Australia)

21 Holcim Group Support Presidents Meeting July 10 th, 2007 Agenda  Business realities  « Political realities »  Getting the Numbers Right  Invitation for Participation

22 Holcim Group Support Presidents Meeting July 10 th, 2007 Participant: What you give & What you get 1. What you give.  Input data on CO2 and energy performance of all your plants according to CSI-Protocol  According to contractual agreements 2. What you get.  Access to all results of analyses on consolidated data  Right to use the results according to the contractual agreements  Right to ask additional analyses 3. Cost of participation.  Development and operation paid by CSI core members  Expansion paid by participants from Annex 1 countries  Participation from federations and companies in non-Annex 1 countries is free of charge  Cost of additional requests on case by case

23 Holcim Group Support Presidents Meeting July 10 th, 2007 Contractual arrangements 1. Master Agreement between PWC and WBCSD-CSI.  Scope of work  Roles & responsibilities of PWC, participants, WBCSD-CSI  Fees and payments  Limitation of responsibilities of WBCSD-CSI  Project Management Committee  IT Service Level Agreement 2. Individual Agreement between PWC and each Participant.  Mirroring the Master Agreement  Confidentiality and Anti-trust Agreement  Code of Conduct  Project Management Charter

24 Holcim Group Support Presidents Meeting July 10 th, 2007 GNR Project management  Howard Klee, CSI secretariat:  Bruno Vanderborght: TF1 co-chair:  Manuela Ojan: TF1 co-chair:  Francisco Centeno: LD sponsor: