1. Potential Impacts of Climate Change on Cement Industry PCA MTC Steering Committee, May 2008

2. Among other things, we have to face the fact that whether we agree that a crisis of rapid climate change exists, the political drive is pushing this to reality and regulation is eminent. We have to be prepared! What do we need to Know? What is coming - requirements What are our emissions What are our options, specific to our operations and location How much will it cost Which is the best application How easy is implementation Climate Change Impact

3. But first, where is it coming from? Sources of CO2 Emissions Transportation Fuels Industrial Processes Power Stations Waste Disposal Land Use/Biomass Combustion Residential, Commercial, Other Fossil fuel retrieval, processing/distribution Agricultural byproducts 20.6% 29.5% 19.2% 12.9% 1% 8.4%

4. What about my house? Sources of CO2 Emissions Waste Vehicles 51% 5% Appliances 26% Heating/Cooling 18%

5. Definitions Greenhouse gases (GHG) Not Just CO2 : Carbon dioxide (CO2), Methane, Nitrous oxide (N2O, not NOx), hydrofluorocarbons, perfluorocarbons and Sulfur hexafluoride Carbon Credits – Tons of carbon emissions “granted” to each facility, similar to a permitted emission limit except it decreases over time What is coming – Definitions and requirements Carbon Credits Example : A Cement operation emits 2,000,000 tons of carbon Dioxide per year If the law says they will reduce CO2 by 25% over time : Plant receives 1,500,000 carbon credits - 2,000,000 tons CO2 per year X 75% = 1,500,000 carbon credits

6. Definitions Carbon credit allocation vs. auction Auction - govt. gets money, consumer pays What is coming – Definitions and requirements Industry (or speculators) buy CO2 credits at auction

7. Definitions Carbon credit allocation vs. auction Allocation - Industry is given carbon credits to sell and reinvest What is coming – Definitions and requirements Industry sells CO2 credits on market Industry is given CO2 credits Industry invests $$ on CO2 reduction technology

8. Definitions Cap and trade Maximum emissions (cap) set for facilities with reductions over time Carbon credits granted (or auctioned) to company to be sold as commodity (trade). Seller uses money to invest in CO2 reduction technology What is coming – Definitions and requirements Carbon Trade Example : Brand X receives 1,500,000 carbon credits can reduce CO2 by 30%. The Market price is $30 per carbon credit when Brand X sells : 1,500,000 carbon credits X 30% reduction = 450,000 credits for sale $30 per credit X 450,000 x 3 years = $40,500,000 $40.5 Million to invest in CO2 reduction technology

9. Definitions Leakage – guarantees the export of business, an increase in global GHG emissions and a life threatening competitive disadvantage for US cement industry Leakage is a serious concern for the cement industry! If not properly legislated, leakage could give foreign companies a clear competitive advantage What is coming – Definitions and requirements

10. Currently there are over twelve proposed bills in Congress Most will be “Cap and Trade” type legislation, some with auctioning of carbon credits, some with allocation, some a combo Progressive GHG emission reductions from 2012 to 2050 Most will regulate 6 specific sectors of our economy : Power Generation Industry/Manufacturing Transportation Oil & gas Forestry Agriculture What is coming – Definitions and requirements Requirements - Legislation

11. Legislation What is coming – Definitions and requirements We are here Law wants us here!

12. What are your emissions ? Sources of GHG’s to be Counted : Direct Emissions Mobile combustion (heavy equipment, etc.), stationary combustion Non-combustion manufacturing, chemical processes, fugitive releases Indirect Emissions Energy purchased/consumed : electricity, steam, heating/cooling Other indirect emissions Business travel, employee commute Product use

13. What are our options ? More blended cements – Type IP, slag blends, other additions Carbon neutral fuels, renewable fuels (bio mass, bio fuels) Energy efficiency measures – Pyro-process and electrical efficiencies Carbon dioxide capture and storage (CCS) – complex process to capture CO2 from fuel process or stack and put it underground Hybrid cement energy facilities – utilization of waste heat Use of non-cement binders (e.g. geopolymers), with lower specific CO2 emissions Last 3 items are expensive, not practical right now – short-term measures will have to be used while new technologies are being developed

14. What are our options (contd.)? Blended cements : Limestone, Slags, Fly Ash, Silica Fume and other additives Caution : DOT / customer acceptance, Consistent product, Added metals, Color and quality variations Carbon dioxide capture and storage (CCS) : Goodbye CO2, Site considerations based on capability to sequester CO2, Experience from enhanced oil recovery Caution : Co$$$$t to capture, CO2 – Hello again?, Who owns the rights?, Public acceptance, Regulations and regulatory authority?

15. What are our options (contd.)? Carbon Neutral and Renewable Fuels : Bio-Fuels are considered zero or low CO2 emissions since all of the carbon in bio-fuels came from the earth’s atmosphere Fuel crops, Bio mass, Wood wastes, Refuse derived fuels Caution : High moisture or low BTU content, Consistency of fuels, Special handling - low bulk density, Hurdles for feeding and transport Energy efficiency measures : Plant upgrades – conversions, Grinding and pyro- processing improvements, Technology/software tools, Building and site energy measures Caution : Expen$e, Discard good equipment? Timing, Limitations - equipment and product demand, Regulatory – permit possible in reasonable time?

16. Assembly Bill 32 (AB 32) - California Climate Change Regulation Very Aggressive and Stand Alone California producers are vulnerable to a competitive disadvantage if implemented before other states are under similar regulation Preventing leakage difficult or impossible with international law Goals : Reduce GHG emissions to 1990 levels by 2020 (25% reduction) 80 % reduction below 1990 levels by 2050

17. Magnitude of the Challenge For California Current Trend Versus AB32 Targets 1990 Emissions Baseline ~ 173 MMton CO2 EQ Reduction 80% reduction, ~ 340 MMT CO2 EQ

18. Sectors Agriculture Forests Energy (Electricity/Natural Gas) Water California AB 32 - Sectors Business/Industry Cement Semiconductor manufacturing Oil and Gas/Refining General Combustion Sectors Transportation Land Use/VMT Vehicles Fuels High GWP Gases Recycling and Waste Management State Gov’t Green buildings State fleet

19. 2007 2008 2009 2010 2011 2012 2020 AB 32 Timeline Publish list of early actions Mandatory reporting & 1990 Baseline Adopt scoping plan Adopt enforceable early action regulations Early action regulations enforceable Adopt GHG reduction measures GHG reduction measures enforceable Reduce GHG emissions to 1990 levels Identification/ implementation of further emission reduction strategies

20. CO2 Evaluation : Cement and Concrete Both cement and concrete operations considered  Energy use  Fuel types and efficiencies  Transportation and material use  Product waste  End of life consideration

21. Cement operations :  11 cement plants, cement 14 kilns in CA  3 in Northern CA, 8 in Southern CA  Over 1,700 employees  11.3 MMT Clinker, 11.6 MMT Cement General Information : Concrete and Cement in California Concrete Operations : Over 400 - 500 established concrete batch plants in CA Many more temporary batch plants 75% of cement distributed to concrete batch plants 25% distributed to other businesses

22. Cement : Convert to clean alternative fuels Improve energy efficiency practices/technology in cement production Use blending cements California’s CO2 Reduction Strategy for Cement

23. Concrete : Reduce concrete waste Use less cement Universal GHG emission standard Blend SCM at batch plants CO2 Reduction Strategy for Concrete

24. We have to be prepared – Don’t wait for law, start now! Get involved and provide input into regulations (PCA, etc.) Know your emissions – Carbon Inventory, don’t stop at the plant How Will Climate Change Impact The Cement Industry? Conclusion Know your options for each facility – find the best fit Long –range planning starts now

25. Potential Impacts of Climate Change on Our Industry PCA MTC Steering Committee, May 2008