1. 131th March 2006 Competitiveness of and access to cost effective energy inputs for energy intensive industry Contribution from Alain CAPMAS Cement industry

2. 231th March 2006 Definition of energy intensive industry Cement sector EU25 1.Level of energy used : -Fuels: 22 Mtce/year = 572 000TJ/y -Electricity: 24 TWh/year = 86 000TJ/y 2.CO 2 emission: 700kg/t cement at 65/t =11kgCO 2 / of turnover 3.Base load use of energy: Alliance of EEI:

3. 331th March 2006 Main energy feedstock and environmental factors impacting competitiveness: electricity The cost of electricity in Europe has increased exactly like CO 2 price for energy intensive base load users. Price setting is out of the standards for commodities trading

4. 431th March 2006 Main energy feedstock and environmental factors impacting competitiveness: electricity Electricity price in Europe has become a risk management issue for EII, greater than in other continents for long term contracts: –Africa: Eskom: 150Rds= 20/MWh+d –Asia : China: 40USD = 33/MWh –Canada: HydroQuébec:40CAD = 28/MWh –USA: West Virginia: 30USD=25/MWh+d These prices are for 2006 and most are indexed on coal prices.

5. 531th March 2006 Main energy feedstock and environmental factors impacting competitiveness: electricity Increased demand in those countries means coal power plants, even for baseline users. Greater risk means fewer investments to improve plants efficiency. Energy Intensive Industries need to be able to establish long term contracts.

6. 631th March 2006 Developments over time of the different factors: Electricity –A real commodity market pricing is a must, with CO 2 price cap or safety valve. –Long term contracts are needed for visibility and investment strategies of the energy intensive industries. –The future European Common Energy Policy should take into account EII needs. –Nuclear seems to be the only middle term option for base load users.

7. 731th March 2006 Main energy feedstock and environmental factors impacting competitiveness: fuels Cement industry (EU25) –Produces 238 M tonnes/year of cement at 65/t –Uses 22 M tonnes of coal equivalent (tce) = 100 - 150 tce/day/kiln) –Valorises 3,6 M tce of waste fuels –emits about 150 M tonnes CO 2 in Europe –2/3 come from decarbonation, process emission Imports –34,3 M tonnes of cement in 2005 (14%) –16 M tonnes of coal equivalent (71%)

8. 831th March 2006 Main energy feedstock and environmental factors impacting competitiveness: fuels Cement industry has a high CO2 price sensitivity: CEMENT MEDD/D4E/DPPR Novembre 2003 CO2=10/t

9. 931th March 2006 Main energy feedstock and environmental factors impacting competitiveness: fuels Cement industry has a huge CO 2 price sensitivity –CO 2 at 27/t means an impact of 20 /t of cement at 65/t average (+30%) –Import freight rates are: 11.5 to 13 /t of cement from the Mediterranean area (+160kg CO 2 /t cement due to transport) 20 /t of cement from the Far East (+94kg CO 2 /t cement due to transport) –ETS has created a strong distortion of competition on marginal tonnes produced, with a negative impact on GHG

10. 1031th March 2006 Main energy feedstock and environmental factors impacting competitiveness: fuels European cement industry keeps optimising fuel mix: Biomass is neutral for CO 2 Why not consider wastes to be opt-out of the ETS? Each tonne of waste fuel reduces imported fuel with equivalent thermal efficiency

11. 1131th March 2006 Main energy feedstock and environmental factors impacting competitiveness: fuels Cement industries keep optimising waste fuel mix: Country200220042005 Netherlands72% Switzerland47,8%51,2%46,8%* Germany33%40,2% France34%29,5%28,1%* Sweden30% Belgium30% Autria29% Europe16% * The decrease is mainly due to the reduction of available biomass European harmonisation could improve energy supply

12. 1231th March 2006 Developments over time of the different factors: Fuel mix: –Reduce the fuel imports by optimising the waste fuel stream efficiently (not incompatible with the reduction of waste production). Opt-out waste fuels of the ETS. –Develop a strong policy on biomass fuel: Biomass offer has not increased since ETS. 600ha of land could provide 10% of fuel for a 1Mt cement plant –Reduce the fuel imports by promoting new technologies when possible (long term)