U.S. cement production takes place in 130 facilities across 37 states and accounts for a third of global production (Hanle, Jayaraman et al. 2004). The industry includes all manufacturing and distribution of cement. In 2008, shipments from the industry were estimated to be $10 billion (Portland Cement Association 2009).
Physical Exposure Risk. The cement industry is sensitive to water shortages, since its product requires about 15-20% water by volume (Portland Cement Association 2011). Also, the cement industry’s infrastructure could be affected by increased extreme weather events.
Policy and Regulatory Risk. The industry contributes 3.7% of U.S. greenhouse gases, since cement is reliant on coal and petroleum coke as fuel sources for their kilns (Hanle, Jayaraman et al. 2004). Several cement manufacturers will be required to measure and report their greenhouse gas emissions under the EPA’s Mandatory Reporting of Greenhouse Gases Rule (Environmental Protection Agency 2010). Future climate legislation will almost certainly have an effect on the industry whether in the form of a cap and trade bill or a carbon tax as cement production is heavily reliant on cheap coal, which will likely become more expensive. The EU Trading Scheme caused higher electricity prices, and as a result, electricity constitutes 25% of the EU cement industry’s production costs—a 14% increase (Lehman Brothers 2007).
Reputational Risk. Companies that are implementing greener strategies, such as incorporating fly ash into their mix, improve their eligibility for use in creating sustainable sites under the U.S. Green Building Council’s Leadership in Energy and Environmental Design certification (Portland Cement Association 2011).
Competitive Risk. Given current industry average emissions, if the right to emit a ton of CO2e cost $50 that would increase the cost of producing a ton of cement by approximately $12, which would be the biggest expense (Humphreys and Mahasenan 2002). Cement companies that improve their supply-chain sustainability by becoming more energy efficient and producing less waste, will reduce the hardship of adapting to future climate regulation. Some companies, such as Holcim, are already making efforts to reduce their carbon dioxide emissions (Feigt 2009) .Additionally, some companies are developing methods for closed-loop water-recycling and solid waste recycling, reducing their vulnerability to water shortages and saving money. Falcon, Inc. of Minnesota has been able to save approximately $200,000 annually through water recycling (Minnesota Technical Assistance Program 1995).