4. The perverse effects of EU ETS free
allocation rule: the cement industry
Observed cement installations
by activity level
Theoretical distribution
0
10
20
30
40
50
Number of installations
2012 - LD Countries
0
10
20
30
40
50
Number of Installations
2012 CF - LD Countries
Ø5.8 Mt excess clinker production in 2012 (= 5.2 Mt CO2 emissions)
Activity level thresholds: free allocation reduced by 50%
(resp. 75%) if production falls by 50% (resp. 75%)
5. Worrying consequences
• CO2 intensity of the European cement sector
+5% 2011-2014!
– EU 2050 objective: -80% CO2 emissions
• Cumulative surplus: 450M credits (=tonnes
CO2) for the cement sector
• Free allocations are received by large, carbon-
intensive incumbent firms
• SMEs who have developed commercially
viable low-carbon cements (e.g. Ecocem, EMC,
CarbonCure, BanahCEM) get nothing