In the mix

The circular economy of cement could be worth €110bn by 2050, says a report from McKinsey & Company.

In The circular cement value chain: sustainable and profitable report, McKinsey & Company projects that adoption of circular technologies could decarbonise 80% of all cement and concrete emissions by 2050 and increase profitability.

Driven by capture, storage and usage of CO2 from cement and concrete production, reuse of energy from waste material and recirculation of materials and minerals across the built environment, this circular economy for concrete and cement could produce €110bn in net value and avoid or mitigate two billion tons of CO2 emissions by 2050. Jukka Maksimainen, Global Co-leader of McKinsey’s Global Energy & Materials practice, says: “Applying circular economy principles to cement and concrete would not only help decarbonise the built environment, but generate enormous economic value. The cement industry is perfectly positioned to create closed loops for CO2, materials, minerals and energy.

“We estimate each of these circular technologies will be value-positive by 2050, while some are already more profitable than today’s typical solutions. This will also drastically reduce global emissions and 30-40% of the world’s solid waste created through construction and maintenance of the built environment.”

The adoption of circular economy principles is estimated to offset more than half of the losses to the cement industry from rising costs and reduced demand. Adoption of circular technologies could also be further accelerated by rising CO2 prices, landfill costs and decarbonisation subsidies.

The report states that recycling and reusing construction materials and minerals alone will add nearly €80bn of annual earnings before interest, taxes, depreciation and amortisation (EBITDA), while reusing concrete modules and structures will drive an estimated €24bn of net value by 2050. Regions with high landfill costs and construction and demolition waste will also reap major benefits from the use of alternative fuels from waste material, with the global average share of alternative fuels reaching 43% by 2050.

Capitalising on opportunity

Technologies with high potential include the use of CO2 for enhanced recarbonation of construction and demolition waste and the use of alternative fuels from energy waste. McKinsey suggests this will be achieved by cement companies adopting circular business models such as digital marketplaces for waste and using circular technologies to react to evolving business risks in each region.

McKinsey suggests two key actions:

• engaging in circular business building by embracing digital marketplaces for waste materials, using technologies that facilitate design and standardisation and creating customer-centric circular economy businesses. Cross-sector collaboration would enable CO2 offtake opportunities in other industries – for example, using CO2 as a feedstock for hydrogen production; and

• using circular technologies to react to evolving financial risks – building cost-benefit positions based on locally varying CO2 prices, landfill costs and regulatory frameworks and the amount of waste material available in each region. Also ensuring offtake agreements are available for circular products in each country, such as the 100 construction companies across 10 countries that recently joined the UN Race to Zero campaign.

Sebastian Reiter, Partner at McKinsey’s Global Energy & Materials, says: “Cement and other industry players should engage in circular business building and use circular technologies to react to evolving financial risks. The total value at risk from rising CO2 prices and landfill costs could reach approximately €210bn by 2050 and this will significantly accelerate uptake of circular technologies. For example, our research shows that technologies utilising CO2, such as curing ready-mix or precast concrete, can create positive economic value, while using construction waste as aggregates for concrete production avoids landfill costs.” 

Read the full report at mck.co/470b99R

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