Cement Manufacturers Association (CMA)

35 The FY 2025–26 burden of USD 50 million is broadly absorbable for the sector as a whole, serving primarily as a transition-year compliance signal. The USD 130 million exposure in FY 2026–27 is materially higher and may create significant differentiation between firms with progressive blending and efficiency strategies versus those with high clinker ratios and coal-heavy fuel mixes. 8. Broader Benefits and Constraints of the CCTS for the Cement Sector 8.1 Benefits • Explicit carbon-intensity pricing: The CCTS creates a direct financial incentive to reduce tCO e per tonne of product, reinforcing earlier 2 PAT-style incentives.[1,8] • Improved MRV discipline: Stronger monitoring, reporting, and verification for cement plants supports energy-efficiency planning and green-finance assessment.[1,9] • Sector-level learning: Cement can help test the credibility of GEI benchmarks and identify low-cost abatement levers — blending, alternative fuels, process efficiency.[9] • Long-term investment signal: A clear and rising carbon-price path improves the business case for advanced technologies including CCUS and electrified-heat kilns.[9,11] 8.2 Constraints • Process-emission challenge: A substantial share of cement CO ₂ — from calcination of limestone — is structurally resistant to reduction through energy-efficiency measures alone.[9,11] • Increasing marginal abatement cost: After low-cost measures are exhausted, further decarbonisation requires CCUS-linked retrofits, which remain capital-intensive and commercially unproven at scale in India.[9,11] • Effectiveness Data and verification capacity: will depend on robust third-party verification and consistent benchmarking across heterogeneous plant configurations.[1,3] • Carbon price uncertainty: Wide speculative price ranges — approximately USD 8–23.5/tCO e by 2035 — require firms to 2 manage price risk alongside long-horizon capital investment decisions.[2,12] 9. International Experience: Carbon Markets and the Cement Sector 9.1 European Union Emissions Trading System (EU ETS) The EU ETS operates as a cap-and-trade system with tradable EU Allowances (EUAs).[12,13] Cement producers must surrender one EUA per tonne of CO emitted; initially the sector received 2 substantial free allocations, but these have been progressively reduced as the carbon price has risen to approximately USD 65–90/tCO e.[12] 2 Table 5: Hypothetical CCC Cost Burden for the Indian Cement Sector — FY 2025–26 and FY 2026–27 Fiscal Year Emission Deficit (MtCO₂e) Carbon Price (USD/tCO₂e) CCC Cost Burden (USD) Interpretive Notes FY 2025–26 0.5 10 USD 50 million Generally absorbable; viewed as a transition- year signal building on PAT-era intensity improvements [2,9]. FY 2026–27 1.3 10 USD 130 million Materially higher; potential for significant inter-plant differentiation; direct motivation for emission- reduction investment [2,9]. Sources: ICRA ESG / Business Standard [2]; NITI Aayog [9]. Carbon price assumption: USD 10/tCO ₂ e (conservative early-phase estimate)