An estimation of the effect of carbon pricing for CO2 mitigation in China's cement industry

This study estimates the effect of carbon pricing for CO2 mitigation in China's cement industry. The statistics and prediction show that cement production initially experienced accelerated growth and is now expected to plateau out over the next few years. The energy saving and carbon mitigation technologies considered in this estimation are at different adoption stages. Full technology diffusion is expected within 10-20 years, and the remaining technology mitigation potential stands at about 8.8% by 2025 and 10.2% by 2030. Nevertheless, attaching a price to carbon would have a limited effect. Reductions of 9.9 and 12.9 Mt-CO2 might have been realised in 2015 under respective prices of 60 and 100 Yuan/t-CO2, compared to a non-pricing scenario. The reduction attributed to carbon pricing would be around 4.9 Mt-CO2 in 2020 at both price levels, and around 70% of the mitigation may be at a marginal cost of 50 Yuan/t-CO2 by 2020. The marginal cost for nearly 90% of the policy mitigation would be below 100 Yuan/t-CO2 by 2030. This paper confirms the effectiveness of a command-and-control approach so far for energy saving in China's cement industry and advises early introduction of a carbon pricing regime with consideration of policy interactions.