The Next Economy
McKinsey:
Circular Economy for Cement Could Be Worth €110B by 2050

Circular models for production and reuse of concrete and cement could produce €110 billion in net value and avoid or mitigate two billion tons of CO₂ emissions by 2050, according to a new McKinsey & Company report.

This will be 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. Circular cement value chain: Sustainable and profitable projects that adoption of circular technologies could also decarbonize 80 percent of all cement and concrete emissions by 2050.

“Applying circular principles to cement and concrete would not only help decarbonize the built environment but generate enormous economic value,” says Jukka Maksimainen, global co-leader of McKinsey’s Global Energy & Materials practice. “The cement industry is perfectly positioned to create closed loops for CO2, materials and 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 to 40 percent of the world’s solid waste created through construction and maintenance of the built environment.”

Cement and concrete are the linchpins of the built environment; and their global demand has nearly tripled over the past 20 years with the proliferation of urban development. Concrete is one of the most consumed materials on our planet, second only to water. Today, the concrete industry is responsible for 8 percent of all global carbon emissions; and 30 to 40 percent of today’s solid waste is created through the construction and maintenance of the built environment.

The McKinsey report posits that adoption of circular principles could offset more than half of the losses to the cement industry from rising costs; and adoption of circular technologies could be further accelerated by rising CO2 prices, landfill costs and decarbonization subsidies. The report reveals that recycling and reusing construction materials and minerals alone will add nearly €80 billion of annual EBITDA while reusing concrete modules and structures will drive an estimated €24 billion 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 percent by 2050.

“Cement and other industry players should engage in circular business-building and use circular technologies to react to evolving financial risks,” says Sebastian Reiter, Partner at McKinsey's Global Energy & Materials. “The total value at risk from rising CO₂ prices and landfill costs could reach approximately €210 billion by 2050 and this will significantly accelerate uptake of circular technologies. For example, our research shows that technologies utilizing CO₂ can create positive economic value at carbon prices of approximately €80 percent of CO₂, while using construction waste as aggregates for concrete production avoids landfill costs.”

More and more innovators have developed potential solutions to help address the materials’ environmental impact — including a clay-based concrete, a bio-enhanced, ecosystem-enhancing concrete for coastal infrastructure, a cement cured with captured CO2 instead of water, and another cement made from captured carbon that produces 60 percent fewer emissions and costs 10 percent less than conventional cement. Other technologies with high potential include the use of CO2 for enhanced recarbonation of construction and demolition waste, recycling of waste into gravel for roadbuilding, and 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 adjust to evolving business risks in each region.

To take advantage of these opportunities, McKinsey suggests two key actions:

• Engage in circular business-building: Embracing digital marketplaces for waste materials; using technologies that facilitate circular design and standardization; and creating customer-centric, circular business models. Cross-sector collaboration should enable CO2 offtake opportunities in other industries — for example, using CO₂ as a feedstock for hydrogen production or any number of consumer products.

• Use circular technologies to react to the 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 — 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.