Displaying items by tag: Carbon tax

Vietnam: The government will allocate greenhouse gas emissions quotas to 150 facilities across the cement, thermal power and steel sectors, according to a draft decree discussed by the government. Under the proposed roadmap, quota allocation will be implemented in phases over the next five years.

These sectors account for 40% of national emissions, according to the Vietnam Investment Review, and are also subject to the EU’s carbon border adjustment mechanism. The draft decree proposes decentralised development of technical regulations and mutual recognition of carbon credit data with international partners. Quotas will be proposed annually by ministries and submitted to the prime minister for approval.

 Deputy prime minister Tran Hong Ha said “This is a technical decree with many variables. The Ministry of Natural Resources and Environment will provide a controlled framework and guiding principles using a ‘sandbox’ approach, allowing businesses to experiment while regulators monitor, evaluate and make adjustments.”

Australia: The Australian government’s ‘unwillingness’ to impose a carbon levy on imported cement, lime and clinker is threatening decarbonisation efforts and could cost up to 1400 jobs, according to the Financial Review.

The Cement Industry Federation, which represents local producers Adbri, Boral and Cement Australia, has said that the absence of a carbon levy on imports from countries with less robust climate commitments paved the way for the offshoring of local manufacturing, a process known as ‘carbon leakage’.

It said “Not addressing the issue of carbon leakage in a timely manner will be detrimental to Australian cement and lime manufacturing and could lead to the unnecessary loss of key Australian cement and lime facilities."

Imports currently account for over 40% of domestic clinker consumption and originate largely from southeast Asia. In 2023, an energy expert was appointed by the government to assess the feasibility of an Australian carbon border adjustment mechanism, with a final recommendation expected to be delivered in 2024. However, only an interim report was released in November 2024, with the final advice now reportedly due after the election in May 2025.

Two news stories to note this week concerning climate legislation in eastern Asia. First, the Indonesian government announced plans to create a mandatory carbon emissions trading scheme (ETS) for key industries including cement. Second, an initiative to set up a carbon border adjustment mechanism (CBAM) in Taiwan emerged.

The proposal in Indonesia has been expected by the local cement sector and the wider market. Back in November 2024 at the ASEAN Federation of Cement Manufacturers (AFCM) event, an Indonesian Cement Association (ASI) speaker said that a preparation period for carbon trading by industrial sectors was expected from 2025 to 2027 followed by an easing-in period and then full implementation from 2031 onwards. This latest announcement appears to confirm the planned roll-out of the country’s cap-and-trade system. So far the government has set up a carbon tax, a voluntary carbon trading scheme (IDX Carbon) and a mandatory carbon trading scheme for part of the power sector. Notably, the local carbon price for that last one is low compared to other schemes elsewhere around the world. In 2024 the World Bank reported a price of US$0.61/t of CO₂. Since it only started in 2023 it is still early days yet though.

The new information confirms that the cement, fertiliser, steel and paper industries will be added to the mandatory emissions trading scheme. As per other cap-and-trade schemes, low emitters should be able to sell spare credits. However, comments made by Apit Pria Nugraha, Head of the Center for Green Industry, Ministry of Industry, at a recent trade event in Jakarta suggested that companies that emit more than their allowance would have to pay a 5% levy on the excess and buy credits for the rest. This seems to be different from the EU Emissions Trading Scheme, where companies are fined only if they go above their allowance and they do not buy sufficient credits to cover themselves. However, we’ll have to wait to confirm this and other details.

Meanwhile in Taiwan, Peng Chi-ming, the Minister of Environment, announced that a bill establishing a local CBAM could be prepared in the second half of 2025. What is telling though is how the local press coverage of this story framed the trade policy aspects of such a scheme. Peng questioned how the EU CBAM might fare in response to the protectionist and pro-tariff administration in the US. He also noted that importers of cement and steel didn’t have to disclose their carbon emissions compared to local producers. Vietnam, unsurprisingly, was singled out as a likely target of a CBAM given that one third of Taiwan’s imports of cement come from there. Lastly, Peng also said that Taiwan would have to apply to the World Trade Organization for approval if or when it did set up its own CBAM.

Taiwan introduced a carbon tax at the start of 2025 with a standard price of US$9.16/t of CO₂ and lower prices for companies using approved reduction plans or meeting technology benchmarks. Research by Reccessary indicated that Taiwan Cement might face a carbon tax bill of US$41m and Asia Cement could be looking at US$28m based on 2023 data. These additional costs will increase operating costs and reduce profits.

All of this may sound familiar because it has already happened in Europe. Some form of carbon trading or taxation is introduced and then the debate moves on to carbon leakage via imports. The cement industries in Indonesia and Taiwan are unlikely to be aggravated directly by the EU CBAM but the wider economies of both countries are reacting to secure access to export markets. This, in turn, has implications for a heavy CO₂-emitting sector like cement. For example, if a CBAM isn’t already being considered in Indonesia, local heavy industry is likely to start lobbying for one, if the new ETS starts affecting import rates.

The Minister of Environment in Taiwan and others before him have identified that climate policies can be protectionist. As more countries regulate local carbon emissions, more trade disputes look likely. The big one right now might be the growing argument between the US Trump administration and the EU. Yet, every time a country sets up a new carbon scheme, a potential new argument over trade is brewing. And cement producers in Indonesia, Taiwan and everywhere else are stuck in the middle of all of this.

EU: European Union (EU) member state governments have agreed to establish a carbon border adjustment mechanism on imports of polluting goods, including cement, from outside of the EU. Besides preventing carbon leakage, the member states hope that the mechanism will encourage EU partners to establish carbon pricing policies and combat climate change within the framework of the European Emissions Trading System (ETS).

Vietnam: 20 factories in Quang Ninh, Thanh Hoa, Quang Nam and Thua Thien Hue provinces will be subject to a new carbon tax in a pilot project. The Ministry of Agriculture and Rural Development has started to put the programme into action following approval from Prime Minister Nguyen Xuan Phuc, according to the Vietnam News Agency Bulletin. The pilot project will start in 2020 and run until the end of 2021.

The scheme will include 11 cement companies and nine power plants. Cement producers and traders will be charged US$0.09/t of clinker, equivalent to US1.35/t of CO₂. The tax will also increase electricity costs for cement producers. It is expected to increase the production cost at plants by 0.29%.

Nguyen Van Vu, head of Finance and Planning Department under Vietnam Administration of Forestry (VAF), said that the tariff was lower than the World Bank’s Forest Carbon Partnership Facility pledge to pay for emission reduction efforts in North Central Region of US$5/t of CO2. The provinces running the tariff are expected to generate around US$7.4m/yr. Most of this revenue will be accrued in Quang Ninh, followed by Thanh Hoa, Thua Thien Hue and Quang Nam.

South Africa: Sephaku Cement estimates it will have to pay up to US$2.8m/yr as part of South Africa’s new carbon tax. The new tax started in June 2019. The subsidiary of Nigeria’s Dangote Cement said that it would apply the tax on its products based on the proportion of clinker per tonne. This would work out at between a 1.5% and 2.5% price increases on lower strength and high strength cement respectively.

In a financial report to 31 March 2019 the cement producer said that its cement sales volumes fell by 6.4% year-on-year due to low cement demand was exacerbated by increases in value added tax (VAT) and fuel prices during the first and last quarter of its financial year. Its sales revenue fell by 3.1% to US$162m and its net profit rose to US$9.08m but only due to a tax credit.

South Africa: The government has introduced a carbon tax of around US$8/t for carbon dioxide-equivalent (CO₂e) emissions. The carbon tax will initially only apply to scope 1 emitters in the first phase. The first phase will be from 1 June 2019 to 31 December 2022, and the second phase from 2023 to 2030. Large-scale tax-free emission allowances from 60 – 95% will be provided in the first phase. Industries such as cement or iron production will benefit from a basic threshold of 70%.

A review will be held before the second phase starts to measure progress. The treasury reinforced that the introduction of the carbon tax would not raise electricity prices due to tax breaks for renewable energy sources and credits for existing generation capacity.

Canada: The government has made a proposed new carbon tax easier for large-scale industrial emitters such as cement and steel producers. Originally the new legislation proposed imposing a levy on around 30% of a company’s CO₂ emissions from the start of 2018, according to the Globe and Mail newspaper. However, the revision has reduced the tax on so-called vulnerable industries with the cement and steel sectors only having to pay 10%. The levy will start at US$15/t in January 2018, rising to around US$40/t in 2022.

The decision to soften the carbon tax follows lobbying by the affected industries. The tax applies to provinces that do not have existing carbon emission controls, such as cap-and-trade schemes, that meets the central government’s standards. The provincial government of Ontario, which contains six of the country’s 17 integrated cement plants, recently decided to leave its own carbon pricing system. It will be subject to the new rules. Saskatchewan will also be affected.

Check out this great graph that the UK Mineral Products Association (MPA) released in its latest sustainable development report this week. It lays out where the MPA says the various direct and indirect costs come from climate change policies per tonne of cement.

Graph 1: The cumulative burden of direct and indirect cost of climate change policies on the cement sector (per tonne of cement). GBP£1 = Euro0.94 at time of writing. Source: MPA. 

If it’s correct then the two biggest contributors from carbon taxes on the price of cement in the UK arise from the Carbon Price Support (CPS) mechanism and the Renewable Obligation (RO). Between them the two policies account for around two-thirds of the carbon tax burden on the price of cement. Of note to an industry advocacy body like the MPA, both of these derive from local legislation and they could be changed or dispensed with separate to the Brexit negotiations to extricate the UK from the European Union that have just officially started.

The MPA then goes on to warn that these added costs could rise from GBP£3.24/t at present to GBP£4/t in 2020 and then the truly terrifying (to energy intensive manufacturers at least) GBP£17/t. Subsequently the MPA has flagged these potentially mounting costs as the biggest threat to the UK cement industry in the near future. Failure to act could mean more foreign imports, loss of jobs and damage to the security of supply. All very heavy stuff. The MPA’s warning was nicely timed to precede the UK government’s response to a consultation on another decarbonisation scheme, the Contracts for Difference (CfD) scheme. Here, the government is about to exempt high-energy users, including cement producers.

Essentially, the key message from the MPA’s report is that the cement sector is picking up but it is still below sales levels in 2007. At the same time it has made all these environmental improvements and, now, steadily tightening regulations threaten its future. Just compare this with the situation in the US where the Portland Cement Association (PCA) recently applauded President Donald Trump’s executive order to roll back environmental legislation from the Obama administration. Despite this it insisted that its members were committed to manufacturing products with a ‘minimal’ environmental footprint.

Funnily enough the MPA didn’t mention environmental issues when it released its updated Brexit priorities for the UK government. This is understandable given the graph above that suggests that the majority of the carbon costs on cement production come from UK legislation. However, sharing a land border with the EU south of Northern Ireland may give rise to all sorts of market skulduggery once any sort of post-Brexit deal becomes clear. And this doesn’t even take into account moving secondary cementitious materials about, like slag, or the UK’s international market in solid recovered fuels (SRF) and the like. Differences in UK and EU overall carbon costs on cement may start to have acute implications for producers in both jurisdictions as the negotiations build. In this atmosphere moves like Ireland’s Quinn Cement’s last month, to build a terminal on the UK side of the Irish border, make a lot of sense.