Circular economy of cement could be worth €110 billion by 2050: report

A circular economy 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, re-use of energy from waste material and recirculation of materials and minerals across the built environment. The Circular cement value chain: Sustainable and profitable report projects that adoption of circular technologies could also decarbonize 80 percent of all cement and concrete emissions by 2050.

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. And adoption of circular technologies could be further accelerated by rising CO₂ prices, landfill costs and decarbonization subsidies. The report reveals that recycling and re-using 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. 

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 react to evolving business risks in each region. 

Jukka Maksimainen, global co-leader of McKinsey’s Global Energy & Materials practice said: “Applying circular economy principles to cement and concrete would not only help decarbonize the built environment but generate enormous economic value. 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.”

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 €210 billion by 2050 and this will significantly accelerate uptake of circular technologies. For example, our research shows that technologies utilizing CO₂ such as curing ready-mix or precast concrete 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.”

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 design and standardization and creating customer-centric circular economy businesses. Cross-sector collaboration to enable CO₂ offtake opportunities in other industries, for example using CO₂ as a feedstock for hydrogen production.

• 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 ten countries that recently joined the UN Race to Zero campaign.