CONSTRUCTION INDUSTRY VALUE CHAIN How Companies Are Using Carbon Pricing to Address Climate Risk and Find New Opportunities About IFC IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In fiscal year 2018, we delivered more than $23 billion in long-term financing for developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org About CPLC A unique initiative, the Carbon Pricing Leadership Coalition (CPLC) brings together leaders from national and sub-national governments, the private sector, academia, and civil society with the goal of putting in place effective carbon pricing policies that maintain competitiveness, create jobs, encourage innovation, and deliver meaningful emissions reductions. The Coalition drives action through knowl- edge sharing, targeted technical analysis and public-private dialogues that guide successful carbon pricing policy adoption and accelerate implementation. The Coalition encourages private sector climate leadership through sector-specific task teams, including for the construction industry and the banking sector. The Coalition was officially launched at COP21 in Paris in December 2015. As of 2018, CPLC comprises 32 national and sub-national government partners, 150 pri- vate sector partners from a range of regions and sectors, and 67 strategic partners representing NGOs, business organizations, and universities. More information: https://www.carbonpricingleadership.org/ CONSTRUCTION INDUSTRY VALUE CHAIN How Companies Are Using Carbon Pricing to Address Climate Risk and Find New Opportunities © International Finance Corporation 2018. All rights reserved. 2121 Pennsylvania Avenue N.W. Washington, D.C. 20433 Internet: www.ifc.org IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector develop- ment, mobilizing private capital, and providing advisory and risk mitigation services to businesses and govern- ments. This report was commissioned by the Carbon Pricing Leadership Coalition (CPLC) through IFC’s Climate Business Department. The CPLC secretariat is administered by The World Bank Group. The conclusions and judgments contained in this report should not be attributed to, and do not necessarily rep- resent the views of, IFC or its Board of Directors or the World Bank or its Executive Directors, or the countries they represent. IFC and the World Bank do not guarantee the accuracy of the data in this publication and accept no responsibility for any consequences of their use. The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without per- mission may be a violation of applicable law. 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Contents Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 What is the Construction Value Chain?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Sustainability Along the Construction Value Chain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 The Business Case for Pricing Carbon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Approaches to Implementing an Internal Carbon Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Construction Industry and Carbon Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Current Carbon Pricing Practices by Companies across the Construction Value Chain. . . . 20 Common Considerations across Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 The Role of the Carbon Pricing Leadership Coalition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32   iii iii Acknowledgements This paper was prepared by the Climate Business Department (Alzbeta Klein, Director) through its Climate Finance and Policy team (Vikram Widge, Head) for the Carbon Pricing Leadership Coalition (CPLC). The authors were Ayesha Malik and Aditi Maheshwari. Isabel Saldarriaga Arango and Sona Panajyan led the communications and dissemination strategy for the paper. This work could not have been completed without the support and insights from CPLC Partners who agreed to be interviewed: Rocio Fernandez Flores (Acciona); Alexander Roeder (Cemex); Anupam Badola (Dalmia Cement); Andrew Bowerbank (EllisDon); Jeanne Michon- Savarit (Groupe ADP); Cedric de Meeus and Elodie Woillez (LafargeHolcim); Hitesh Kataria and Janhavi Parab (Mahindra & Mahindra); Mark Crouch, Dominika Nowosinska, and Madeleine Rawlins (Mott MacDonald); Sergey Chestnoy and Dinara Gershinkova (Rusal); Nicolas Baglin (Saint-Gobain); Volker Hessel and Dieter Vollkommer (Siemens); and Abhishek Goyal and Alka Upadhyay (Tata Group). In addition, many World Bank Group colleagues and experts provided invaluable insights and feedback to shape the paper. Sector expertise was provided by IFC industry specialists Michel Folliet, Prashant Kapoor, Rozita Kozar, Ommid Saberi, Stefan Johannes Schweitzer, Henri Rachid Sfeir, Jigar Shah, and Alexander Sharabaroff. Overall guidance was provided by Angela Naneu Churie Kallhauge and Tom Kerr. This study reflects the views of the authors and does not necessarily reflect the views of the companies covered by the paper. The findings would, thus, not be binding on the companies studied.  ACKNOWLEDGEMENTS vv EXECUTIVE SUMMARY T he global construction industry is the world’s largest consumer of raw materi- als, and constructed entities account for between 25 and 40 percent of total carbon emissions in the world.1 The industry is projected to grow at 4.2 percent annually between 2018 and 2023 in terms of market value,2 with expansion opportuni- ties in residential, nonresidential, and infrastructure projects. This expected growth and the impera- tive toward decarbonization3 signaled by the Paris Agreement have created the impetus for sustainable construction. Construction companies are becom- ing increasingly accountable for their contribution to global emissions and are facing pressure from investors, banks, regulators, contracting authorities, and consumers to mitigate their climate risk and find new solutions to reduce their carbon footprint. In response, the industry is making inroads toward addressing these concerns. What is the Construction stakeholders, incentivizing low-carbon alter- natives, and providing a revenue stream for Value Chain? investment in clean innovations. Companies in the construction industry are The value chain for any construction project recognizing the role of carbon pricing in is composed of specific variations within a managing climate risk and carbon exposure, fixed framework of distinct stages—design, revealing opportunities for climate-smart production and conversion of raw materials business, and acting as a transition tool to into manufactured products, and construction incentivize low-carbon activities.5 In addition, itself. Each of these comprises its own internal companies along the construction value chain stages, processes, stakeholders, and aspects need to manage their Scope 3 emissions by that interact to bring a project to fruition. The engaging with their supply chains on carbon distinctness of these processes, as well as the pricing and emissions reduction tools. The fixed-term, project-based nature of relation- high level of fragmentation and the disconnect ships along the supply chain, results in a highly between decision makers along the value chain fragmented industry structure. necessitates the development of an integrated approach to carbon pricing for it to be most Sustainability Along the effective in enabling companies to achieve climate goals and reduce risk. That is, without Construction Value Chain industrywide support and coordination, the production of green products is not linked to the demand and valuation of these products Companies across all sectors of the construction further down the chain. Construction sector value chain are using methods such as internal companies acting alone represent great initia- carbon-reduction targets, development of inno- tive but would be significantly more effective vative green products, advocacy for sustainabil- at helping the industry meet climate targets ity standards, and integration into the circular with the support of and linkages to their coun- economy to embed sustainability into their terparts along the value chain. operations and products. While the momentum Current Carbon Pricing toward sustainability is ubiquitous across the industry, it manifests differently in each sector Practices by Companies along the value chain, as explored in this paper. Construction Industry and across the Construction Carbon Pricing Value Chain Internal carbon pricing has emerged as a pre- Twelve companies from sectors across the ferred tool for businesses to measure, manage, construction value chain, including aluminum, and mitigate their climate risk to prepare for cement, glass, steel, infrastructure, construction a future in which carbon pricing is a regula- services, and equipment manufacturing were tory mandate, as well as reduce their carbon interviewed for this paper. Their attitudes, footprint. In 2017, almost 1,400 companies used existing initiatives, and future plans for carbon an internal carbon price or planned to within pricing were documented to reveal common two years, from only 150 in 2014.4 This is due to concerns and themes surrounding carbon pric- the effectiveness of carbon pricing in quantify- ing in the value chain: ing climate risk exposure, communicating it to 2 CONSTRUCTION INDUSTRY VALUE CHAIN ●● Using carbon pricing to reduce the industry’s ●● The challenge of “socialization” faced carbon footprint will work only if compa- by early movers has eased because of a nies can remain competitive. change in culture brought about by recent advances such as the Paris Agreement and ●● Companies would prefer to operate on a the Financial Stability Board’s Task Force on level playing field and seek the universal Climate-related Financial Disclosures (TCFD) application of an external carbon price recommendations. across their sectors, applicable to all actors. ●● Companies lack clarity on how to operational- ●● The challenges faced by companies in the ize and standardize the implementation of an construction value chain differ by geogra- internal carbon price. Businesses are inter- phy and jurisdiction. No one solution is ested in learning from the experiences of applicable across all business units or stages other companies. of the value chain. ●● All the companies surveyed advocated for ●● Companies seek assistance with managing the development of an integrated carbon Scope 3 emissions and engaging with their pricing mechanism (additional Carbon supply chain, and they need standardized Pricing Leadership Coalition [CPLC] analysis and comparable frameworks for scenario forthcoming in Fall 2018). analysis. EXECUTIVE SUMMARY 3 Introduction T he global construction industry is the world’s largest consumer of raw materi- als, and constructed objects account for between 25 and 40 percent of total carbon emissions in the world.6 The industry is projected to grow at 4.2 per- cent annually between 2018 and 2023 in terms of market value, with expan- sion opportunities in residential, nonresidential, and infrastructure projects.7 In parallel, the Paris Agreement and its well-below-2 degrees Celsius target for global temperature increase8 has signaled an imperative toward decarbonization in the public and private sectors,9 including creating the impetus for a sustainable construction industry. With increasing populations, urbanization, and the fact that almost 75 percent of the infrastruc- ture that will exist in 2050 has yet to be built,10 the construction industry is expected only to expand, thus providing a significant opportunity to improve its efficiency and transition toward a low-carbon future. Governments are taking their own steps to The International Financial Corporation (IFC) manage such opportunities, with 66 of the Paris estimates an investment opportunity in green Agreement signatories mentioning buildings as buildings totaling more than $16 trillion by a key sector for mitigation targets.11 Similarly, 2030 tied to meeting the Paris Agreement and over 80 percent of all Nationally Determined domestic policy targets in 21 key emerging Contributions (NDCs) include a focus on markets.14 Similarly, McKinsey estimates that resilient infrastructure, also corresponding to annual investments of $3.3 trillion in infra- Sustainable Development Goal (SDG) 9’s inter- structure are needed worldwide to support the section of infrastructure, energy, and housing,12 projected growth in GDP until 2030, of which and SDG 11 on sustainable cities.13 At the 60 percent will be in emerging markets.15 These same time, the private sector is also assuming trends provide an enormous opportunity to responsibility. green the future construction of buildings and infrastructure through innovative low-carbon The construction industry is already mak- technologies, policies, and processes. ing inroads toward addressing its emissions, in response to these trends and the growing Companies have a growing sense of account- demand for green, low-carbon construction. ability for their contribution to global emis- Consumers of newly constructed buildings and sions, and they increasingly understand the infrastructure increasingly require the industry risks that climate change and carbon exposure to meet standards of energy efficiency, respon- pose to businesses and the potential oppor- sible resource management, and resilience. tunities that exist for low-carbon solutions. 4 CONSTRUCTION INDUSTRY VALUE CHAIN Companies along the construction value chain and providing revenue for investment in clean face pressure from investors, banks, regulators, innovations. It is even more effective when sup- and consumers to respond to concerns to miti- ported by and used in collaboration with other gate their own carbon risk and find new solu- financial and nonfinancial incentives to lower tions. To meet these demands, forward-thinking companies’ carbon footprints. However, given companies are exploring a variety of methods the fragmented nature of the construction including, science-based targets, public and industry, there is a need for companies along private procurement standards, standardized the value chain to align their approaches to sus- tools and measurements, building codes, certifi- tainability, and develop an integrated approach cation systems for infrastructure, and lifecycle to carbon pricing. analysis of projects. This paper provides a framework for consider- One approach that has gained significant ing the construction value chain and explores momentum and prominence is carbon pricing. existing attitudes and initiatives toward carbon As of now, 51 carbon pricing initiatives includ- pricing along it, with the objective of enabling ing 15 in emerging markets, have been imple- companies to identify possible synergies and mented or are scheduled for implementation. align their approaches to sustainability. Twelve These include 25 emissions trading systems, of the Carbon Pricing Leadership Coalition’s mostly located in subnational jurisdictions, (CPLC) partner companies representing sectors and 26 carbon taxes applied at a national level, across the construction value chain, including generating a total collective value of US$82 aluminum, cement, glass, infrastructure, equip- billion in 2018.16 In addition, internal carbon ment manufacturing, construction services, pricing is also increasingly being used as a key and steel were interviewed to understand their part of their low-carbon transition strategy by motivations and experiences as they attempt a growing number of businesses across sectors to implement carbon pricing and transition to prepare for imminent future regulations toward low-carbon construction. This paper mandating carbon pricing. Internal carbon seeks to supplement forthcoming analysis pricing has become a preferred part of compa- under the CPLC, expected in Fall 2018, on how nies’ toolkits to measure, manage, and mitigate to bring together all decision makers along the their climate risk because of its effectiveness construction value chain to develop an inte- in quantifying risk exposure; communicating grated approach to carbon pricing that will it to relevant stakeholders, including investors; allow companies to achieve their climate goals, incentivizing low-carbon alternatives by pricing and reduce their risk exposure and carbon out carbon-intensive projects and investments; footprint. INTRODUCTION 5 What is the Construction Value Chain? T o accurately allocate risk and align sustainability approaches, it is important to identify the actors that can assess, inform, and adapt their decision making to most effectively implement an integrated carbon pricing mechanism. However, construction projects differ by location and vary by type, from buildings to civil engineering projects to large-scale infrastructure, and they are directed by local conditions, purpose, regulations, codes, and resources that evolve with time. As such, the specific contexts of construction projects also have an impact on the requirements, compo- sition, and significance of different stages and actors in the value chains for those projects. A holistic approach is needed to define the construction value chain so all relevant stake- holders can jointly develop a strategy for integrated carbon pricing and, more broadly, achieve their climate goals. As the industry is integral to both national and the broader construction industry. The opera- global economic flows, several definitions of tion of each phase as silos results in delays, the construction value chain have been put missing information, and miscommunication, forth, reflecting changing trends in technolo- which is reflected in the fragmented nature of gies, processes, and projects. A review of the the construction value chain with its separate, literature shows commonalities in definitions unaligned sectors. of construction supply chains. One definition17 considers the value chain as a process that Others define the construction industry in transforms raw construction materials into terms of its distinction from manufacturing manufactured materials that are made into a supply chains,19 characterizing the industry’s final product. Another reflects the specialized structure and function as one where the value nature of each project, with new technologies chain converges all materials at the construc- helping the construction industry evolve into tion site to set up a de facto “construction fac- an “engineer-to-order” format where each tory” around a single, final, constructed project. product is made specifically in accordance The project is produced by repeatedly recon- with customer preferences and requirements.18 figuring its organization and making use of Despite the relatively niche use of engineer-to- temporary supply chains typified by instability, order construction to date, it offers lessons for 6 CONSTRUCTION INDUSTRY VALUE CHAIN fragmentation, and separation of design and bricks/clay, cement, glass, plastics, and steel— construction stages. are supported by the ancillary activities of com- panies working with construction financing, This analysis considers the value chain for legal firms, and the like. The final stage, on-site any construction project as variations arising construction, may be for residential or commer- within the fixed framework of three distinct cial use and includes infrastructure, buildings, stages: design, production and conversion of and industrial sites. The distinctness of these raw materials into manufactured products, processes, as well as the fixed-term, project- and on-site construction. Each stage comprises based nature of relationships along the supply internal phases, processes, and stakeholders chain, result in a highly fragmented industry that interact to bring a project to fruition. The structure. 20 major sectors in this industry—aluminum, FIGURE 1: CONSTRUCTION VALUE CHAIN: ACTORS AND INTERACTIONS20 Local Authorities Financiers Developers Owners Users Architects & Contractors Engineers Materials & Equipment Suppliers Manufactured Products Raw Regulators Materials Services Inputs WHAT IS THE CONSTRUCTION VALUE CHAIN 7 Absent from all the above definitions, is the to ensure sustainability across the lifecycle of deconstruction of a built structure. Despite its the project. Strong policy signals in this direc- scope for sustainability and role in the circular tion are being provided by upcoming regula- economy and global decarbonization, decon- tions such as France’s Thermal Regulation struction is not included in the analysis of the 2020.24 This imposes low-carbon mandates value chain in this paper. This is due to the throughout the lifecycle of buildings including long lifetimes of buildings and infrastructure, energy consumption targets and end-of-life with deconstruction coming anywhere from activities.25 20 to 100 years later depending on the type of construction.21 Given the contractual and As companies at different stages of the con- project-based nature of relationships along the struction value chain develop sustainability value chain, the deconstruction process would initiatives, they need to identify which part of have its own value chain, with an entirely their operations account for the majority of independent set of firms, suppliers, custom- their emissions, namely Scope 1 (direct emis- ers, and linkages as it takes place decades sions from owned or controlled sources), Scope after the initial completion of the construction 2 (indirect emissions from the generation of project. 22 The firms interviewed confirmed purchased energy), or Scope 3 (all indirect that the industry supply chain does not include emissions that occur along their value chain, the deconstruction stage in either business or both upstream and downstream).26 Scope 1 design considerations. and 2 emissions are relatively straightforward to measure and manage. Estimating Scope 3 While the framework for this analysis considers emissions is much more complex because of the value chain extending only to the comple- variations in reporting and metrics along value tion of the construction process, a significant chains that are frequently fragmented and proportion of a building’s emissions arise from often draw from the informal sector in emerg- its lifecycle use after construction, especially ing markets, where there is a significant lack from energy consumption for electricity, heat- of information.27 Since the largest source of ing, and cooling in buildings. 23 It is imperative emissions are often Scope 3,28 it is important to consider emissions from both use, as well as for companies to work to manage these value- end-of-life deconstruction and recycling of con- chain-related indirect emissions as part of their struction materials as early as the design stage overall efforts to reduce their carbon footprint. 8 CONSTRUCTION INDUSTRY VALUE CHAIN Sustainability Along the Construction Value Chain C onstruction companies are championing sustainability initiatives across the world. For example, through the Sustainable Housing Leadership Consortium leading companies from the industry have pledged to work together to make at least 20 percent of new housing developments in India go green by 2022.29 The Cement Sustainability Initiative(CSI), launched by the World Business Council for Sustainable Development (WBCSD), brought together 25 major cement producers, account- ing for 30 percent of global cement production, to pursue sustainable, business-positive development.30 CSI is being succeeded by the Global Cement and Concrete Association (GCCA), which will continue to reflect and support the industry’s commitment to sus- tainability.31 The Aluminium Stewardship Institute (ASI) is a global standards setting and certification organization, that unites more than 60 members in the aluminum value chain to maximize the sector’s contribution to a sustainable society.32 The Global Alliance for Buildings and Construction has almost 100 members, ranging from national governments to private companies, trade associations, and research organizations committed to meet- ing the Paris Agreement targets.33 Green buildings with a certification from Leadership in Energy and Environmental Design (LEED),34 Building Research Establishment Environmental Assessment Method (BREEAM),35 or Excellence in Design for Greater Efficiencies (EDGE, which is especially prevalent in emerging markets)36 are already at a premium, and demand for sustainable construction is only increasing. McKinsey has iden- tified a huge opportunity for construction “materials of the future,” of which green materi- als and low-carbon technologies are integral parts.37 The various sectors of the construction value economy, and others. While sustainability chain are demonstrating their awareness of the measures have gained momentum across the importance of embedding sustainability into industry, they manifest differently in each sec- their operations and products. This is apparent tor. Some broader sustainability trends in select through their use of methods such as internal sectors are outlined below. carbon-reduction targets, development of inno- vative green products, advocacy for sustain- ability standards, integration into the circular SUSTAINABILITY ALONG THE CONSTRUCTION VALUE CHAIN 9 Aluminium Even though almost 75 percent of the aluminum ever produced is still in circulation today,38 the demand for new aluminum continues to grow. The construction industry has a high demand for the material due to its durabil- ity, recyclability, flexibility, and light weight.39 Over 63 million metric tons of primary aluminum were produced in 2017 alone.40 Perfluorocarbon emissions from the production of primary aluminum represent the third-largest source of fluorinated greenhouse gas emissions in the industrial sector, and baseline emissions between 2010 and 2030 are projected to grow by 42 percent, from 26 million metric tons of carbon dioxide equivalent to 37 million metric tons.41 Investments in the production of metals and mining, including aluminum, are inherently long-term given the nature of the projects and the longer payback periods. Thus, investors looking to plan their investments in the industry need to account for longer-term trends, including likely policies in the future and consumer preference for sustainable production as well as resultant demand for low-carbon aluminum products.42 Strategies that account for the long term, as well as the inherent profitability of reducing costs through more energy efficient production, have resulted in the growing demand for sustainable production. Such strategies are also providing the stimulus for market growth in recycled aluminum products43— annual output has quintupled from 5 mil- lion tons to almost 25 million between 1980 and 2015.44 Recycling aluminum saves over 90 percent of the energy that would have been needed to produce the same amount of the metal from raw materials.45 Green production of aluminum, made from renewable energy sources rather than fossil fuel, has also caught on, with industrial consumer-demand for lower-carbon products allowing producers to charge premium prices for their sustainable outputs.46 Producers of aluminum from hydro-powered smelters in Norway, Russia, and Canada are gaining a competitive edge against producers relying on smelters powered by coal or gas.47 Industry heavyweights such as Rusal, Alcoa, and Rio Tinto are already developing and advertising low-carbon primary aluminum,48 while others are providing low-carbon guarantees for sustainably produced aluminum at modest premiums.49 Despite these efforts, current sustainability trends and initiatives in the sec- tor will have to be greatly increased to meet climate targets while keeping up with aluminum demand from downstream industries such as construc- tion, automobiles, and electronics.50 These industries are already facing more pressure from regulators, investors, and consumers to engage in sustainable production and business practices, and new policies affecting the aluminum sector globally can be expected. The opportunity exists to meet increased demand with low-carbon aluminum, and tools such as carbon pricing provide an incentive for its use. Despite such ventures, however, a study by Climate Action Tracker found that the decarbonization of steel with currently available technologies, including a 10 CONSTRUCTION INDUSTRY VALUE CHAIN greater shift toward a circular economy, would be insufficient to meet the tar- gets of the Paris Agreement.51 To meet the global goal, the study found that the industry needs to develop innovative production processes, such as electrolysis through renewable energy, carbon capture, and materials substitution.52 Cement and Concrete The share of global greenhouse gas emissions from the cement industry nearly doubled between 1990 and 2010, from 2.8 percent to 5.5 percent, driven largely by the explosion of cement production in China.53 As of 2017, the industry represents 7 percent of global carbon dioxide emissions and is the third largest consumer of energy. Cement is the key input for the produc- tion of concrete, which is the most consumed manufactured substance in the world and is integral to construction activity. 54Concrete typically has an embodied carbon dioxide content of 50 kilograms to 150 kilograms per ton that is fully “paid off” early in the lifetime of concrete buildings because of gains from energy efficiency.55 The production of cement and concrete is likely to continue rising, given the continuing economic development and growing need for construction in markets such as South Asia and Sub-Saharan Africa.56 The International Energy Agency estimates a 12 percent increase in global cement production by 2050.57 CDP surveyed cement companies’ exposure to high earnings risk from their emissions and found that the poorest-performing companies were the least supportive to carbon regulations and unprepared for a low-carbon future, and thus, the most exposed.58 On the other hand, companies that had been reduc- ing their emissions intensity over time were much better positioned to handle the transition risks toward a low-carbon economy, although the industry as a whole needs to seek longer-term solutions, such as carbon capture and low- carbon cement products. The cement and concrete industry is coming together to meet this challenge through forums such as the GCCA, which seek to explore the role of cement and concrete in sustainable construction. Concrete is helping to reduce life- cycle emissions from buildings, as its use can reduce energy consumption from heating and cooling by up to two-thirds.59 Individually, too, companies are applying increasingly stringent sustainability standards to themselves and engaging in the production of low-carbon cement, concrete, and related products. Large firms are making efforts to create effi- ciencies and sustainable policies. For example, LafargeHolcim has among the lowest emissions intensities and most robust reduction targets and Cemex has one of the highest utilization rates of alternative fuels in the industry.60 The cement companies surveyed by CDP had reduced their emissions intensity by SUSTAINABILITY ALONG THE CONSTRUCTION VALUE CHAIN 11 1 percent each year over the last four years, but were still found to be incom- patible with the commitments of the Paris Agreement.61 However, the sector will need to more than double the rate of emissions intensity improvements to meet the 2 degree goal, highlighting the scope for significant changes in the industry’s business practices.62 Innovative green cement and concrete products are also reaching the market. Some examples are high fly ash content concrete, which uses half as much water and lasts three times longer than other substitutes;63 concrete that is reinforced with recycled plastic instead of energy-intensive steel;64 and other “carbon-negative manufacturing processes” that substitute clinker with a more sustainable material.65 However, such low-carbon cement and concrete prod- ucts have seen low uptake along the value chain thus far. Adoption of such products can be encouraged by developing an integrated approach to sustain- ability across the value chain, which will help boost green construction. Glass Glass products for buildings account for 80 percent of the float glass66 market, and building refurbishment accounts for 40 percent of global glass consump- tion, driven by the demand for increased energy efficiency of buildings.67 A fully recyclable resource made from natural raw materials, glass is an inher- ently sustainable material that provides great environmental benefit from its ability to be recycled repeatedly in a closed loop.68 Glass manufacturing produces extremely low quantities of solid waste, as a vast majority of glass waste is immediately recycled and reused as raw material.69 Glass companies are recognizing the business opportunity reflected within the sustainable nature of their product and have come together to collectively advocate for stronger regulations and innovative solutions to encourage glass recycling. For example, the Glass Recycling Coalition’s70 members comprise glass manu- facturers, processors, end-users, materials recovery facilities, and packaging companies. In addition, the Glass for Europe trade association advocated for a stronger mandate on building-glass recycling within the European Union’s waste legislation.71 The biggest source of emissions from the glass sector comes from the melt- ing process, which releases carbon dioxide through the use of fossil fuels in the process as well as the decomposition of raw materials.72 Some of the best opportunities for companies to reduce their carbon impact come from switch- ing to renewable energy sources in their melting activities and developing low-carbon, high-efficiency glass products for the construction sector. The lat- ter is increasingly being used in buildings, with architects taking advantage of glazed glass’s energy-saving properties that reduce energy consumption from heating and air conditioning.73 12 CONSTRUCTION INDUSTRY VALUE CHAIN Plastics Now the second-largest consumer of plastics, the construction industry is using the durable material and its derivatives with wide functionality to create more sustainable and resilient structures.74 Plastic-reinforced concrete is increas- ingly used to reduce carbon dioxide emissions from construction projects, and plastic-reinforced carbon fiber is used to make buildings more resilient against earthquakes. Recycled plastic is also sometimes blended with previ- ously unprocessed plastic and used as a sustainable construction material for green buildings.75 Innovations in the sector include using carbon-negative plastics, which are made from greenhouse gas emissions converted into long- chain polymers, to make manufactured products for the construction industry, such as foam blocks and panels for buildings.76 In January 2018, the Plastics Industry Association, a manufacturers trade association in the United States, adopted its first-ever sustainability statement, following the global trend toward responsible production.77 However, these innovative solutions and initiatives are a drop in the bucket given that 91 percent of all plastic is still not being recycled,78 which highlights the urgent need for significant change in the industry. With the European Union,79 Costa Rica80 and many other countries considering bans on single-use plastics, there is an opportunity for the plastics industry to take advantage of its recyclable product and reposition itself as a low-carbon-intensity construc- tion material for an increasingly sustainability-minded industry. Steel Conventional steel production is highly energy intensive. Each ton of steel pro- duced, generates almost two tons of carbon dioxide.81 It is one of the highest- emitting industries, accounting for about 7 percent of global carbon dioxide emissions.82 The explosion of demand for green buildings and sustainable construction has, however, encouraged the steel industry to produce cleaner alternatives. Structural steel, for example, has one of the highest rates of recycled content and recyclability of any construction material, and the carbon footprint of its manufacturing process has decreased by 37 percent per ton since 1990. Both of these factors have encouraged its use in buildings seeking LEED certification.83 Industry-led sustainability initiatives are gaining momentum. For example, ResponsibleSteel84—the industry’s first global multi-stakeholder standard and certification program—involves companies at all points along the steel supply chain. The steel industry is also developing low-carbon, sustainable products. One example is Hydrogen Breakthrough Ironmaking Technology (HYBRIT), SUSTAINABILITY  ALONG THE CONSTRUCTION VALUE CHAIN 13 which substitutes hydrogen for coal in the steelmaking process, producing water instead of carbon dioxide.85 The HYBRIT collaboration aims to develop a solution for fossil-free steel by 2035. Its initial deployment is expected to reduce Sweden’s total emissions by 10 percent and Finland’s by 7 percent. Design and technological improvements have increased productivity and energy efficiency of electric arc furnaces,86 which produce steel by recycling ferrous scrap.87 These are in use in many regions and have a significantly lower emissions profile.88 Building Codes and Standards The sustainability practices being adopted across sectors producing inputs for construction are being complemented by efficiency measures in the design, planning, and final product stages. Regulations and building codes are encour- aging low-carbon choices early in the construction process—at the design stage. For example, Jakarta’s government has introduced a regulation requir- ing all large buildings, yet to be built or existing, to meet green building specifi- cations.89 Symbolic prestige and conditional requirements for access to finance are often drivers for achieving progressively higher sustainability standards, inspiring low-carbon alternatives in construction projects, for example not just a LEED Certification but a LEED Gold or LEED Platinum rating.90 Likewise, BREEAM is an international provider of third-party certification of the sustain- ability performance of individual buildings and infrastructure projects, which incentivizes higher-performing assets by reflecting their impact on the built environment’s lifecycle emissions.91 Similarly, construction companies can use EDGE or ENERGY STAR certifications for efficiency to differentiate themselves from their competitors and position themselves as sustainability leaders. Firms are increasingly conforming to sustainability standards, evidenced by over 32,500 commercial projects across 162 countries being LEED-certified by 201692 and almost 11 million square meters of BREEAM In-Use certified assets internationally as of 2017.93 Similarly, EDGE has broadened its scope beyond new buildings to meet a growing demand for certification.94 This trend is pro- jected to continue, with the global sustainable construction materials market expected to grow annually by 11.6 percent in terms of value and 12 percent in terms of volume between 2017 and 2026.95 The construction sector is moving toward a more sustainable future, with industries along the value chain taking steps to lower their carbon footprint. However, even more needs to be done to align the sector’s operations and practices with the Paris Agreement 2 degrees Celsius target. Carbon pricing can be an innovative, effective, and business-positive tool to help incentivize this. 14 CONSTRUCTION INDUSTRY VALUE CHAIN The Business Case for Pricing Carbon A round the world and across industries, the private sector is recognizing the relevance of and benefits from implementing an internal carbon price in their operations and cost calculations and using it as a guide for business decisions. The number of companies using an internal carbon price or plan- ning to do so within the next two years has grown from 150 in 2014 to almost 1,400 in 2017.96 Implementing an internal carbon price has a clear business case. It helps com- panies manage climate risk and carbon exposure, and reveals opportunities for climate- smart investments while acting as a transition tool to internally incentivize low-carbon activities.97 It links a company’s financial performance to its climate record, thus embed- ding sustainability into profitability and mainstreaming climate-smart decision making. In addition, external drivers, including regulatory compliance, corporate social responsibil- ity, and preempting expected emission-control policies in jurisdictions of operation, are prompting the adoption of internal carbon pricing. Carbon pricing regulations currently cover 20 percent of global greenhouse gas emissions and this coverage is expected to expand as addi- tional jurisdictions impose prices.98 Given the growing likelihood of becoming subject to such regulations, companies are managing their risk exposure by implementing internal car- bon prices now to not be caught unprepared. Making this transition allows companies to measure the cost of the externality, internalize and assign it to their emissions, and assess the corresponding impact on their businesses. A key hurdle remains, however, surround- ing the impact on a firm’s competitiveness. Companies are concerned that implementing 15 an internal carbon price when their com- streamline their emission reduction efforts. petitors are not may result in a self-imposed Internalizing costs associated with a project’s de facto tax that prices the company out of emissions can affect the project’s rate of return, business. While an externally imposed carbon and hence tip the scales toward a cleaner price from policy or regulation might partially alternative in financial terms. By assigning resolve this issue, companies and policy makers a financial value to sustainability, a carbon worry that such policies could lead to carbon price helps companies make more respon- leakage, in which industries move somewhere sible, climate-friendly choices and changes the with less stringent carbon policies. financial calculus that incentivizes the use of fuels from high-carbon sources.100 If done cor- Increasingly, however, companies are coming rectly, carbon pricing encourages companies under pressure from investors to focus on man- to reward energy- and carbon-efficiency and aging their climate risk and carbon exposure. allows companies, managers, and investors Measuring this risk and integrating it into busi- to compare and value projects and businesses ness planning is becoming a necessity, espe- based on their management of climate risk.101 cially after the release of the recommendations of the Financial Stability Board’s Taskforce on If a carbon price is applied as an internal car- Climate-related Financial Disclosures (TCFD). bon fee, the revenue generated can be funneled Companies are voluntarily exploring the adop- toward investments in sustainable, climate- tion of carbon pricing as a means to implement smart projects as well as research and devel- TCFD recommendations. opment on future sources of green revenue. The revenue can also be used as part of an A report by S&P Dow Jones Indices found that internal incentive structure for business units low-carbon versions of the S&P 500 and S&P to work toward achieving a company’s overall Global 1200 outperformed their benchmarks climate and emissions targets and for encourag- from 2012 to 2017.99 In addition to risk man- ing innovations in low-carbon processes and agement, carbon pricing helps companies products. 16 CONSTRUCTION INDUSTRY VALUE CHAIN Approaches to Implementing an Internal Carbon Price C ompanies are exploring and implementing carbon prices in ways that best suit their business models, climate goals, geography, and company cultures.102 Although the application of internal carbon pricing varies and is tailored to each company’s needs, it is generally applied in the following ways:103 ●● Shadow Price: By forecasting expected loss statement, highlight the cost of high carbon prices and incorporating these carbon-intensity activities, and encour- alongside other inputs and costs into their age lowering the emissions intensity of a financial models, companies can stress test company’s operations. This price can also projects against a range of carbon price be used to assess the investment required to levels. This allows them to evaluate invest- meet climate targets. ments, manage risks, and guide their busi- ●● Internal Tax, Explicit Price, or Carbon ness strategy toward a low-carbon future. Fee: These are applied as charges to the Companies can model carbon pricing across budgets or fees to the earnings of business their project valuations to reveal the poten- units for their emissions, thus providing tial impact of risks such as stranded assets, financial incentives that redirect cash flow and can use the results to inform strategic toward climate goals such as investment in decision-decision making. clean technologies. Some companies funnel ●● Implicit Price: Companies can augment the “taxes” generated from carbon-intensive their decision making, capital allocation, facilities or units into a central pool whose and assessment of economic implications purpose is to increase research and invest- for specific climate targets by applying ment in clean alternatives. an implicit carbon price to their financial models. This is calculated as the marginal These104 and other methods are being tailored cost of abatement for emissions from the and applied to the specific requirements of each organization, such as the cost of regulatory company, taking into consideration their pur- compliance, or as a fixed value assigned per pose, long-term goals, regulatory restrictions, metric ton of emissions. This would reflect and other characteristics. the cost of carbon in a company’s profit and 17 Construction Industry and Carbon Pricing T he business case for internal carbon pricing also applies to the construction industry. While companies operating along the construction value chain are subject to external carbon regulation in some jurisdictions, such as under the European Union Emissions Trading Scheme (EU ETS), many companies not sub- ject to such policies are also recognizing the benefits of implementing an internal carbon price to manage future policy risk exposure and reduce their carbon footprint. High-carbon-intensity sectors such as cement industry. Relationships within the industry’s and steel have significant carbon cost expo- supply chain are short-term, project based, sure. Estimates suggest that the most carbon- and result in one-of-a-kind final products at intensive cement companies could face risk the construction site itself.106 This project- to their earnings before interest and tax of based fixed-term nature results in a frag- up to 114 percent from a minimal $10 per ton mented structure and has precluded some of carbon price, compared to as low as 10 percent the consolidation and vertical linkages seen risk to more carbon-efficient cement compa- in other industries that result in cost and nies from the same carbon price.105 Moreover, operational efficiencies.107 Although buildings since a significant part of a company’s expo- and infrastructure have emissions throughout sure to climate risk may come from its supply their lifecycle, from construction to use, it is chain, it is increasingly important for compa- difficult for members of the value chain to be nies to bring their suppliers into the fold and held accountable for total lifecycle emissions manage their Scope 3 emissions through direct given the disconnect between the short-term and indirect engagement on carbon pric- nature of their contractual relationships and ing and other tools for emissions reduction. the long-term nature of the actual project. Companies along the construction value chain Actors at each stage of the value chain are not are rising to the occasion, with many at vari- only incentivized to produce at the lowest cost ous stages of the carbon price implementation regardless of carbon impact, but they are also process. Many such companies are engaging not held accountable for the total emissions of with each other to learn from peers’ experi- the project or construction. ences about how best to operationalize such measures to maximize effectiveness. Consequently, the fragmented nature of the construction industry necessitates an inte- It is important to emphasize, however, that grated carbon pricing mechanism that ties the effectiveness of sustainability measures, together different players and sectors along including carbon pricing, is tempered by the the construction value chain. Without indus- fragmented structure of the construction trywide support and coordination, there is a 18 CONSTRUCTION INDUSTRY VALUE CHAIN disconnect between the manufacture of green helping the industry meet climate targets with products and the demand and valuation for support from and linkages with counterparts it further down the chain. Companies acting along the value chain, from beginning to end. alone to develop sustainable construction There is thus a need to develop an effective, practices, processes, and products are to be integrated carbon pricing mechanism that commended and represent great initiative, but applies across the value chain to achieve tan- they would be significantly more effective at gible results. 19 Current Carbon Pricing Practices by Companies across the Construction Value Chain O f the 1,400 companies implementing or looking to implement a carbon price before 2019, around 100 are from sectors along the construction value chain, including infrastructure, materials, construction services, and materials.108 For this paper, twelve CPLC partner companies from sectors along the con- struction value chain were interviewed regarding their experiences with carbon pricing. Each of the companies surveyed is implementing carbon pricing per its own unique set of conditions, and all have faced their own challenges and successes in the process:109 Raw Materials & Manufactured Products CEMEX (MEXICO) Cemex, a manufacturer and distributor of price applied to all investment decisions, but cement and concrete, has introduced an rather, a risk management tool in business internal carbon price of $30 per ton of carbon planning to give the company a better idea of dioxide in its planning exercises to manage its its exposure to carbon risk. climate risk and carbon exposure, align busi- ness strategy with climate targets, and identify While Cemex’s current carbon pricing struc- opportunities for emissions reductions. Cemex ture covers only its Scope 1 emissions, the sees both risk and significant opportunity company has put into place other measures in cap and trade schemes, with the expected and initiatives to reduce its Scope 2 emis- carbon price driving the use of multiple tactics sions, including incentives to improve energy such as improvements to energy efficiency, efficiency and increase the use of renewable switch to clean fuels, and the substitution of energy. The company is engaging with its materials.110 The carbon price is not a shadow suppliers to manage its Scope 3 emissions by 20 CONSTRUCTION INDUSTRY VALUE CHAIN asking them to follow a Sustainability Code at price to be applied to cement companies and the country level. Despite the difficulty of mea- projects worldwide. It anticipates the strength- suring them accurately, Cemex uses the guide- ening of carbon policies across the world, lines developed by the Cement Sustainability particularly with emerging legislation in Latin Initiative for effectively monitoring Scope 3 America and other regions. While risk mitiga- emissions to measure and report these to CDP. tion is done at a local level, Cemex is engag- ing with the issue of carbon pricing globally Cemex has been following legislative propos- through its participation in organizations such als and advocating for a regulatory carbon as the CPLC. DALMIA BHARAT CEMENT (INDIA) Dalmia Cement has a production capacity of to energy from its captive coal power plant. 25 million tonnes across 12 locations in India. The application of a shadow price made the In 2018, the group has been rated the best per- waste-heat recovery plant viable, and it was former on low carbon transition readiness by approved with significant support from the CDP.111 The company uses four key approaches company’s senior management and commis- to reduce its carbon footprint and climate risk sioned in 2018. The internal carbon price has exposure, in addition to regularly monitoring paved the way for the company to develop two progressive targets. These include: the use of more waste-heat recovery plants and manu- industrial waste as an alternative raw mate- facture a new line of low-carbon cement. rial for clinker substitution; electrical energy efficiency; thermal efficiency, and; the use of Although carbon pricing is currently applied incinerable waste as an alternative fuel for its only to the subset of projects described above, cement kilns. The company is keen to develop the ultimate goal is to extend it to every proj- long term partnerships for research on tech- ect. The current price level of $11 per ton of nologies for Carbon Capture and Utilization. carbon dioxide2, was calculated using sce- nario analysis that took into account expected Carbon pricing has been a key tenet of Dalmia future opportunities in carbon abatement. Cement’s strategy for thermal and electrical Reevaluating and increasing this price level energy efficiency improvements. Its opera- is contingent on a favorable future policy tions in India are subject to the government’s environment that encourages a low carbon implicit carbon pricing policies including the transition. Perform Achieve and Trade scheme for the trading of energy efficiency certificates in high An estimated 90 percent of the company’s energy-use sectors,112 and a Renewable Energy raw material comes from captive mines, and Purchase Obligation.113 These implicit mecha- Dalmia Cement uses guidelines developed in nisms, coupled with Dalmia Cement’s member- collaboration with the CSI to engage with its ship of the CPLC, encouraged the company to supply chain on sustainability. The construc- announce an explicit shadow internal carbon tion industry in India comprises both the price in 2015. The shadow price is applied on a organized and unorganized sector, and Dalmia project-by-project basis on low-return projects Cement is conducting awareness campaigns on with a long payback period. The carbon price climate impacts for its suppliers. They con- was piloted on a 9.2 MW waste-heat recovery sider this sensitization as the first step towards plant, earlier considered financially unvi- introducing carbon pricing to the value chain. able as the company had economical access CURRENT  CARBON PRICING PRACTICES BY COMPANIES ACROSS THE CONSTRUCTION VALUE CHAIN 21 2 Photo: © IFC / Flickr LAFARGEHOLCIM (FRANCE/SWITZERLAND) A leading manufacturer of building materi- LafargeHolcim is engaging with governments als operating across 80 countries globally, to advocate for consistent, fair, effective, and LafargeHolcim’s climate ambition is defined in level-playing field regulations while internally its sustainable development program, of which preparing for future carbon pricing costs climate is a key component. The company as economic pressure points.115 To do so, it seeks to reduce its carbon emissions by 40 applies a carbon price of $31.19 per ton of percent compared to 1990 levels and continue carbon dioxide116 in its operations as per the to be the most efficient and least carbon-inten- requirements of the regulatory carbon price sive cement manufacturer. It also seeks to help in the jurisdiction of operations. The company prevent the release of up to 10 million tons of does not apply a carbon price uniformly across lifecycle carbon dioxide emissions from build- all jurisdictions, but only in those where an ings and infrastructure annually through the external carbon price already exists or where use of its low-carbon products and solutions. it sees a future carbon price on the climate policy agenda. The carbon price is used to gen- The company recognizes that it faces signifi- erate an integrated profit and loss statement, cant climate risk and carbon exposure as a which simulates the impact of the company global manufacturing business and identi- on a triple bottom line of people, profit, and fies increased carbon pricing policies as one planet. Further, instead of a blanket carbon of the main risks for its business.114 As such, price, LafargeHolcim is developing a new 22 CONSTRUCTION INDUSTRY VALUE CHAIN internal carbon pricing tool to ensure the sys- sequestration. For example, the company has tematic accounting of carbon impact across a partnered with Solidia Technologies to develop variety of scenarios for each project. The value a low-carbon cement and concrete technology of this tool is in the assessment of different that allows concrete to harden while seques- levels of carbon pricing for each project, with tering carbon dioxide, which replaces water as carbon pricing acting as a variable tool for the a binder, thus capturing and reducing emis- evaluation of carbon exposure. sions by up to 70 percent in some cases. The company is also innovating new products that In addition, LafargeHolcim has significantly help reduce lifecycle emissions in buildings, invested in developing several low-carbon such as Airium, a mineral foam insulating products, including low-carbon clinker, technology, and Ductal, an ultra high perfor- cement, concrete, and binder technology, mance concrete. and is exploring opportunities in carbon RUSAL (RUSSIA) As one of the largest aluminum companies in and divestments. The company’s operations the world, sustainable development is a key within Europe are subject to the EU ETS, but part of Rusal’s business strategy, which places it applies a price of $20, higher than what the significant emphasis on innovation, modern- EU ETS mandates. In addition, some of the ization, and improved environmental per- company’s new projects in Russia and abroad formance. Rusal is actively assessing its own are also voluntarily implementing an inter- climate risk and carbon exposure as well as nal carbon price. Rusal is also implementing the opportunities for sustainable products and the Aluminium Stewardship Initiative (ASI) low-carbon alternatives presented by climate Standard and ASI Chain of Custody Standard, change. The company is exploring the role of to be independently audited and certified. The aluminum in helping sectors such as construc- company recently developed and began apply- tion and transportation improve their own ing a Business Partner Code for its suppliers to energy efficiency and performance. engage with them on sustainability. Rusal has been implementing an internal car- The company has also developed a low-carbon bon price, set at $20 per ton, as a mechanism aluminum product known as ALLOW, which to influence the decision-making process for uses clean hydroelectricity to deliver alumi- investment in projects. This internal carbon num with a lower carbon emissions footprint, price is applied to a new project’s financial at less than one-third of the global average models to assess its exposure to carbon risk, for aluminum production.117 The company including from potential carbon pricing poli- provides a low-carbon guarantee for the prod- cies. If the internalization of this carbon cost uct, assuring customers that ALLOW’s carbon makes a project unprofitable, Rusal intends footprint is less than four tons of carbon diox- to either find a low-carbon alternative that ide equivalent per ton of aluminum, account- makes the project profitable or reject it alto- ing for all Scope 1 and 2 emissions from the gether. The carbon price is also used as a tool smelter process. Despite the higher production in the company’s overall financial modeling to costs associated with ALLOW, Rusal has seen evaluate strategic decisions such as expansion, customer interest in the product since intro- acquisitions, new buildings, decommissioning, ducing it to the market. CURRENT CARBON PRICING PRACTICES BY COMPANIES ACROSS THE CONSTRUCTION VALUE CHAIN 23 SAINT-GOBAIN (FRANCE) Saint-Gobain manufactures and distributes development projects. The first is for capi- building materials to create living spaces that tal expenditure projects and energy-related combine comfort and sustainability. Its prod- investments to incentivize investment in ucts include glass, insulation, and plasterboard energy efficiency equipment and manage the that help improve energy efficiency in existing risk from a potential scenario where the com- and new buildings, and the company develop pany might face carbon pricing mechanisms lightweight solutions for construction with other than the EU ETS, which would lead to reduced carbon content. higher operational costs.118 The second, much higher carbon price is applicable to research Following its 2014 Energy, Atmospheric and development projects, in a move to Emissions and Climate Change Policy, Saint- incentivize innovation in low-carbon products, Gobain implemented carbon pricing in its processes, and technologies. Projects are struc- operations in 2016 in all 68 countries where tured so that their payback accounts for the the company has a presence, many of which carbon price, which has a significant impact do not have carbon pricing requirements. on the projects with the higher research and Saint-Gobain’s approach has been to adopt development carbon price. The company is two parallel carbon prices, applicable to its still receiving feedback on this initiative and Scope 1 and 2 emissions for investments, and will evaluate it to tailor and evolve the pricing Scope 1, 2, and 3 emissions for research and structures as required. SIEMENS (GERMANY) Industrial manufacturer Siemens has an Although Siemens is not yet applying an inter- internal goal to halve the carbon footprint nal carbon price across its operations, it has of its business operations by 2020 and be developed a framework and begun activities climate neutral by 2030, with all production toward this end. In addition, although there is facilities and buildings worldwide expected not yet an active price signal throughout the to achieve net-zero carbon footprints by then. company to achieve its goal of carbon neutral- The company has identified four pillars to ity, some activities covered by the four pillars achieve these goals: energy efficiency, decen- named above come with a price premium, tralized energy systems, intelligent e-mobility such as buying clean but more expensive solutions, and the purchase of electricity from renewable energy, which is accepted as an renewable energy sources. These pillars are implicit cost for carbon reduction. applicable across its operations, including for the production of construction materials, Siemens is considering a shadow price for its equipment, and concrete solutions. Siemens is suppliers as part of its dialogue and engage- bringing its supply chain into the fold, having ment with its supply chain, which might be developed its Code of Conduct for Siemens applied to the purchasing volume from each Suppliers and third-party intermediaries. supplier based on their geographic location and regulatory jurisdiction. 24 CONSTRUCTION INDUSTRY VALUE CHAIN Construction Services ELLISDON (CANADA) As a construction project management com- EllisDon is developing a Carbon Accounting pany with few emissions from its operations, Tool to track emissions throughout the life- EllisDon does not have an internal carbon cycle of new building as well as retrofitting price, but it is working with governments, projects, from design to operation. This tool companies, and coalitions such as the CPLC to will be part of the process of transforming the advance the carbon pricing agenda. It views market without pushing it to stall during the regulations such as the goal for all new homes transition to carbon neutrality by incentivizing in Ottawa to be net zero carbon by 2030 as low-carbon alternatives through the valuation indication that the construction industry is of emissions. moving toward carbon neutrality, with carbon pricing as an important tool to aid in the transition. MOTT MACDONALD (UK) Mott MacDonald, a global engineering, man- projects—beyond simply meeting performance agement, and development consultancy, is standards. In addition, the release of the TCFD working with its clients to dispel myths sur- recommendations has especially urged larger rounding carbon management while iden- companies, with longer-term planning such as tifying it as a key focus area in the earliest five-year-plan reports, to go beyond existing stages of a project to drive down capital and regulations and prepare for a carbon-averse operational costs. Together with its partners, future. Companies are increasingly engaging in 2016 Mott MacDonald coauthored PAS 2080, with their value chains along these lines, with the world’s first carbon management standard low-carbon and sustainability clauses written for infrastructure. A voluntary standard, PAS into contracts and procurement processes. 2080 offers a suite of tools and methodologies to businesses in the construction sector, who Mott MacDonald is helping its clients with a can adopt it in the manner that works best for low-carbon transition and sees a significant them from a sustainability and competitive- scope for improvement and action ahead. ness point of view. While attaining accredi- While Scope 3 emissions are beginning to be tation might be difficult, PAS 2080 provides considered all along the value chain, they guidance for businesses seeking to implement are still largely unmanaged because of the low-carbon solutions. complexities of measuring the impact from a company’s value chain, both upstream and Beyond the cost implications of potential downstream. Appropriate tools to measure carbon risk exposure, Mott MacDonald’s and manage these emissions need to be devel- clients are recognizing the financial and oped. Construction companies, developers, reputational benefits of sustainable operations and projects are taking lifecycle cost consid- and decision making. Already the picture has erations more seriously, but this is slower changed, with climate, resilience, and carbon- in those areas or projects where the builder oriented due diligence seeing an upswing for or client is not the operator. Whereas the CURRENT CARBON PRICING PRACTICES BY COMPANIES ACROSS THE CONSTRUCTION VALUE CHAIN 25 company has observed that its clients and the transparency that the construction industry market recognize the complexity of the climate needs, especially for investors and insurers. It issue and worry about reputational and other considers carbon pricing to be the approach impacts, there is still a lack of clarity on what that will push the construction industry needs to be done and how to do it. The TCFD’s toward zero carbon. Mott MacDonald believes recommendation for scenario analysis has that a shift in decision making across the value begun to create some direction, but there is chain will require effective carbon pricing that still a lack of understand regarding what it reflects the social cost of carbon. The com- means in practice. pany will work with TCFD and other reporting initiatives to create greater transparency for The company advocates carbon pricing as an investors, insurers, and other actors on carbon effective tool for providing the clarity and exposure and risk. 26 CONSTRUCTION INDUSTRY VALUE CHAIN Project Developers & Construction Equipment ACCIONA (SPAIN) Acciona, an infrastructure and renewable Acciona established an internal offset price in energy project developer and manager, has 2016, that ensured compliance with the com- been carbon neutral in Scope 1 and 2 emis- pany's carbon neutrality objective. Since then, sions since 2016 and intends to continue the company has compensated its annual non- reducing its emissions in accordance with avoided GHG emissions through the acquisi- science-based targets. The company estab- tion of UNFCCC certified emission reductions lished a Sustainability Committee in 2009 and resulting from the development of social launched a new Sustainability Master Plan in and environmentally responsible projects in 2016 that will guide its strategy until 2020. It emerging economies. has been implementing a carbon price since 2008 and considers it to be an essential tool for The company’s carbon neutrality commitment decarbonizing its business. Acciona has been as well as its internal carbon price initiatives subject to the EU ETS since 2009. are enabling it to raise internal awareness and introduce measures including: incre- In 2015, Acciona established an additional mental emission reduction targets aligned internal shadow price for new and future with the Science Based Targets framework, investments to assess and mitigate its climate sourcing 100 percent of its electricity supply risk and carbon exposure. Acciona considers from renewable energy sources in its energy unaccounted negative externality costs from business division, and additional investments greenhouse gas emissions to be a market fail- in social and environmentally responsible ure, and the company expects the carbon price projects fostering low carbon innovation. to correct this. Thus, the latest shadow price is integral to the company’s risk mitigation strat- egy going forward. GROUPE ADP (FRANCE) With an aim to achieve carbon neutrality by per ton of carbon dioxide in 2017,119 intended 2030, French airport infrastructure developer, to familiarize and comfort investors, with the owner, and operator Groupe ADP launched implicit assumption that this price level will an internal carbon price in early 2017 that likely evolve over time. Although initially the it implemented as a shadow price on the carbon price was applicable only to projects operation of three Paris airports to encourage worth over 3 million euros, it now applies to low-carbon decision making and operational the operations of all projects with any energy efficiency. This internalization of carbon cost impact as of March 2018. Until now, the focus has been part of an effort to anticipate the of Groupe ADP’s carbon price has been on risks and consequences of the trend of tight- energy efficiency in its infrastructure project ening carbon policies, which the company operations; however, there is an ongoing inter- expects will continue. The company is employ- nal discussion on whether an internal carbon ing a strategy that started with a price of $23 price might also be applicable to the actual CURRENT CARBON PRICING PRACTICES BY COMPANIES ACROSS THE CONSTRUCTION VALUE CHAIN 27 construction of its projects and, if so, how it which has been committed since 2016 to might be best implemented. ensuring that 60 percent of its electricity comes from renewable sources. Groupe ADP is managing its Scope 1 and 2 emissions by purchasing energy from Engie, MAHINDRA & MAHINDRA (INDIA) The Mahindra Group has implemented a premium is already embedded through energy hybrid form of carbon pricing, with both efficiency and other sustainability measures. shadow and explicit pricing, in its automobile Learning from its experiences with apply- activities and is studying how this might be ing carbon pricing to its other operations, replicated in its construction activities. The the Mahindra Group is priming its construc- Mahindra Group considers carbon pricing to tion activities for the same by engaging with be a useful tool to evaluate the exposure of its its supply chain on sustainability within a projects and investments to transition risk as broader context. Suppliers and contractors well as incentivize innovations in low-carbon are given training through workshops that alternatives to meet the company’s broader aim to build their capabilities and help them sustainability goals. Its current carbon price understand the business case for environ- has been determined as an abatement cost for mentally responsible decision making, includ- greenhouse gas emissions that would have a ing through measuring and disclosing their material impact on decision making. The price own carbon footprints. The company is a has been arrived at by considering the group’s founding member of the Sustainable Housing current energy efficiency and sustainability Leadership Consortium and applies several commitments as well as exposure to potential other initiatives to embed sustainability within climate policies. its construction and real estate projects, such as building resilient, energy-efficient Smart Although its construction activities are not Cities. subjected to a carbon price as yet, a price TATA GROUP (INDIA) The Tata Group has a corporationwide code of operations with the EU ETS for their European conduct that covers sustainability and is appli- steel manufacturing. cable to Tata Group companies, and all their suppliers as well. The code, which is qualita- Tata Group has a federalist structure, so it tive in nature, contains language surround- allows each company in the group consider- ing Environmental, Social and Governance able autonomy on whether and how to apply criteria. From 2008 to 2015, the Tata Group carbon pricing to their operations to help held an internal carbon footprint reduction achieve their carbon reduction and abatement exercise. This was followed by the creation of targets. The Tata Sustainability Group has an internal task force on carbon pricing, made created and disseminated internal guidance up of regulators, C-suite executives, and those on carbon pricing for the entire Tata Group with experience aligning the Tata Group’s that is valid till 2020, after which the price and 28 CONSTRUCTION INDUSTRY VALUE CHAIN structure will be reevaluated for adoption if The Tata Group’s approach to sustainability, and as each individual company sees fit. however, takes a broader view than only carbon pricing, and the group is attempting to Of significant relevance to the construction educate its clients about a value-in-use con- value chain is the adoption of carbon pric- cept. The group operates under the philosophy ing by Tata Steel, currently priced at $15 per that sustainable products and their use can ton. This price was calculated by estimating be justified and marketed on normal business the required investment needed to achieve and economic grounds through, for example, its internal emissions targets within a specific arguments for lower fuel consumption, better time frame while still remaining competi- lifetime mileage, greater strength, and longer tive. Tata Steel evaluates its investments and lifespan of the products. In the group’s expe- projects based on two levels of internal rate rience, its clients are willing to pay a higher of return, one with and one without carbon premium for such qualities, and greater adjustment. Those projects that meet the inter- sustainability is thus embedded within rather nal hurdle rates for both are passed immedi- than separate from business decisions, strat- ately. Those that have a low-carbon-adjusted egy, and product choices. internal rate of return are judged on a case-by- case basis at the board level. CURRENT CARBON PRICING PRACTICES BY COMPANIES ACROSS THE CONSTRUCTION VALUE CHAIN 29 Common Considerations across Companies C ompanies across all sectors of the construction value chain have had some com- mon experiences and questions arising from their experiences of implementing carbon pricing, despite the differences in their approaches and the fragmented nature of the industry. These are broadly grouped in two, sometimes-overlap- ping, areas of concern. The first, covering carbon pricing as a regulation that is externally imposed, and the second surrounding the obstacles faced when implementing a voluntary internal carbon price. The challenges faced by companies in the to operate in jurisdictions with high carbon construction value chain differ by geography pricing regulations, and potentially mov- and jurisdiction. The variance in the degree ing their operations to regions without such of strictness of carbon policies across jurisdic- regulations that eat into profits. Similarly, com- tions has a material impact on methods and panies also hesitate to voluntarily implement measurement. Even in areas without carbon high internal carbon prices that could price pricing mandated by regulation or policy, the themselves out of the market, resulting in the success that a company has in implementing application of internal carbon prices that are an internal carbon price varies by location. too low to have material impact on decision This is because jurisdictions have more or less making. The incentive for companies to imple- organized supply chains, different levels of ment an internal carbon price depends on its maturity in their markets of operation, varying impact on business. Although carbon pricing access to new technologies and less carbon- has been acknowledged as an effective risk intensive resources, and ranging degrees of management tool, the costs begin to outweigh consumer awareness. As a result, the same the benefits in areas with small margins and methods and approaches that are effective high price sensitivity. for a company in some of its business units might not be as successful in others. Similarly, In a similar vein, although companies are what works for a company in one part of the using carbon pricing as an internal risk miti- value chain in the same jurisdiction will not be gation tool, they would prefer the universal equally applicable for a company operating at application of an external regulatory carbon another stage of the process. price across their industries. Consistent, predictable, and fair regulation that is appli- Achieving sustainability goals through carbon cable to all firms operating in the sector or pricing will only work if companies are able jurisdiction, would create a level playing to remain competitive. Carbon leakage is a field, and address some of the concerns about significant concern, with companies reluctant competitiveness. 30 CONSTRUCTION INDUSTRY VALUE CHAIN While these companies are at various stages of implementing an internal carbon price, almost all of them identified the need for assistance in managing their Scope 3 emissions and engaging in structured and effective ways with their supply chains. Measuring, monitoring, and evaluating Scope 3 emissions were identi- fied as common challenges across the compa- nies and will be an essential next step toward decarbonization. Targets and levels for judging contractors will need to be developed, as well as supplier codes of conduct that can be quan- titatively evaluated. In addition, the companies identified the need for standardized and com- parable frameworks for scenario analysis as well as for rating suppliers by their low-carbon credentials. For early movers, one of the biggest challenges faced by the proponents of carbon pricing has been the “socialization” of the concept among the finance and business executives. However, the Paris Agreement, the successful applica- tion of carbon pricing policies across several national and subnational jurisdictions, and, most recently, the release of the TCFD recom- mendations have all helped bring about a change in culture. The private sector is now aware and accepting of the business case for carbon pricing and is increasingly enthusias- tic about mainstreaming it as a tool for risk management. The biggest missing link for companies is the lack of a clear idea about how to operation- Photo: © IFC / Flickr alize and standardize the implementation of an internal carbon price. Businesses are interested in learning from the experiences of other companies, both from within their come together and develop an integrated car- sector and across the construction value chain, bon pricing mechanism that could be applied of implementing and institutionalizing carbon along the value chain to cover lifecycle emis- pricing. This includes lessons in integrating sions from construction projects. The compa- carbon pricing into business models as well as nies also acknowledged the need for a strong in communicating the benefits of carbon pric- and holistic climate-policy approach. While ing to stakeholders and investors concerned carbon pricing provides a policy push, market- about competitiveness. led sustainability initiatives must be incentiv- ized by creating conducive policy and business Finally, the companies surveyed unanimously environments, such as through procurement advocated for the construction value chain to standards. COMMON CONSIDERATIONS ACROSS COMPANIES 31 The Role of the Carbon Pricing Leadership Coalition C ollaboration between companies along the construction value chain is essential for helping the industry meet its sustainability goals and support low-carbon, high-resilience transformation. An analysis by the Boston Consulting Group and World Economic Forum found that companies in the highly fragmented con- struction industry rely on a “seamless interplay of all participants along the value chain and throughout a project’s life cycle,”120 belying the need for greater cooperation and coor- dination along the value chain to enhance productivity and achieve common goals such as reducing their collective carbon footprint. Despite a traditionally fragmented structure and maritime industries. These efforts are comprising different sectors with strong play- supported by developing targeted knowledge ers, the construction industry has recently products, including guidance to assist compa- seen a number of large, consolidating mergers nies with implementing and institutionalizing and acquisitions because of a strong global best practices and webinars for companies to economy and housing market.121 Analysis by share their experiences on carbon pricing. PWC suggests that this trend is driven by the increasing size and complexity of construction In a recent webinar, as part of a series on projects, which create a premium for techni- internal carbon pricing hosted by the CPLC cal expertise and capacity, resulting in higher and Yale University, it was observed by pre- average transaction values that incentivize senters from Unilever that one company’s industry players to continue to seek value and Scope 3 emissions are another company’s win such contracts.122 This is a clear indication Scope 1. That is, if at every stage along the that companies are coming together in the construction value chain, every company industry, be it through mergers or by collabo- manages its direct Scope 1 and 2 emissions, the rating in forums such as the CPLC to achieve added complexity of measuring and mitigating their climate objectives. Given that climate indirect Scope 3 emissions is greatly reduced. change poses a risk globally and across all Doing so makes the industry’s collaborative sectors, there is a need to bring together the effort to decarbonize itself significantly more entire construction industry value chain to effective. collaborate on issues of sustainability, decar- bonization, and carbon pricing. The CPLC is well placed to help companies along the construction value chain address Through the CPLC, companies are collaborat- some of the key concerns identified. It has ing on sector-specific approaches to carbon convened a Construction Value Chain Task pricing, including in the construction, banking, Team, comprising of companies from various 32 CONSTRUCTION INDUSTRY VALUE CHAIN sectors in the industry as well as relevant As part of this function, the CPLC is support- strategic partner organizations to help shape ing the launch of a High-Level Commission on the agenda of carbon pricing along the value Carbon Pricing and Competitiveness, which chain. This includes an effort to develop an will be a platform to discuss the concerns integrated approach to applying carbon pric- voiced by companies on the implications ing and assess its impact on decision-making for their competitiveness if they stand alone processes across the value chain through a in implementing an internal carbon price lifecycle analysis of a variety of construction (therein effectively taxing themselves). The projects. Commission will comprise global business and thought leaders and be supported by an expert As a coalition that includes members from Advisory Group. The work will involve wide business, government, and civil society, it is consultation with industries on the impact of uniquely positioned to convene organizations carbon pricing on their competitiveness and representing all stakeholder interests. The will help to demystify the issue through an CPLC facilitates companies’ sharing of experi- evidence based approach. ences and best practices for operationalizing internal carbon pricing with others that are Finally, the CPLC provides a forum for pri- looking to learn and apply these lessons to vate companies to engage with governments their own efforts. It also provides a forum for to ensure the development of well-designed private companies to engage with govern- carbon pricing policies to help create a level ments to ensure the development of well- playing field. designed carbon pricing policies to help create a level playing field. THE ROLE OF THE CARBON PRICING LEADERSHIP COALITION 33 Endnotes 1 WEF (World Economic Forum). 2016. Shaping the Future of Construction: A Breakthrough in Mindset and Technology. Cology/Geneva: WEF. http://www3.weforum.org/docs/WEF_Shaping_the_Future_ of_Construction_full_report__.pdf 2 Business Wire. 2018. “$10 Trillion Growth Opportunities in the Global Construction Industry, 2018–2023.” January 5. https://www.businesswire.com/news/home/20180105005334/ en/10.5-Trillion-Growth-Opportunities-Global-Construction-Industry. 3 See http://deepdecarbonization.org/ 4 CDP. 2017. Putting a Price on Carbon https://b8f65cb373b1b7b15feb- c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/002/738/ original/Putting-a-price-on-carbon-CDP-Report-2017.pdf?1507739326 5 CDP 2017 6 WEF 2016 7 Business Wire 2018 8 See https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement 9 See http://deepdecarbonization.org/ 10 Global Infrastructure Basel Foundation. 2014. Removing the Bottlenecks of Infrastructure Investments http://resilient-cities.iclei.org/fileadmin/sites/resilient-cities/files/Resilient_Cities_2014/ PPTs/A/A1_Tafur.pdf 11 IFC (International Finance Corporation). 2016. Climate Investment Opportunities in Emerging Markets https://www.ifc.org/wps/wcm/connect/51183b2d-c82e-443e-bb9b-68d9572dd48d/3503-IFC- Climate_Investment_Opportunity-Report-Dec-FINAL.pdf?MOD=AJPERES 12 See https://klimalog.die-gdi.de/ndc-sdg/sdg/9 13 See https://klimalog.die-gdi.de/ndc-sdg/sdg/11 14 IFC 2016 15 Woetzel, Jonathan, Nicklas Garemo, Jan Mischke, Martin Hjerpe, and Robert Palter. 2016. “Bridging global infrastructure gaps.” McKinsey and Company. https://www.mckinsey.com/industries/ capital-projects-and-infrastructure/our-insights/bridging-global-infrastructure-gaps 16 World Bank Group. (2018). State and Trends of Carbon Pricing https://openknowledge.worldbank. org/bitstream/handle/10986/29687/9781464812927.pdf?sequence=5&isAllowed=y 17 Foulkes, Andrew & Ruddock, Les. 2007. Defining the Scope of the Construction Sector http://www. irbnet.de/daten/iconda/CIB16522.pdf 18 Dallasega, Patrick & Rauch, Erwin. 2017. Sustainable Construction Supply Chains through Synchronized Production Planning and Control in Engineer-to-Order Enterprises http://www.mdpi. com/2071-1050/9/10/1888 19 Papadopoulos, Georgios A., Zamer Nadia, Gayialis Sotiris, Tatsiopoulos Ilias. 2016. “Supply Chain Improvement in Construction Industry.” Universal Journal of Management 4 (10). http://www.hrpub. org/download/20160930/UJM2-12107018.pdf 20 Draws actors from the graphic presented by Hermawan et al., from the Institut Teknologi Bandung, Indonesia (2016) https://ac.els-cdn.com/S1877705817303491/1-s2.0-S1877705817303491- main.pdf?_tid=99493bbd-b8ae-4a1d-8479-3d308054e558&acdnat=1523394556_ a960afeac5a2ea4640fb92fe4d26d304 21 Mullenix, Ryan. 2014. Should Buildings Have Expiration Dates? https://medium.com/re-form/ should-buildings-have-expiration-dates-2da30f42cd55 22 Hosseini, M. Reza, Raufdeen Rameezdeen, Nicholas Chileshe, and Steffen Hehmann. 2015. “Reverse Logistics in the Construction Industry.” Waste Management Research 33 (6): 499–514. https://www. researchgate.net/publication/277306638_Reverse_logistics_in_the_construction_industry 23 See https://www.nrdc.org/issues/energy-efficient-buildings 24 See http://climateobserver.org/country-profiles/france/ 34 CONSTRUCTION INDUSTRY VALUE CHAIN 25 ADEME (French Environment & Energy Management Agency). 2017. Towards Environmental Performance of New Buildings https://ec.europa.eu/energy/sites/ener/files/documents/008_1b_ jose_caire_seif_paris_11-12-17.pdf 26 See https://ghgprotocol.org/sites/default/files/standards_supporting/FAQ.pdf 27 Economic & Social Research Council. 2013. Informal Economy Missing from Climate Change Debate http://www.southasia.ox.ac.uk/sites/sias/files/documents/Informal%20Economy%20Missing%20 from%20Climate%20Change%20Debate.pdf 28 See https://ghgprotocol.org/sites/default/files/standards_supporting/FAQ.pdf 29 Bharucha, Nauzer. 2017. “Housing Consortium Launches Greenhomes Campaign.” Times of India, July 18. https://timesofindia.indiatimes.com/business/india-business/housing-consortium-launches- greenhomes-campaign/articleshow/59651993.cms. 30 See https://www.wbcsdcement.org/index.php 31 WBCSD (World Business Council for Sustainable Development) & GCCA (Global Cement and Concrete Association). 2018. Joint Communique from GCCA and WBCSD on the future of the Cement Sustainability Initiative 32 See https://aluminium-stewardship.org/about-asi/ 33 See https://www.globalabc.org/about-gabc/declaration 34 See http://leed.usgbc.org/leed.html 35 See http://www.breeam.com/ 36 See https://www.edgebuildings.com/ 37 McKinsey & Company. 2016. Imagining Construction’s Digital Future https://www.mckinsey.com/ industries/capital-projects-and-infrastructure/our-insights/imagining-constructions-digital-future 38 See http://www.aluminum.org/industries/production/secondary-production 39 Stacey, Michael. 2015. “Aluminium and Durability: Towards Sustainable Cities.” International Aluminium Institute http://www.world-aluminium.org/media/filer_public/2016/10/03/tsc_report1_ aluminiumdurability_bookspreads_100dpi_release_locked_1016.pdf 40 See http://www.world-aluminium.org/statistics/primary-aluminium-production/#histogram 41 See https://www.epa.gov/global-mitigation-non-co2-greenhouse-gases/ global-mitigation-non-co2-greenhouse-gases-aluminum 42 WEF. 2015. Mining & Metals in a Sustainable World 2050 http://www3.weforum.org/docs/WEF_MM_ Sustainable_World_2050_report_2015.pdf 43 Greenbiz. 2006. Climate and the Aluminium Industry https://www.greenbiz.com/research/ report/2006/02/27/climate-and-aluminum-industry 44 See http://recycling.world-aluminium.org/review/industry-structure/ 45 See http://www.aluminum.org/industries/production/secondary-production 46 Hobson, Peter. 2017. “Hydro-powered Smelters Charge Premium Prices for ‘Green’ Aluminum. Reuters. https://www.reuters.com/article/us-aluminium-sales-environment/ hydro-powered-smelters-charge-premium-prices-for-green-aluminum-idUSKBN1AI1CF 47 Hobson 2017 48 Williams, Melanie. 2017. Low Carbon Aluminium Gets Motoring http://www.melaniewilliamsconsulting. com/news/low_carbon_al_gets_gets_motoring/ 49 Hobson 2017 50 Aluminium Insider. 2017. Low-carbon Aluminium Boosts Industry’s Green Credentials https:// aluminiuminsider.com/low-carbon-aluminium-boosts-industrys-green-credentials/ 51 Climate Action Tracker. 2017. 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CO2 and the Built Environment https://www.theconcreteinitiative.eu/ images/Newsroom/Factsheets/8193_TheConcreteInitiative_CO2-BuiltEnvironmen_2015-12-09.pdf 60 CDP 2016 61 CDP 2016 62 CDP 2016 63 Majcher, Kristin. 2015. “What Happened to Green Concrete?” MIT Technology Review. https://www. technologyreview.com/s/535646/what-happened-to-green-concrete/ 64 Kane, Annie. 2016. “Making Concrete Green: Reinventing the World’s Most Used Synthetic Material.” The Guardian. https://www.theguardian.com/sustainable-business/2016/mar/04/ making-concrete-green-reinventing-the-worlds-most-used-synthetic-material 65 Nandy, Utpal. 2017. “Is Green Cement the Future of Sustainable Construction?” Brightwood Real Estate Education. https://www.kapre.com/resources/contractor/ is-green-cement-the-future-of-sustainable-construction/ 66 Float glass, manufactured through a process whereby molten glass is floated on a bed of metal, is used to make windows and glass doors for buildings. 67 See http://www.glassforeurope.com/en/industry/market-for-glass.php 68 See https://www.glassallianceeurope.eu/en/environment 69 See https://www.glassallianceeurope.eu/en/environment 70 See http://www.glassrecycles.org/about 71 See https://glassforeurope.com/eu-waste-legislation-building-glass-recycling/ 72 See http://www.agc-glass.eu/en/sustainability/environmental-achievements/environmental-impact 73 See http://www.glassforeurope.com/en/issues/glazing-solutions.php# 74 Plastics Market Watch. 2016. 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EU Official Hints Ban on Single-Use Plastic Across Europe.” EcoWatch. https://www.ecowatch.com/eu-ban-single-use-plastic-2538546402.html 80 WEF. 2017a. Costa Rica Wants to be the First Country to Ban All Single Use Plastics. https://www. weforum.org/agenda/2017/08/costa-rica-plastic-ban-2021/ 81 Chandler, David L. 2013. “One Order of Steel; Hold the Greenhouse Gases.” MIT News. http://news. mit.edu/2013/steel-without-greenhouse-gas-emissions-0508 82 See https://www.ssab.com/company/sustainability/sustainable-operations/hybrit 36 CONSTRUCTION INDUSTRY VALUE CHAIN 83 See https://www.aisc.org/why-steel/sustainability/#29351 84 See https://www.responsiblesteel.org/working-group/ 85 See https://www.ssab.com/company/sustainability/sustainable-operations/hybrit 86 Pistorius, Chris P. 2017. 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Business Case for Pricing Carbon. https://b8f65cb373b1b7b15feb- c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/comfy/cms/files/files/000/000/284/ original/business-case-for-carbon-pricing.pdf 103 IFC. 2017. Climate Investment Opportunities in South Asia. https://www.ifc.org/wps/wcm/connect/ be4dacbd-18d1-4159-b9e9-e6a95e094d7a/Climate+Investment+Opportunities+in+South+Asia+- +An+IFC+Analysis.pdf?MOD=AJPERES 104 CDP 2017 105 CDP 2016 106 Fulford, Richard & Standing, Craig. 2014. Construction Industry Productivity and the Potential for Collaborative Practice https://www.sciencedirect.com/science/article/abs/pii/S0263786313000641 107 The Economist. 2017. Efficiency Eludes the 108 CDP 2017 109 The information in this section has been collected largely from conversations with representatives of the companies. Where other sources have been used, they are cited accordingly. 110 Cemex. 2017. Climate Change 2017 Information Request https://www.cemex.com/ documents/20143/11025391/InvestorCdpCemex2017.pdf/1f4fc007-f4d8-9d8a-6790-8375071a5012 111 CDP. 2018. Building Pressure. https://6fefcbb86e61af1b2fc4-c70d8ead6ced550b4d987d7c03fcdd1d. ssl.cf3.rackcdn.com/cms/reports/documents/000/003/277/original/Cement_Report_Ex_Summary. pdf?1523261813 112 See http://iepd.iipnetwork.org/policy/perform-achieve-trade-scheme-pat-scheme 37 113 See https://mnre.gov.in/renewable-energy-regulatory-framework 114 See https://www.lafargeholcim.com/Sustainability-reports 115 See https://www.lafargeholcim.com/Sustainability-reports 116 CDP 2017 117 Aluminium Insider. 2017. Rusal Sets New Standard in Low-Carbon Aluminium with ALLOW. https:// aluminiuminsider.com/rusal-sets-new-standard-low-carbon-aluminium-allow/ 118 CDP. 2016a. Embedding a Carbon Price into Business Strategy. https://b8f65cb373b1b7b15feb- c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/001/132/ original/CDP_Carbon_Price_2016_Report.pdf?1474269757 119 CDP 2017 120 WEF 2016 121 PwC (PricewaterhouseCoopers). 2018. Global Engineering and Construction Deals Insights Year- End 2017 https://www.pwc.com/us/en/industrial-products/publications/assets/pwc-engineering- construction-industry-mergers-acquisitions-q4-2017.pdf 122 Ibid 38 CONSTRUCTION INDUSTRY VALUE CHAIN