CBAM Impact on Indian Cement Exports

CBAM Impact on Indian Cement Exports: Clinker Ratios, Process Emissions, and Strategic Response

India is the world’s second-largest cement producer, manufacturing over 380 million tonnes per annum (MTPA) across more than 200 integrated plants. While the vast majority of Indian cement serves domestic demand — driven by infrastructure mega-projects, housing, and urbanisation — a growing share is exported, including to the European Union and its neighbouring markets. The EU’s Carbon Border Adjustment Mechanism (CBAM) now places cement and clinker squarely within its scope, creating a new compliance and cost reality for Indian cement exporters. This analysis dissects the emission profile of Indian cement, quantifies CBAM duty exposure, and maps strategic options for the sector.

India’s Cement Export Profile and EU Exposure

India’s cement exports to the EU are modest in volume terms compared to steel or aluminium, but they are strategically significant for coastal producers in Gujarat, Tamil Nadu, and Andhra Pradesh who serve Mediterranean and Middle Eastern EU markets. More importantly, CBAM’s coverage of clinker as a standalone product category exposes Indian clinker exports — often shipped as an intermediate product to grinding stations in importing countries — to full carbon border duties.

The CBAM regulation covers cement under CN code 2523, including Portland cement, aluminous cement, and other hydraulic cements, as well as clinker under CN 2523 10 00. The distinction matters: clinker carries the highest embedded emissions per tonne because it is the emission-intensive precursor, whereas finished cement benefits from dilution through the addition of supplementary cementitious materials (SCMs) such as fly ash, slag, and limestone.

The Clinker Ratio: India vs EU

The clinker-to-cement ratio is the single most important variable determining the carbon intensity of finished cement. It measures the proportion of clinker in the final blended cement product:

• Indian average clinker ratio: 0.70-0.80. While India’s blended cement penetration has improved significantly — with Portland Pozzolana Cement (PPC) and Portland Slag Cement (PSC) now accounting for approximately 70% of production — the average clinker ratio remains higher than EU best practice. Ordinary Portland Cement (OPC), which has a clinker ratio of 0.90-0.95, still accounts for roughly 25-30% of production.
• EU average clinker ratio: approximately 0.65. European producers have aggressively reduced clinker content through CEM II, CEM III, and CEM IV classifications, using ground granulated blast furnace slag (GGBS), fly ash, natural pozzolans, and limestone filler. Some specialised products achieve clinker ratios below 0.50.

Every 0.01 reduction in clinker ratio reduces embedded emissions by approximately 0.008-0.009 tCO2/t cement, making clinker substitution the most accessible lever for reducing CBAM exposure.

Emission Profile of Indian Cement Production

Cement manufacturing emissions arise from three sources, each with distinct abatement characteristics:

1. Process Emissions (Calcination)

The thermal decomposition of limestone (CaCO3) into calcium oxide (CaO) and CO2 in the rotary kiln releases approximately 0.53 tCO2 per tonne of clinker. This is an inherent chemical reaction — not a combustion process — and it accounts for approximately 60% of total cement CO2 emissions. Process emissions cannot be reduced through fuel switching or energy efficiency improvements; they can only be addressed by reducing clinker content (using SCMs), developing novel low-clinker binders (such as LC3 — Limestone Calcined Clay Cement), or deploying carbon capture.

2. Fuel Combustion Emissions

Heating the rotary kiln to the 1,450 degrees Celsius required for clinker formation demands significant thermal energy — typically 3,000-3,500 MJ per tonne of clinker (known as specific heat consumption, or SHC). Indian plants predominantly use coal and pet coke as kiln fuels. Fuel combustion emissions range from 0.25-0.35 tCO2 per tonne of clinker, depending on fuel mix, SHC, and the use of alternative fuels.

India’s thermal substitution rate (TSR) — the percentage of thermal energy derived from alternative fuels such as refuse-derived fuel (RDF), biomass, waste tyres, and industrial waste — averages only 5-7%, compared to 50-60% in leading EU markets like Germany and Austria. Increasing TSR is a proven, cost-effective decarbonisation lever with significant headroom in India.

3. Indirect Emissions (Electricity)

Cement grinding, material handling, and ancillary processes consume approximately 80-100 kWh of electricity per tonne of cement. With India’s grid emission factor at approximately 0.70-0.75 tCO2/MWh, this translates to 0.056-0.075 tCO2/t cement. While CBAM currently focuses primarily on direct emissions for cement, the regulation includes provisions for indirect emissions to be incorporated in future implementing acts. Indian producers relying on coal-heavy grid electricity face higher exposure than those with captive renewable energy or waste heat recovery (WHR) power generation.

Total Embedded Emissions: Indian Cement vs EU Benchmark

Note: Values are indicative averages. Actual emissions vary by plant. EU electricity emissions are lower due to a less carbon-intensive grid (approx. 0.28 tCO2/MWh EU average).

CBAM Duty Calculation for Cement

The CBAM duty for cement follows the same structure as other covered sectors:

CBAM Duty = (Embedded Emissions – Free Allocation Deduction) x EUA Price

The EU ETS benchmark for grey clinker is approximately 0.766 tCO2/t clinker. For cement, the benchmark is product-specific and adjusted for the clinker ratio. Assuming free allocation at 40% of the benchmark during the phase-out transition:

* Net emissions after deducting 40% of the applicable EU ETS benchmark. Actual free allocation percentages change annually as the phase-out progresses.

At current cement export prices of approximately EUR 60-80/t (FOB), a CBAM duty of EUR 26-35/t on OPC or clinker represents a 35-50% cost surcharge — a prohibitive margin for a commodity product. PPC and PSC fare significantly better, reinforcing the case for maximising clinker substitution in export-grade cement.

CBAM Reporting Requirements for Cement

Indian cement producers must provide EU importers with the following data for CBAM compliance:

• Installation boundary definition: All emission sources within the cement manufacturing installation, including raw material preparation, clinker kiln system, cement grinding, and on-site power generation. Co-located captive power plants that supply the kiln or grinding operations are within scope.
• Clinker production emissions: Separated into process emissions (from the CaCO3 content of raw meal, adjusted for cement kiite dust (CKD) recycling) and fuel combustion emissions (from all fuels used in the kiln system, including main burner and precalciner).
• Product-level attribution: Where an installation produces multiple cement types (OPC, PPC, PSC), emissions must be attributed to each product based on the clinker content and grinding energy of that specific product.
• Indirect emissions: Electricity consumption and the emission factor of the electricity source. While the EU is still finalising how indirect emissions for cement will be treated in CBAM calculations, the data must be reported from the transitional phase onward.
• Third-party verification: All emissions data must be verified by an accredited verifier. Indian cement companies already subject to BEE’s Perform, Achieve, Trade (PAT) scheme have some monitoring infrastructure in place, but CBAM verification standards follow the EU MRR methodology, which requires specific uncertainty thresholds and calculation tiers.

Strategic Options for Indian Cement Producers

Given that 60% of cement emissions are unavoidable process emissions, decarbonisation in this sector requires a multi-lever approach:

• Maximise clinker substitution: Shifting export product mix from OPC to PPC (with 25-35% fly ash) or PSC (with 25-65% GGBS) is the fastest route to reducing CBAM exposure. India has abundant fly ash availability from its thermal power stations, and GGBS supply is expanding with growing steel production. The emerging LC3 technology (Limestone Calcined Clay Cement) can achieve clinker ratios of 0.50 with widely available raw materials and is being piloted by several Indian producers including Dalmia Cement and Shree Cement.
• Increase alternative fuel usage (TSR): Raising the thermal substitution rate from India’s current 5-7% to 30-40% would reduce fuel emissions by 25-35%. This requires investment in co-processing infrastructure (waste pre-processing, fuel feeding systems, regulatory approvals) and partnerships with municipal solid waste management agencies. Several Indian states (Rajasthan, Madhya Pradesh, Chhattisgarh) are actively promoting co-processing under Solid Waste Management Rules.
• Waste heat recovery (WHR) and renewable energy: Installing WHR power generation systems on clinker cooler and preheater exhaust can offset 25-30% of a cement plant’s electricity demand. Combining WHR with captive solar or wind via open-access arrangements can reduce indirect emissions to near zero. UltraTech, Dalmia, and ACC have deployed or announced significant renewable energy capacity.
• Energy efficiency in kiln operations: Upgrading to six-stage preheater-precalciner kilns, optimising kiln feed chemistry, and reducing specific heat consumption from 3,200+ MJ/t to below 3,000 MJ/t clinker reduces fuel emissions by 5-10%. Many Indian plants still operate older four or five-stage preheater systems.
• Carbon capture, utilisation, and storage (CCUS): Given the irreducible nature of calcination emissions, CCUS is the only technology pathway to near-zero cement production. Several pilot projects are underway globally, including the LEILAC (Low Emissions Intensity Lime And Cement) project in Europe and Dalmia Cement’s partnership with Carbon Clean for a 0.5 MTPA capture facility. India’s basaltic formations in the Deccan Traps offer potential mineralisation-based storage, though commercial-scale deployment remains 8-15 years away.
• Novel binders: Research into non-Portland binders — including geopolymer cements, calcium sulfoaluminate (CSA) cements, and magnesium-based cements — could eventually bypass calcination emissions entirely. These remain at laboratory or pilot scale for most applications but represent a long-term strategic option for forward-looking producers.

Competitive and Policy Implications

CBAM will likely accelerate the shift in India’s cement export mix away from clinker and OPC toward blended cements. Producers with access to abundant SCMs (fly ash from power plants, slag from steel plants) have a structural advantage. Coastal plants with access to alternative fuel supply chains (port-based waste importers, industrial waste generators) can achieve faster TSR improvements.

India’s Bureau of Indian Standards (BIS) has been progressively updating cement standards to encourage blended varieties, and CBAM provides additional commercial impetus for this transition. The Indian cement industry’s trade associations — the Cement Manufacturers’ Association (CMA) and the National Council for Cement and Building Materials (NCB) — are actively engaging with the EU on CBAM implementation details and equivalence recognition for Indian verification standards.

How RSustain Carbon Can Help

RSustain Carbon provides specialised CBAM compliance and decarbonisation advisory for the cement sector:

• CBAM Compass — Step-by-step guidance on CBAM reporting obligations for cement and clinker products, including CN code mapping, installation boundary definition, and timeline planning for the transitional-to-financial phase transition.
• CBAM Duty Calculator — Model your CBAM cost exposure across different product types (OPC, PPC, PSC, clinker), clinker ratios, fuel mixes, and EUA price scenarios. Compare actual-value reporting against default values to quantify the cost benefit of investing in MRV systems.
• Carbon Desk Advisory — Our cement sector specialists support installation-level emissions quantification, EU MRR-aligned monitoring plans, alternative fuel strategy, clinker substitution roadmapping, and CCUS feasibility assessment. Contact carbon@rsustain.com to schedule a consultation.