Cement production is highly energy-intensive and ubiquitous with infrastructure development. As Global Cement asserts, “There’s enough cement used every week to build a city the size of Paris.” Despite this, cement production remains accountable for a significant share of global CO₂ emissions.

As one of the largest cement producers in the world, Votorantim Cimentos is the flagship asset within Votorantim’s portfolio. The company tackles this challenge by integrating carbon pricing into its investment strategy, ensuring long-term competitiveness while progressing toward ambitious decarbonization targets. Operating worldwide in 11 countries, they face diverse regulatory landscapes and market conditions in their journey to navigate the global transition to a low-carbon economy.

By leveraging internal carbon pricing (ICP)—including shadow pricing and sensitivity analyses—the company is proactively aligning investment decisions with anticipated regulatory shifts and technological advancements. This approach allows Votorantim Cimentos to remain competitive while preparing for a future where carbon costs are fully embedded in business operations.

Changing Regulatory Landscape Across Regions: Both a Blessing and a Curse

As a multinational company, Votorantim Cimentos manages a variety of regulatory scenarios. In the European Union (EU), Votorantim Cimentos operates under the EU Emissions Trading System (EU ETS), where the current carbon price is approximately €80 per ton. This system has a direct impact on operations, influencing investment decisions and strategic planning.

Conversely, regions like Brazil recently passed legislation for carbon pricing and are in the early stages of implementing such mechanisms. While the real impacts are not expected for another four to five years, Votorantim Cimentos nonetheless employs a shadow price of $100 per ton of CO2 for all CapEx costs in investment decisions.

While it can be initially challenging to (hypothetically) impose an additional cost to investments and project selection in such a competitive industry, Votorantim Cimentos believes that doing so will help them get ahead of the curve on carbon pricing. Eventually, more consistent carbon regulations will level the playing field and reward efficient producers who have already planned for the long term. In the end, companies most efficient at managing carbon will be the most competitive.

Integrating Carbon Costs into Financial Strategy

Despite operating in regions with varying regulations, Votorantim Cimentos has embedded carbon considerations into its cash flow analyses and strategic planning processes. Exercises such as sensitivity analyses and scenario planning help leadership evaluate the potential impact of carbon costs and prioritize decarbonization initiatives.

This approach includes utilizing a marginal abatement cost curve (MACC) to evaluate the feasibility and profitability of investment projects under hypothetical carbon cost scenarios. These exercises help Votorantim Cimentos’ leadership visualize the impact to decarbonize an additional ton of emissions at different price points (e.g. $10/ton, $20/ton…to well-beyond $100/ton). This can then help the company calculate breakeven prices for projects and what form of decarbonization is needed become financially viable—ranging from lower-cost efficiency measures to more expensive carbon sequestration options. By quantifying the cost-effectiveness of different emissions reduction strategies, Votorantim Cimentos can identify the most efficient pathways to help align investment decisions with long-term decarbonization goals.

Decarbonization Strategies and Challenges

In addition to ICP, Votorantim Cimentos also has set approved Science-Based Targets (SBTi) for 2030 with a pipeline of initiatives aimed at achieving carbon neutrality by 2050.

Through careful project selection and lower-carbon additives, Votorantim Cimentos is currently on track to meet interim SBTi goals by 2030. In countries where carbon pricing is integrated into financial planning, projects that reduce emissions, such as biomass energy, alternative fuels, and innovative cement materials, are prioritized.

The additional use of fly ash—a byproduct of thermal power plants—has proven effective in lowering emissions, and as thermal power generation declines, alternative materials like calcined clay are being explored to ensure sustainable production.

While carbon pricing increases production costs, its impact on end products, such as housing, is relatively modest. Doubling the price of cement, for instance, would increase the cost of a house by less than 10 percent. This relatively small cost increase highlights the feasibility of passing carbon costs through to consumers, creating a financial incentive for emissions reductions.

Looking beyond 2030 however, stricter decarbonization standards and policy changes may add a new layer of complexity. As the EU phases out free allowances under the Carbon Border Adjustment Mechanism (CBAM) by 2031, companies will bear the full cost of cement emissions and transportation, intensifying the demand for innovative decarbonization solutions. Votorantim Cimentos is using this as an opportunity to capitalize on its early investments in low-carbon solutions and position itself as a leader in sustainable cement production.

The company has invested significantly in decarbonization technologies, including fuel substitution and carbon capture, utilization, and storage (CCUS). These technologies are still in the early stages and face challenges related to cost and practicality. However, as they mature, their long-term success will be essential for improving cost-effectiveness and helping the company achieve its 2050 net-zero goal.

Conclusion

Votorantim Cimentos’ proactive approach to carbon pricing and decarbonization underscores its commitment to sustainability and operational resilience. By leveraging ICP, embracing innovative materials, and investing in advanced technologies, the company is positioning itself as a leader in the global cement industry’s transition to a low-carbon future. Rome wasn’t built in a day, and neither will the transformation of the cement industry. But through sustained investment, strategic adaptation, and a commitment to innovation, Votorantim Cimentos is laying the foundation for a more sustainable future. Ensuring that this essential material is produced sustainably is both a challenge and an opportunity that Votorantim Cimentos is prepared to meet.