Environment

Economics & discounting rates for climate change

Published

4 years ago

March 5, 2021

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The earth had been mostly very hot over its 4.5 billion years of existence but there were severe spells of low temperature epochs in the latter stages, but undoubtedly the current period of permanent settlements over the last 10,000 years is one of relatively low temperatures, barring the last century where there has been significant human activity that has led to temperature increase; the non-linearity of results notwithstanding but taking Ockham?? Razor, as a principle, (when multiple competing hypotheses are equal in other respects, choose the hypothesis that introduces the fewest assumption), CO2 as a heat trapping gas and its abundance created by emissions is a good enough reason to go after, if we want to limit temperature increase. But Methane and NO2 or SO2 are also to be dealt with but have other consequences as well.

Climate, the word is derived from the Greek word, which depicts the inclination of earth?? rays, which is a reminder again of the importance of warmth than cold, in fact it is far more efficient to heat up than extract heat, or most economic systems are far better attuned to heat additions than heat extractions as the progress of the last three hundred years have been facilitated by heating systems that produced the much needed energy to propel modern systems forward. The economics of heating or energy never precluded the absorption of CO2 as an externality, a cost that must be endured and therefore paid for by the consumers; had it been the norm, the current use of fossil fuels would have seen natural moderations and renewable energy sources would have by this time proliferated at a frenetic pace.

The importance of the externalities, the costs that are to be borne by the society, for example the cost of CO2 released to the environment when an item is produced for consumption, only remained in the economics footnotes and only in the last two decades some meaningful treatment has been meted out. But think of it as Bill Gates points out in his book, ??ow to Avoid a Climate Disaster?? clean versions of fossil fuels for cargo ships are at $5.5 -$9.05 per gallon against their fossil fuel versions which are at $1.29 per gallon, making them hugely uneconomical, whereas if the cost of externalities are included this difference would considerably reduce. It is same as investing in climate change actions for the future, none of which would at the moment give benefits to the environment. Therefore it is as good as saying that corporations are entering into pledges for the future which would need investments and the environmental benefits will only be visible and enjoyed by generations in the future, for which the current stakeholders would have to bear the costs.

To put it differently what part of consumption now needs to be foregone, in order that the future consumption can be maintained? Or how much profits would have to be foregone now for future benefits? But a unit of consumption now or profits is not the same as a unit of consumption or profits in the future. So we enter the realm of time-discounting rates to fix this problem.

But how do you impose the social cost of externalities and what would be the economic impact for the current generations while they altruistically take the brunt of ??limate change??impact now so that the future generations enjoy large parts of the benefit. This is what the economists calculate through the time-discounting rates. These are not mere market rates of return on investment, but that they ought instead to be derived from economic forecasts and society?? conception of distributive justice concerning the allocation of goods and services across personal identities, time, and events. Inter-generational transfers and the incentives for savings over consumption needs to be weighed against a non-linear and highly unpredictable future impact on livelihood and environment forced by climate change. No doubt this is an arduous task in itself.

But there are potentially two distinct camps in which the economists are camped into, Nordhaus, who supported a milder action on climate change and who got the Economics Nobel in 2018 and the Stern camp, after the Stern Report (2006) that specified far more stricter actions on climate change now, believing that aggressive abatement is worthwhile even though the future is much richer, because the potential massive damages warrant the costs. When you take milder scheme of things, where current consumption can continue, you are in effect proposing a different discounting rates, like the high 4 to 7 per cent, while anything between 1 to 2 per cent is a low enough discounting rate for the very drastic measures now.

The real implications of these two discounting rates is the following. If the current generation is too impatient to enjoy the benefit now against that in the future, the consumption discount rate needs to be higher. Also an unit of consumption now against the cost of that in the future is higher, as the opportunity cost of capital itself would propound and that is not going down but only moving up. So in effect Nordhaus is proposing a milder version of actions, that of a much higher discounting rate, so that current consumption now is valued and not therefore foregone that easily.

Stern camp however is believing that foregoing consumption now is the more important thing to do so a much higher foregoing of consumption is necessary for a dramatic result in the future, which will avert the crisis. But it essentially means that corporations and consumers would have to bear the brunt of these actions in the current times.

Think of a steeper slope of climate actions now versus a less steep slope in the future? It means that an industry would have to invest now and that would mean it would draw away capital from the alternate use of it. Further to maintain the same level of profit, it would need to factor the price increases necessary to compensate for the rising costs, this must be paid for by the consumers.

This would also mean that an entire industry in a specific space must act as an industry body, otherwise it will never work, some could get away being the free-rider, thus removing all incentives for actions. On the other hand the government or the regulatory body must factor in the loss of income that could ensue if economic activities get impacted due to higher prices or lower profits that impact government revenues.

Thus net zero pledge is a serious debate on the current versus the future benefits and time discounting rates. Those corporations who take a drastic view of things are actually discounting at a lower rate, they are willing to forego current profits for a better future and essentially this is making the corporation stronger for the future, than currently what it could be without these actions.

Footnote:

ABOUT THE AUTHOR:

Procyon Mukherjee is an ex-Chief Procurement Officer at LafargeHolcim India.

Concrete

Need for Reinvention Amid Recovery

Published

1 week ago

April 21, 2025

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The cement industry in India has just emerged from one of its most challenging years in recent history. FY25 witnessed the steepest year-on-year decline in cement prices in nearly two decades, driven by a combination of sustained capacity additions and subdued demand across key sectors. Even as volumes remained steady in many regions, profitability took a hit, revealing the fragile balance between supply dynamics and pricing power.
Looking ahead to FY26, industry analysts, including India Ratings and Research, predict demand growth in the mid-single digits. This projection is supported by a series of favourable indicators: a likely normal monsoon, continued infrastructure investments, improving real wage growth and momentum in urban housing. Yet, the central question remains—can cement manufacturers regain pricing discipline to restore margins?
The Cement Expo Forum 2025, recently held in Hyderabad, served as a timely platform to examine these issues. Leaders from across the value chain came together to discuss not only the sector’s growth trajectory but also the pressing need for sustainable practices. As India’s cement consumption grows, the environmental responsibilities of the industry grow with it. Cement companies are increasingly expected to meet rising demand while aligning with global decarbonisation goals. Energy efficiency, alternative fuels and clinker factor reduction are no longer optional—they are integral to long-term competitiveness
and compliance.
What emerged from the Forum was clear: the Indian cement industry stands at a pivotal juncture. Pricing strategy, capacity optimisation and green technology adoption must now work in tandem to secure resilient growth.
The Hyderabad Forum was but a preview. The much-anticipated
15th Cement Expo, to be held on November 12–13, 2025, at Yashobhoomi, Delhi, promises to be the definitive industry showcase of the year. As the sector navigates recovery and reinvention, this event will spotlight innovation, policy alignment and investment strategies shaping the future of Indian cement.

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Concrete

We are committed to being a trusted partner

Published

1 week ago

April 21, 2025

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Hitendra Bhargav, CEO, Klüber Lubrication, discusses how advanced synthetic lubricants are driving sustainability in the cement industry by enhancing energy efficiency, extending equipment life and reducing carbon emissions.

The Indian cement industry is making significant strides toward carbon neutrality while striving to enhance operational efficiency. As manufacturers seek high-performance solutions to optimise critical machinery—such as VRMs and gearboxes—extending equipment life and boosting productivity have become paramount. In an exclusive conversation, Hitendra Bhargav, CEO, Klüber Lubrication, shares how the company is driving innovation and sustainability-focused initiatives to help cement manufacturers achieve their net-zero ambitions.

How is Klüber Lubrication India supporting the cement industry’s sustainability goals?
The Indian cement industry is actively working towards carbon neutrality while maintaining operational efficiency. It is adopting various measures such as improving energy efficiency, clinker substitution, waste heat recovery and carbon capture to achieve its sustainability goals—helping India meet its target of reducing carbon emissions by 50 per cent by 2030.
At Klüber Lubrication India, we support this transition by offering high-performance synthetic lubricants that significantly enhance energy efficiency and reduce carbon emissions. A major portion of a cement plant’s energy consumption is related to its rotary equipment and machinery, such as vertical roller mills (VRM), ball mills, coal mills, bucket elevators, cooling towers and screw pumps. Our state-of-the-art gear oils and other lubricants help these machines consume less energy, optimise efficiency and, in turn, support cement plants in complying with regulatory frameworks like the Business Responsibility and Sustainability Reporting (BRSR), moving them closer to their net-zero targets.

Can you elaborate on Klüber Lubrication’s role in helping cement manufacturers achieve net-zero emissions?
Achieving net-zero emissions requires innovative solutions that minimise energy consumption and carbon footprints. Our Klüber Energy Efficiency solutions are specifically designed to support this goal. By switching from conventional mineral oils to our advanced synthetic lubricants, cement plants can achieve an average of three per cent savings in electrical energy consumption, leading to substantial reductions in CO2 emissions.
Our solutions extend equipment life,reduce downtime and improve overall plant efficiency—making sustainability not just an environmental responsibility but also an economically viable choice.
(Note: One unit of power saved is equivalent to approximately 0.6 kg of CO2 reduction when generated by a coal-based thermal power plant.)

What impact do energy-efficient lubricants have on the performance and longevity of machinery?
Energy-efficient lubricants play a crucial role in optimising the performance of cement plant machinery. Our synthetic lubricants reduce friction, minimise wear and tear, and offer superior thermal stability. This leads to lower energy consumption, fewer breakdowns and extended service life for critical equipment such as various types of mills, cooling towers and gearboxes. As a result, cement manufacturers benefit from improved productivity, reduced maintenance costs and enhanced reliability.

Klüber Lubrication India recently achieved the EcoVadis GOLD certification for the fourth consecutive year. What does this recognition mean to you?
Securing the EcoVadis GOLD certification for the fourth consecutive year is a testament to our unwavering commitment to sustainability and responsible business practices. This recognition places us among the top three per cent of companies worldwide. It underscores our dedication to minimising environmental impact, upholding ethical business practices, and promoting sustainable procurement. Our customers can be assured that our solutions are designed not only for superior performance but also for long-term environmental benefits.

What is your message to manufacturers looking to enhance their sustainability journey?
Sustainability is no longer an option; it is a necessity for long-term success. Cement manufacturers who proactively adopt energy-efficient solutions will not only reduce their environmental footprint but also improve operational efficiency and profitability. At Klüber Lubrication India, we are committed to being a trusted partner in this journey, providing cutting-edge lubrication solutions that help the industry transition towards a more sustainable and efficient future.
The cement industry is under immense pressure to improve sustainability while maintaining operational efficiency. At Klüber Lubrication India, we support this transition by offering high-performance synthetic lubricants that significantly enhance energy efficiency and reduce carbon emissions. Our solutions for critical machinery, such as VRM and main gearboxes, help manufacturers optimise their operations, comply with regulatory frameworks like the BRSR and move closer to their net-zero targets.

How do Klüber Lubrication’s energy efficiency projects provide a strong ROI?
One of the biggest concerns in adopting sustainability measures is the associated cost. However, our energy efficiency solutions present a compelling business case. With an investment of less than one crore rupees, cement manufacturers can achieve a payback period of less than a year.
For example, by using Klübersynth GEM 4-320 N, a single VRM gearbox with a sump capacity of 6,000 litres and a 6.5 MW motor rating can save over 1.3 million kWh annually. This translates to an average power saving of three per cent, leading to lower operational costs. Additionally, oil life is extended by three or four times compared to conventional mineral oil, contributing to a CO2 reduction of 715 tonnes. This ensures manufacturers achieve sustainability milestones while maximising profitability.

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Concrete

Decarbonising Cement Transportation

Published

1 week ago

April 21, 2025

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The Indian cement industry is embracing green logistics through electric and alternative fuel vehicles, digital innovations and sustainable transport strategies to reduce carbon emissions and improve efficiency. Kanika Mathur looks at the collaborative efforts between industry leaders and government initiatives driving this transformation toward a net-zero future.

The Indian cement industry, as the world’s second-largest producer, plays a pivotal role in the nation’s infrastructure development. However, this prominence comes with significant environmental challenges, particularly in logistics operations. Green logistics—integrating sustainable practices into transportation and supply chain management—has emerged as a critical focus area. By adopting eco-friendly transportation methods, optimising supply chains and leveraging technological innovations, the industry aims to reduce its carbon footprint and enhance operational efficiency.
According to Cargo Insights, the cement industry plans to invest around `40,000 crore to add 40 MTPA annually, targeting an increase of 100-120 MTPA over the next three years.
India is the sixth-largest market for medium and heavy-duty trucks (MHDTs), with over 200,000 vehicles sold in 2021 and more than 40 lakh trucks operating on its roads. However, the dominance of internal combustion engine (ICE) trucks, with over 90 per cent running on diesel, presents significant challenges, including high emissions and fuel dependency. In the cement industry, road transport plays a crucial role, with 74 to 76 per cent of cement, 15 to 20 per cent of clinker, and most limestone, fly ash, and other additives being transported by trucks. While coal and slag rely more on rail, the sector remains heavily dependent on road logistics, underscoring the urgent need for sustainable alternatives such as LNG and electric trucks to reduce environmental impact and improve efficiency, informs a report by the Confederation of Indian Industry (May 2024).

Environmental imperative
Logistics in the cement industry is a major contributor to carbon emissions, primarily due to the extensive use of fossil fuel-powered transportation. With approximately 74 per cent of cement and clinker transport relying on roadways, the environmental impact is substantial. Transitioning to greener logistics solutions is essential to mitigate these emissions and align with global sustainability goals.
“Jassper Shipping is dedicated to reducing carbon footprints, including those of clients. Emission-reduction plans and carbon offset investments aim to achieve net-zero carbon emissions by 2035. Over the next two quarters, the number of EVs in the fleet will increase from 58 to 150. The last-mile delivery supply chain is becoming more sustainable and efficient with EV integration while maintaining high-quality service,” says Pushpank Kaushik, CEO, Jassper Shipping.
According to the Investment Information and Credit Rating Agency (ICRA), cement demand in India may touch approximately 460 million metric tonnes (MT) by 2025, and the sector is projected to grow its capacity by 5 per cent annually until
March 2027.
India’s per capita cement consumption remains below 300 kg, which is only half of the global average, indicating significant potential for growth. However, economic progress often comes at an environmental cost, with the cement industry accounting for approximately seven per cent of India’s total CO2 emissions due to its heavy reliance on coal. During China’s peak growth in 2008, the country produced 113.5 crore MT of cement, emitting approximately 0.46 MT of CO2 per MT of cement. In 2024, while India is producing only 40 per cent of China’s 2008 cement volumes, its specific emissions remain comparable. Additionally, environmental concerns are exacerbated by clinker dust, wastage during manufacturing and packaging, and transportation leaks, all of which contribute to the industry’s overall carbon footprint.
As India works toward its ambitious goal of becoming a net-zero emissions nation by 2070, it faces the challenge of balancing rapid economic growth with sustainability. The cement industry, as a key player in infrastructure development, must integrate green solutions at multiple levels of the value chain. This transformation involves optimising power consumption, improving manufacturing processes, developing eco-friendly products and implementing better preservation methods post-processing. By adopting these measures, the industry can contribute to India’s sustainability goals while maintaining its critical role in economic expansion.

The race for EVS
A significant stride toward green logistics is the industry’s pilot testing of electric trucks (E-trucks). Around 150 E-trucks have been deployed to assess their feasibility in cement transportation. Neeraj Akhoury, President, Cement Manufacturers’ Association (CMA), and Managing Director, Shree Cement, highlighted that while E-trucks can potentially reduce operating costs and emissions, challenges such as high ownership costs, heavy batteries, limited charging infrastructure and range constraints need to be addressed.
Companies like UltraTech Cement are leading the way by expanding their EV fleet. UltraTech has signed contracts to deploy approximately 100 EV trucks, aiming to transport 75,000 metric tonnes of clinker monthly. This initiative is part of a broader strategy to incorporate 500 electric trucks by
June 2025, aligning with the Government of India’s eFAST initiative.
The company has signed a transport service contract to deploy approximately 100 EV trucks, which will transport 75,000 MT of clinker each month. This initiative positions UltraTech as the first Indian cement company to integrate EV trucks on such a large scale for long-distance logistics.
By replacing conventional fossil-fuel-powered
trucks with EVs, the company expects to reduce its transport-related carbon emissions by 17,000 MT annually, making a significant contribution to sustainable logistics.
This large-scale deployment follows a successful pilot project launched in January 2024, which introduced five electric trucks on the same route. The pilot also focused on setting up essential charging infrastructure and implementing driver training programs to ensure smooth operations. Encouraged by the positive results, UltraTech is now evaluating additional routes for EV integration and is preparing for another pilot to facilitate clinker transport between two of its other manufacturing units. This phased approach demonstrates the company’s commitment to expanding green logistics solutions across its supply chain.
In a press release, KC Jhanwar, Managing Director, UltraTech Cement, stated, “UltraTech is fully committed to achieving its Net Zero goal by 2050. We have taken a holistic approach to embedding sustainability in our operations. Scaling up EV trucks in our logistics is a testament to our commitment to advancing sustainable practices in the industry.”
UltraTech plans to scale up its EV fleet to 500 trucks by June 2025 under the Government of India’s eFAST initiative. The company has been a pioneer in sustainable transportation, having introduced CNG vehicles in 2021 and LNG vehicles in 2022 before adopting EV trucks in 2024. Currently, its logistics network operates over 468 CNG and
67 LNG trucks, ensuring a reduced environmental footprint across multiple manufacturing units. This ambitious expansion further cements UltraTech’s leadership in integrating sustainability into its business operations while advancing India’s green energy and carbon reduction goals.

Integrating alternative fuels and renewable energy
Beyond electrification, the industry is exploring alternative fuels to power logistics operations. JK Lakshmi Cement, in collaboration with GreenLine Logistics, has introduced LNG-fueled heavy trucks to decarbonise its road logistics. This initiative marks a significant step toward reducing emissions associated with cement transportation.
Back in 2022, JK Lakshmi Cement had announced its tie-up with GreenLine, an Indian green and smart logistics company. This collaboration introduced LNG-fueled heavy trucks in the company’s logistics protocol. While Arun Shukla, President and Director, JK Lakshmi Cement, had hailed this as their first step towards sustainable transportation in an official statement, the company has come a long way in integrating green logistics in its supply chain over the years. Companies such as GreenLine Logistics are helping the cement transportation industry become more eco-conscious, thereby facilitating the transition towards a more circular economy.
Heavy trucking contributes approximately 10 to 12 per cent of total emissions. Switching to LNG-fuelled trucks can reduce CO2 emissions by 28 per cent, NOx by 59 per cent, SOx by 100 per cent, and particulate matter by 91 per cent, while also cutting noise pollution by 30 per cent. This transition
offers a cleaner, more sustainable alternative for freight transport.
Additionally, the adoption of renewable energy sources within manufacturing and logistics operations is gaining momentum. The Indian cement industry has been proactive in utilising waste heat recovery systems and renewable energy, contributing to a reduction in overall carbon emissions.
Another dimension to consider is improving the supply chain efficiency. The integration of digital technologies is revolutionising supply chain management in the cement industry. Advanced tracking systems, data analytics and the Industrial Internet of Things (IIoT) are being employed to optimise routes, monitor vehicle performance, and reduce fuel consumption. These technologies not only enhance efficiency but also contribute to sustainability by minimising unnecessary transportation and associated emissions.

Challenges in implementing green logistics
Despite the clear benefits, the transition to green logistics is fraught with challenges:

High initial investment: The upfront costs for EVs and alternative fuel vehicles are considerably higher than traditional diesel trucks.
Infrastructure limitations: The lack of adequate charging stations and refueling infrastructure for alternative fuels hampers widespread adoption.
Regulatory Hurdles: Navigating the evolving landscape of environmental regulations and standards can be complex and resource-intensive.
Technological adaptation: Integrating new technologies requires substantial changes in existing operational frameworks and workforce training.

“At Fleetronix, we are constantly looking ahead to the future of logistics, and we see a massive opportunity in using technology to make fleet management smarter and more sustainable. Right now, fleet maintenance is often reactive – issues are fixed after they cause downtime. But we envision a future where predictive maintenance becomes the norm. Our goal is to develop a system that identifies potential problems before they turn into costly breakdowns, ensuring trucks run efficiently and reducing unnecessary emissions,” says Anuradha Parakala, Co-founder, Chief Strategy and Product Officer, Fleetronix Systems.
“As the industry moves towards hybrid and electric vehicles, we see Fleetronix playing a key role in optimising fleet transitions – from smart route planning that maximises battery efficiency to integrated tracking for EV charging. Our vision is clear: healthier trucks, lower emissions, and a logistics industry that’s not just efficient, but truly sustainable. And we are actively building the technology to make it happen,” she adds.

Collaborative efforts and government initiatives
Addressing these challenges necessitates collaboration between industry stakeholders and government bodies. The Indian government is facilitating Memorandums of Understanding (MoUs) for new technologies, promoting research and development through incentives, and providing subsidies to encourage the adoption of green logistics practices. Such partnerships are crucial for creating an ecosystem conducive to sustainable logistics.
Furthermore, the Indian cement industry’s commitment to green logistics is poised to yield significant environmental and economic benefits. As technological advancements continue and infrastructure improves, the adoption of sustainable practices is expected to accelerate. This transition not only aligns with global sustainability targets but also positions the industry competitively in a rapidly evolving market.

Conclusion
Embracing green logistics is imperative for the Indian cement industry to mitigate its environmental impact and ensure long-term sustainability. Through the adoption of electric and alternative fuel vehicles, integration of renewable energy, and leveraging technological innovations, the industry is making commendable strides toward eco-friendly operations. Continued collaboration among industry players, government agencies and technology providers will be essential to overcome existing challenges and
fully realise the potential of green logistics in
cement manufacturing.