CBAM and EU ETS costs are strengthening the investment case for capturing process emissions, but transport infrastructure, storage access and contractual risk remain critical to project viability.
ANALYSIS · 5 NOVEMBER 2026
BRUSSELS, 5 NOVEMBER 2026 — Carbon capture is emerging as a major financing challenge for Europe’s cement industry, as producers seek ways to address emissions that conventional efficiency improvements cannot eliminate. Even highly efficient cement kilns release carbon dioxide through the chemical conversion of limestone into clinker. Capturing these process emissions offers a route to substantial reductions, but requires additional equipment, energy, transport infrastructure and access to permanent storage or reliable utilisation.
The economics of carbon capture therefore extend well beyond the performance of the capture technology itself. Cement Europe’s 28 October explanation of captured CO2 transport and destination routes highlights the importance of developing an integrated value chain. Cement producers must establish where captured carbon dioxide will go, how it will be transported and whether the resulting emissions reductions can be demonstrated under applicable monitoring and accounting requirements. Without reliable transport and storage arrangements, investment in capture equipment risks creating stranded industrial assets.
The financial case is increasingly influenced by the cost of residual emissions. Under the EU Emissions Trading System (EU ETS), covered European cement producers face carbon allowance costs. Meanwhile, the Carbon Border Adjustment Mechanism (CBAM) is designed to address the competitive effects of differences in carbon constraints between EU production and imported goods. These mechanisms can strengthen the rationale for reducing emissions, although the financial return from capture depends on the installation’s emissions profile, the timing of changes to free allocation and the availability of other support measures. The value of a capture project cannot simply be calculated by multiplying captured tonnes by the current quarterly CBAM certificate price.
The scale and timing of capital expenditure are central to investment decisions. Carbon capture installations require substantial upfront funding, while their emissions benefits depend on successful construction, commissioning and reliable operation. Additional power consumption and operational complexity can also affect the financial performance of an existing cement plant. Lenders therefore need to assess engineering and construction costs, permitting, commissioning, maintenance, equipment availability guarantees and connections to external CO2 transport infrastructure. Delays in pipeline or storage development can undermine the commercial viability of an otherwise technically sound project.
Contracts between cement producers and carbon infrastructure operators represent another important financing requirement. The chain of custody must establish how captured CO2 is measured and accounted for at different stages, from the capture outlet through pipeline entry to final storage injection. Variations associated with moisture, impurities and measurement uncertainty require agreed reconciliation procedures. Contracts must also establish responsibility when captured gas is released because of equipment failure or when transport or storage services become temporarily unavailable.
Energy consumption adds another layer of uncertainty. Solvents, compression and transportation increase electricity or heat requirements, potentially raising operating costs at plants already exposed to energy-price volatility. Although capture can reduce direct emissions, additional electricity consumption must be reflected in the appropriate carbon-accounting boundaries and operating-cost forecasts. Headline capture-efficiency figures alone cannot provide an adequate assessment of the project’s overall environmental and financial performance.
A staged development process can help investors manage these uncertainties. Preliminary technical design establishes mass and energy balances, site limitations and infrastructure interfaces. Front-end engineering then examines how capture equipment can be integrated with the existing kiln. Commercial assessments must address storage access, transport tariffs and long-term service contracts. Once these elements are sufficiently developed, lenders can evaluate construction exposure, performance guarantees and operational resilience. Financing arrangements established before infrastructure interfaces are resolved risk shifting uncertainty into project contingencies rather than eliminating it.
Risk allocation between cement producers and infrastructure operators is particularly important for long-term financing. Contracts must address scenarios in which the kiln is offline, capture equipment performs below expectations, transport capacity is unavailable or storage facilities interrupt acceptance. Measurement boundaries, CO2 quality specifications, liability for releases and compensation for prolonged service interruptions all need to be clearly defined. These contractual provisions directly affect the predictability of project cash flows and the ability of lenders to assess repayment capacity.
Smaller and geographically isolated cement plants face additional barriers. Their individual CO2 volumes may be insufficient to justify dedicated transport infrastructure, while access to shared pipelines, terminals and storage hubs cannot always be guaranteed. Industrial clusters could provide the volumes needed to support common infrastructure, but the development schedules of these networks must correspond with individual producers’ investment plans. Public or concessional financing may be necessary to bridge the gap between industrial decarbonisation investments and the commercial development of carbon transport and storage networks.
Carbon capture must also be assessed against other available emissions-reduction measures. Fuel substitution, thermal optimisation, lower-clinker formulations and improved process control can reduce emissions or energy consumption before a capture installation is introduced. Evaluating these measures as part of a phased investment programme can help determine the appropriate scale and operating requirements of future capture equipment. The most capital-intensive technology does not necessarily represent the first or most economically appropriate investment.
For cement producers in the Western Balkans, carbon capture remains a strategic investment option rather than a universal near-term solution. The commercial outlook depends on individual market conditions, electricity grid readiness, access to geological storage and available financing. Exposure to EU markets and CBAM-related costs may strengthen the incentive to reduce embedded emissions, but the potential return must be established through plant-specific economic assessments.
The central challenge for Europe’s cement industry is therefore not limited to capturing CO2 at the production site. It is developing a financially viable system that connects industrial facilities with dependable transport and storage infrastructure. As carbon costs become an increasingly important element of export competitiveness, the availability of bankable infrastructure and clearly allocated project risks will help determine which cement producers can move from capture technology assessments to investment decisions.
