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Abstract

Cement production is a major source of CO2 emissions. In the European Union, the Emissions Trading System is the cornerstone instrument to incentivize industry decarbonization, including cement. However, major uncertainties prevail regarding allowance prices, carbon-capture investment costs, and the availability of CO2 pipelines and storage sites. These uncertainties affect real-world investment decisions, but are not yet well represented in models. Here, we develop a real options valuation model to assess how 179 cement plants across Europe respond to these uncertainties. Our results show that uncertainty perception strongly influences the timing and geography of investments. High confidence in favorable investment determinants could lead to widespread deployment of carbon capture and storage and biomass use, turning the cement industry into a carbon sink with 0.6 gigatons CO₂ removed between 2025 and 2050 in total. Low confidence, however, could lead many cement producers to delay action, resulting in cumulated emissions of 0.8 gigatons CO₂ over the same time frame. Biomass availability, financing conditions, and plant location further shape investment behavior, underscoring the need for credible energy and climate policy.