1. CEMENT SECTOR PRESENTATION TO WCI CANADIAN PARTNERS OCTOBER, 2008 QUEBEC CITY, QUEBEC

2. 2 Canadian Cement Sector Overview Over 85% of Canadian cement production is within WCI jurisdictions; 14 out of 17 cement Canadian plants; More than 40% of cement manufactured in Canada is exported to the US; the US and Canadian markets are fully integrated; Cement manufacturing is an energy and greenhouse gas intensive process; Cement manufactured in Canada (and the US) is trade exposed since it is fully substitutable with cement manufactured anywhere in the world The vast majority of Canadian production is located on seaways making imports easily available to Canadian importers; Canadian cement producers operate in a highly competitive global market for both production and investment - industry is a price taker; GHG Leakage is a reality that must dealt with by regulators; Cement is a strategic commodity - we are self sufficient today and should protect that position.

3. Cement Sector is Uniquely Exposed 3 Exposure of Select Canadian Manufacturing Sectors - 2005 data (Canadian Industrial Energy Efficiency Data and Analysis Centre)

4. 4 Response to WCI Design Recommendations Design recommendations do not fully address the critical issues to sustain the competiveness of the North American cement sector: 1.Uniform cement sector treatment; 2.Irreducible cement process emission; 3.Harmonization of existing or proposed WCI and provincial and federal schemes. The cement industry appreciates: 1.The loosening of restrictions on access to offsets; 2.Change of thinking when dealing with the auctioning requirements for allowances.

5. 5 Uniform Cement Sector Treatment Design recommendations provide WCI Partners with the ‘flexibility’ to agree on uniform treatment for sectors, in our case cement; Uniform cement sector treatment, with a cap based on a cement intensity metric is necessary to: sustain the competitiveness of the Canadian (and North American) cement industry, by insuring a level playing field across all WCI Partners; Reward, rather than penalize, efficient and low-emitting facilities for their early actions; Minimize the threat of leakage and associated emissions to less regulated jurisdictions.

6. 6 Illustration of a cap-based intensity metric approach

7. 7 Irreducible Cement Process Emissions 60% of cement GHG emissions are associated with the irreducible chemical calcinations process: –CaCO 3 ( limestone) + heat = CaO + CO 2; –Pricing and regulating cement process emissions means additional punitive cost with no corresponding decrease in GHG. WCI cap and trade start date is less than four years away, but the industry needs immediate certainty on their risks / exposure on process emissions: –If process emissions are included by a WCI partner, they should be assigned a 0% reduction target, and be free of any price signal; –There are precedents for this approach (EU, Federal Framework, Australia).

8. 8 Harmonization between WCI Partners and others Canadian jurisdictions are already acting: BC Carbon Tax; Quebec Green Fund Levy; Provincial / Territorial Cap and Trade Initiative; Federal Regulatory Framework; Caution must be exercised to ensure these instruments do not disadvantage the sector prior to the start of the Cap and Trade program. The cement sector cannot compete in Canada with multiple price signals / regulatory regimes on the same GHG emissions; Cons ultations at all levels of Government are required to understand, engage with, and facilitate cement sector GHG solutions: Alternative and Renewable Energy Substitution; Clinker substitution in cements; Energy efficiency.

9. 9 Our Positions are Substantiated by GHG Leaders California: AB 32 – Air Resources Board Interim Report –Leakage has been a key consideration in developing the GHG emission reduction strategies in the California cement sector. –“If GHG requirements were applied to California cement manufacturing facilities only, their costs would rise relative to imports, and imports could displace California productivity. California plants would decrease their GHGs produced, but increased imports would likely result in a net worldwide increase in GHG emissions.” Australia: Green Paper (Ch. 9 – Treatment of Energy-Intensive / Trade-Exposed Sectors) –“Compared to the rest of the economy…cement stands out as extremely emissions-intensive and trade exposed.” –To reduce the risk of production and carbon leakage to less regulated jurisdictions, Australia is proposing that, initially, gratis allowances be issued to the cement manufacturing industry at sufficient levels to cover 90% of the sector’s baseline emissions. EU Emissions Trading System –Competitiveness concerns mean that (EU ETS cement sector) allocations are relatively generous: –In Phase I, the aggregate EU cap for cement turned was assigned at BAU levels. –In Phase II, allocations remain relatively generous (i.e. upwards of 90% of firms’ BAU emissions) and some states have chosen to continue to allocate allowances equal to firms’ BAU emissions. –Beyond 2012, the cement industry is identified as being “highly affected by the EU ETS and amongst those likely to receive free allocations”, while other sectors will need to participate in an auction process.

10. 10 Cement Industry Survival Requires: 1.Canadian WCI Partner’s commitment to addressing cement sector issues in a consistent way: A common, uniform approach to Canadian cement sector allocations which recognizes the unique challenges and opportunities of this important sector. Ensuring only one-price signal / regulatory regime in place for Canadian cement GHG emissions; Working co-operatively (with each other and the industry) to share lessons- learned and best practice in reducing cement sector emissions; Discussion on the appropriate process / mechanism is needed. 2.Canadian WCI Partners commitment to advocate for: Uniform cement sector treatment across all of WCI; An appropriate WCI process / mechanism for cement sector engagement. 3.CAC Commitment to: Continued, productive and responsive engagement from the CAC and Canadian cement manufacturers on the design and implementation of WCI; Coordinate WCI cement sector positions across PCA (US) and CAC member companies. 4.The cement industry needs a forum to bring WCI Partners together to discuss relevant sector-specifics.