This report describes the potential use of benchmarking for evaluating Clean Development Mechanism (CDM) projects in the cement industry. We discuss a methodology for comparing proposed projects against a benchmark using a process-step approach. We find that cement production is well suited to a process-step benchmark methodology for evaluating energy use because it consists of a number of discreet steps for which energy use can be measured. There are three primary process steps that can be evaluated with a benchmark: raw material preparation, clinker production, and cement grinding. Benchmark values can be determined for these three major process steps in a number of ways. The most promising methodologies involve analyzing plant performance of recent new plants or modifications and looking to technological estimations of Obest practiceO for energy use. We use technological Obest practiceO estimates for the cement industry as benchmark values to test the process-step benchmarking approach. Two examples are constructed and evaluated against these benchmarks; one uses data from an efficient plant in Thailand and one uses the most efficient values from a range of best available technology estimates. Our examples show that the expected potential financial incentives from CDM credits are small relative to the price of cement. Further research into the economics of cement production would be needed to determine whether CDM credits are significant relative to production costs and therefore offer an incentive to adopt efficient technologies.We identify some issues relevant to cement production that should be considered when a benchmarking scheme for this industry is designed. These issues include the production of Oblended cementsO, which lower the need for clinker, and therefore present an option for avoiding large amounts of carbon dioxide emissions. Reductions of carbon emissions from blended cements potentially greatly overshadow savings from efficiency improvements, but evaluating blended cement projects with a benchmark introduces some methodological problems. Another issue is that most new plant additions in the cement industry utilize modern, efficient technologies and approaches, so setting a benchmark OstrictO enough to exclude non-additional emission reductions may provide only a small economic incentive to improve on the benchmark, depending upon the market value of avoided carbon emissions. Plant modernizations that lower energy consumption are common and provide an excellent opportunity for reducing emissions. Such projects might play a major role in CDM, and can be evaluated at the process-step level using the benchmarks for the whole plant analysis.