Net-zero by 2050: is the mining & metals sector on track to reduce greenhouse gas emissions?

The mining & metals sector is responsible for around 4 to 7 per cent of greenhouse-gas emissions globally. Technology exists for fully decarbonised mining, and metal production and supply chains, through electrification based on renewable energy, carbon capture and operational efficiencies. So there is no doubt that the sector can decarbonise; the question is not if, but when and how.

Achieving Net-Zero, Yes, But By When?

The mining & metals sector's deadline to achieve net-zero is not universally defined. Depending as it does on a combination of national and industry-wide goals, regulatory frameworks, and individual company commitments. However, the global target among states based on the Paris Agreement is to achieve net-zero by 2050. 

As a reminder, Article 2(1)(a) of the Paris Agreement provides detail on how the Paris Agreement aims to strengthen the global response to the threat of climate change, including by holding the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change. Article 4 of the Paris Agreement, requires the state parties to reach global peaking of greenhouse gas emissions as soon as possible while recognizing that peaking will take longer for developing country parties, and to undertake rapid reductions thereafter in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty. 

Against this backdrop, the mining & metals sector is broadly aiming for net-zero emissions by 2050. However, mining companies are also setting interim targets (e.g., by 2030 or 2040) to see significant reductions in emissions well before 2050. Achieving these ambitious interim goals requires collaboration, technological innovation, and above all, substantial capital investment across the entire mining value chain.

Achieving Net-Zero By 2050, But How?

The mining & metals sector plays a crucial role in producing many of the raw materials required for the global energy transition effort. Simply put, without the mining & metals sector, the global effort to achieve net-zero is impossible. From copper for electrification, to cobalt, nickel, lithium and graphite for BESS and EVs; critical minerals are essential to the energy transition. So the sector must recognise its role as an enabler of the energy transition.

This requires strong collaboration and an alignment between raw material producers and consumers across mining & metals supply chains, as well as the providers of debt and equity capital to the sector. The sector has an advantage over others as these themes are not new, particularly in the context of greenfield mining projects. Standards for sustainability, climate risk management and social responsibility have been a hallmark of mining project finance since at least 2003 with the initial launch of the Equator Principles, followed by the 2006 IFC Performance Standards on Social and Environmental Sustainability, and subsequent revisions to both of these principles and standards.

Given where many of the critical minerals for the energy transition are located, we observe a renewed trend to raise capital for mining & metals projects via project finance to mitigate political risk. The Reqo Diq copper-gold project in Pakistan, the Atomai iron ore and DRI pellet project in Mauritania and the Kabanga nickel project in Tanzania are all great examples of this trend. However, we believe that project finance may also increasingly be seen as a tool that mitigates and provides a framework to deal with climate risk, alongside political risk. 

When it comes to tangible scope 1 and scope 2 greenhouse gas emissions reduction and offsetting, here are some examples of recent developments in the sector:

• Renewable energy generation. Wind, solar and battery energy storage systems are increasingly being incorporated into mining operations, to ensure a reliable supply of renewable electricity. Gold Fields recently announced the construction of a US$195 million renewable energy project in Western Australia to power the St Ives Gold mine.
• Electrifying mining equipment and processing. There is growing momentum in electrifying mining trucks, haul trucks, and underground mining equipment as well as electrifying mineral processing. Companies like Komatsu, Caterpillar, and Volvo, are using electrified mining trucks and equipment. Ivanhoe Electric has recently completed the electrification of its entire equipment fleet at its Platreef mine in South Africa. 
• Energy storage. Mining operations have 24/7 power demand for their operations and can seek to integrate large-scale battery energy and storage systems to store renewable energy and provide a consistent power supply. Rio Tinto earlier this year invested in the world's first grid scale liquid air energy storage plant in the UK, with a view to deploying this new form of long duration energy storage in Australia.
• Energy-efficient equipment suppliers. Barrick Gold recently contracted with Weir Group to provide proprietary energy efficient and sustainable mining technology to the Reko Diq copper-gold project in Pakistan.
• Process Optimization and Efficiency. Digital tools such as AI optimize mining operations, improve energy efficiency, reduce waste, and cut emissions. By using sensors and advanced analytics to monitor and control energy consumption, miners reduce their overall carbon footprint.

Other innovative solutions in development and yet to be deployed at scale include:

• Carbon Capture Utilisation and Storage (CCUS). CCUS technologies capture carbon dioxide emissions from mining operations or smelting processes, preventing them from entering the atmosphere. The technology could play a significant role for hard-to-abate emissions.
• Green Hydrogen. Hydrogen produced from renewable energy could be used in processes such as smelting. It's also being explored for use in powering mining trucks and as an energy carrier for off-grid mining operations. Anglo American is testing hydrogen fuel cells to power mining vehicles.
• High Density Pumped Hydro. RheEnergise has developed a unique long-duration energy storage technology that operates outside the high mountainous terrain that traditional pumped hydro systems require. The technology enables pumped hydro electricity generation at lower elevations, suitable for mining applications. Minerals contained in tailings and slurries can also be used in the high density fluid.

Achieving Net-Zero By 2050, What Next?

Comprehensive strategies targeting all three scope emissions, as well as renewable energy adoption, energy efficiency, electrification, and supply chain collaboration, are essential for mining companies to align with global efforts to combat climate change and transition to net-zero. While the sector has access to the technologies and frameworks required to transition to net-zero, more can be done across supply chains and through promotion of circular economy practices, such as recycling mined materials, to reduce the need for new extraction and to lower the carbon footprint of downstream production.

More also needs to be done to direct capital towards greenfield mining and tailings processing projects that are an opportunity to produce the materials required for the energy transition in line with latest technology and sustainability practices.

Governments, NGOs, and investors are likely to push for greater accountability in the mining & metals sector. Carbon pricing, stricter emissions standards, and financial incentives to adopt clean technologies should accelerate the transition. For example, the European Union's Carbon Border Adjustment Mechanism (CBAM) and similar initiatives in other regions put pressure on mining companies to reduce their carbon dioxide emissions. But there is concern in the sector that unless these policies are designed and implemented carefully there could be unintended consequences or policy failures. There is of course a tension between the costs involved in decarbonisation, maintaining profitability and a level global playing field.

Conclusion

Achieving net-zero is not only possible but an imperative for many companies. Major mining companies increasingly regard meeting their greenhouse gas emissions reduction targets as a key part of their mandate with shareholders and the communities where they operate. That said, more needs to be done before greenhouse gas emissions reduction becomes central to corporate strategies and business plans. This is likely to take the form of more certain, more favorable and longer term government policy, regulation and incentives, so watch this space!

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