Decarbonization and the mining industry

Last week, Na'im Merchant interviewed Paul Needham , CEO of ARCA Climate, on the potential for the mining sector to play a significant role in global carbon removal. Paul made the important point that mining is one of the few industries that move large quantities of material – up to billions of tons of rock – cost-effectively. For example, a gold mine may process 1 ton of ore to recover as little as 1 gram of gold, and still be profitable. This suggests that, if there was a way to sequester carbon in mining waste, the industry might be able to do it cost-effectively and at a scale that has a worldwide impact.

Despite this potential, there are significant obstacles for mining companies to become partners in decarbonization.

First, mining is a conservative, highly-competitive industry. One of the reasons is that a mining project comprises many interconnected parts that must work together smoothly. Break one connection and profitability may be threatened. Removing carbon in mining waste represents such a risk. Plans to reduce emissions will have to be developed well in advance and carbon removal measures will have to be integrated in the overall mine plan with minimal impact on profitability. This takes time and resources, and it competes with other priorities. We will need to make persuasive arguments to incorporate our processes into existing operations.

Second, profitability is marginal for many mining projects and adding 15-20% to the cost of producing its commodity may make it uncompetitive. We will need to drive our costs down as much as possible and push our throughput as high as possible to meet their requirements.

Relatedly, if one jurisdiction requires plans for decarbonization but another does not, then this will be a strong disincentive for implementing decarbonization plans. Mining companies require a level playing field. They are more likely to implement decarbonization plans when they become required in every country. Flipping this argument around: the mining industry ought to lobby for an international agreement that requires universal decarbonization of mining and other industries.

Lastly, though there is a clear need for carbon credits to offset unabatable emissions, there is a mismatch between how mining companies want to apply these credits and the way the rest of the world wants them applied.

The Paris Agreement says that emissions can only be addressed at the national level through Nationally Determined Contributions. Therefore, carbon credits should be claimed by the countries where they are generated. However, mining companies often have operations in many different countries: they may generate carbon credits at one mine and apply them towards operations elsewhere. For instance, carbon credits may be generated at a nickel mine because of favourable technical and economic conditions, and then be applied to a smelter operating in another country. Current rules prohibit this transfer.

This is a conundrum that must be resolved before rules enforcing emission reductions and the application of carbon credits become enacted by governments. As a matter of principle, whoever pays for carbon credits should decide where they are applied. However, policymakers do not see it this way. It is incumbent on the mining industry to become involved in the work of the UNFCCC (United Nations Framework Convention on Climate Change) and plead its case (beware: this is not for the faint of heart).

Like the oil and gas industry, the mining industry can process huge volumes of material cost-effectively. It can play a vital role in addressing climate change. However, unlike the oil and gas industry, mining is not conflicted with drawing profits from the sale of products that cause the problem in the first place.

It’s high time for the mining industry to recognize its unique position and take a leadership role in solving this crisis.