In a new assessment of the climate strategy of the mining industry, consultants McKinsey & Company warn that existing policies do not go far enough to have material effect on carbon emissions and that mining companies can expect to face increasing pressure from governments, investors and investors.
The report also goes into some detail on water stress caused by mining activities, using its own database on copper, gold, iron ore, and zinc, and analysing water stress and flooding scenarios. McKinsey has found that 30-50 percent of global operations of these commodities are concentrated in regions where water stress is already “high”.
Mining regions not currently accustomed to water stress are projected to become increasingly vulnerable.
“Climate science indicates that these hot spots will worsen in the coming decades. In Chile, 80% of copper production is already located in ‘extremely high’ water-stressed and ‘arid’ areas; by 2040, it will be 100%. In Russia, 40% of the nation’s iron ore production, currently located in ‘high’ water-stressed areas, is likely to move to ‘extreme’ water stress by 2040.”
Water-intensive mining processes could be adjusted to minimise, conserve and re-use water and the authors provide a number of strategies that would improve resiliency. In addition, new capital investment in new water infrastructure, dams and desalination, and more “nature capital” would also improve longer-range sustainability.
The report also examines the social effect of competition for water resources in stressed areas as well as the shifts that will occur as other sectors decarbonise.
The report examines existing global mining operations and has found that extreme weather, attributable to the effects of climate change, has affected most companies in the sector.
The authors posit that if, the 2015 Paris Agreement targets are to be met, there would have to be major shifts in industrial decarbonisation, creating major shifts in commodity demand, resulting in a decline in global mining revenues. Consequently, mining companies must now prepare for decarbonisation in other sectors as well as prepare to reduce their own emissions in response to increasing pressure from investors, society and governments.
McKinsey reports that: “Mining is currently responsible for 4-7% of greenhouse gas (GHG) emissions globally. Scope 1 and Scope 2 CO2 emissions from the sector (those incurred through mining operations and power consumption, respectively) amount to 1%, and fugitive methane emissions from coal mining are estimated at 3-6%.” But, when indirect emissions (for instance, from the combustion of coal) are included, mining’s share of GHG rises to 28 percent.
Although some companies have begun to make emission pledges and to invest in low carbon strategies, the industry’s targets are not sufficient to have a material effect on the Paris commitments.
“Current targets published by mining companies range from 0-30% by 2030, far below the Paris Agreement goals, which may not be ambitious enough in many cases,” the report says.
The report posits that building a climate strategy “won’t be quick or easy”.