The world’s mining industry is doing little to curb greenhouse gases and combat global warming, raising the possibility of a backlash from governments and society, McKinsey says. At the same time, physical challenges to the industry, exacerbated by climate change, threaten mining operations around the world, the consultant said.
McKinsey’s new report warns that the industry’s proposals are inadequate to deal with the growing threat posed by rising temperatures, boosting the potential for investors to demand the industry to do more to address the problems. The industry is only now beginning to face its responsibilities, the paper said.
To better address climate change, the industry should seek to curb carbon output, prepare for what decarbonization will mean for mineral demand and make plans for infrastructure that will come under threat from climate change, McKinsey wrote.
“The mining sector itself will also face pressure from governments, investors, and society to reduce emissions,” the report said. Mining is responsible for between 4 to 7% of greenhouse-gas emissions, according to the report.
In order to limit global warming by 2°C, all sectors of the economy need to cut greenhouse gas emissions by at least 50% from 2010 by 2050, and more than 85% to cap the gain at 1.5°C, United Nations Intergovernmental Panel on Climate Change data shows. Mining companies have yet to even set adequate targets, according to the report.
“Mining companies’ published emission targets tend to be more modest than that, setting low targets, not setting targets beyond the early 2020s, or focusing on emission intensity rather than absolute numbers,” the report said.
Decarbonization would imply an end to coal use for power generation, while increasing efficiency and recycling should curb virgin-ore demand. Demand for cobalt, lithium, and nickel is expected to rise with increased electrification and battery use. Platinum, palladium, and other catalyst material consumption should grow with emerging sectors such as carbon capture, while rare earths would be needed for wind turbines.
The mining industry claims it’s taken a range of steps to reduce its role in global warming, including carbon capture and storage, alternative energy, vehicle automation and more, according to AusIMM, Australia’s mining lobbyist.
Much of the world’s mining takes place in regions with harsh climates, and the industry has to prepare for conditions to worsen because of climate change, according to the report. Flooding, drought and intense heat are projected to increase, which will hurt output, increase costs and lower the value of assets.
“Climate change is expected to cause more frequent droughts and floods, altering the supply of water to mining sites and disrupting operations,” the report said.
- A coalition of U.S. institutional investors sent a letter to energy, mining and forestry companies, urging them not to take advantage of the Trump administration’s rollbacks of environmental regulations.
- Banks and insurers are becoming increasingly concerned about the risks climate change is bringing to business, with “stranded assets,” or useless infrastructure, among the main concerns for future costs.
- Rio Tinto, the world’s second-biggest mining company, has cut its greenhouse gas emissions intensity by about 30% since 2008 and has a commitment to “substantial decarbonization” by 2050, according to the company’s website. BHP has cut the emissions intensity of its iron-ore assets in Western Australia by 11% over the last five years, the company said.
- Other mining companies are also taking action to cut greenhouse-gas emissions. Codelco is using solar power at copper mines in Chile, Fortescue Metals is investing in renewable energy at its iron ore mines in Australia and BHP signed contracts for renewable power at two copper mines, according to McKinsey.