More than creating zero-carbon mines, which is within reach thanks to new sustainable technologies, the sector can directly act on forest preservation and regeneration and emerge as a critical ally against climate change
In modern society, minerals provide the essential elements needed to produce virtually every type of innovation. Think of any great invention that changed the course of history over the last few centuries —such as steam engines, refrigerators, electrical grids, computers, and smartphones— and it undoubtedly includes metals in its composition. Even today’s incredible food production capacity can be largely attributed to our use of mineral fertilizers.
However, the large-scale unbalanced exploitation of these natural resources has transformed the mining industry into a significant polluting sector, which contributes about 8% of the global carbon footprint. According to McKinsey & Company, to reduce its emissions, the industry has focused too long on portfolio shifts, especially the divestment of coal assets. The industry also tried to avoid a 20% to 25% increase in the cost of capital for companies with the lowest ESG scores.
As this effort remained insufficient to substantially reduce the carbon footprint, in recent years major mining companies have announced more investment in decarbonization solutions, such as electric vehicles, solar panels, and battery storage systems. In Chile, for example, BHP, Anglo American, and Antofagasta Minerals have promised to operate their mines exclusively on renewable energy. Vale has committed to fully producing its own renewable energy for its Brazilian mines by 2025 and all its other mines worldwide by 2030.
This type of goal showcases how the mining industry is at a tipping point, where the pursuit of sustainability coexists with increasing pressure from regulators, investors, and customers to decarbonize operations. The sector faces massive challenges ahead as it needs to:
At the same time, metals play a crucial role in transitioning to a sustainable economy. Technologies for producing clean energy, such as solar photovoltaic panels and wind farms, will significantly increase the demand for different types of metals in the coming years, not to mention electronic components like chips and electric vehicles (EVs) batteries.
According to the International Energy Agency (IEA), a typical electric car requires six times the mineral inputs of a conventional internal combustion engine car. An onshore wind-generating farm requires nine times more mineral resources than a gas-fired plant. How do we ensure that the mining industry can reduce its emissions while meeting this soaring demand?
An in-depth 2021 study by McKinsey, outlined what it would take to aggressively decarbonize global mining in order to achieve the climate change target of 1.5°C by 2050. The report, focused on the mining of metals such as copper, gold and iron ore, breaks down emissions within mining into three broad sources: emissions from diesel, emissions from electricity generation, and emissions from the supply chain and transport.
Therefore, multiple efforts are needed to decarbonize operations to address these different sources of emissions. McKinsey's analysis breaks down actions that are already within reach:
Upgrading processes to reach higher reference levels improves operations and can generate cash flow to invest in alternative solutions and sustainable modifications.
Switching from fossil fuels to liquid sustainable fuels (biofuels or synfuels) can potentially decrease carbon emissions by more than 70%, even while using existing equipment and infrastructure.
To become fully carbon neutral, the industry also needs to change the drivetrain systems of vehicles used in mines. Systems with hydrogen fuel cells, battery electric vehicles, and fast pantograph charging (already used in electric buses) are viable solutions.
Adopting green energy sources is crucial for addressing between 30% and 50% of current emissions output. This can be achieved in several ways, from purchasing green electricity to installing the infrastructure to produce renewable energy.
Moving or adapting complex supply chains toward greener operations is a challenge for the industry, but it must happen sooner or later. The main consumables that need sustainable versions are cement, steel, and lime.
But where to start? One recommendation is to initially focus on where the situation is most critical: miners can substantially reduce their carbon emissions by targeting those mines responsible for the highest emissions. For example, according to the study, total emissions from iron ore exploration would be reduced by about 46% if the top 25% of mines with the highest emission levels operated at the global emissions average. For copper, total emissions would fall by about 26% if the top 25% of mines with the highest emission levels operated at the sector’s average.
While there is a clear path to creating zero-carbon mining, the pace of change still needs to be improved. The latest UN report on climate change shows that the overall curve of global emissions is bending downward, but not enough to reach the 1.5°C target before the end of the century. According to the report, current pledges could put the world on track for about 2.5°C of warming over this period, a scenario that could have "devastating consequences," said Simon Stiell, Executive Secretary of UN Climate Change.
The mining industry needs an ambitious new strategy to strengthen its action plans for the coming years. It is necessary to look separately at different categories within the sector, take a broad view of their problems and seize opportunities.
Gold mining, which emits more than 50 million tons of greenhouse gases annually, is a prime example. In addition to the environmental impact, much of the production is still illegal — in countries like Brazil, this is equivalent to half of all gold produced and exported. Illegal logging and gold mining have surged in recent years, causing distinct and extensive deforestation and degradation of the Amazon rainforest.
Companies in the sector need to look at the production chain as a whole to decarbonize and fight illegal gold mining that destroys the Amazon. One way for the industry to do this is to act directly to preserve the rainforest and regenerate those areas left behind by illegal mining, which will help reduce its own carbon footprint. There are other advantages at play, including:
At the same time, aggressively adopting ESG practices in mines far from the Amazon will exponentially and sustainably leverage the sector. This includes more transparency in contracts with mining rights holders, applying non-polluting scientific methods in gold mining, raising more information about the importance of local biodiversity, and providing a more dignified life for the communities involved with the projects.
2Future is looking at opportunities in this area. “The company is evaluating possibilities of investing in new initiatives aimed at transforming the entire mining business by incorporating governance, sustainability, and social responsibility elements as well as cutting-edge technologies,” says 2Future founder and CEO Luís Felipe Neiva Silveira.
The strategy cannot cede the technology available today to monitor the production of gold and decentralize sales. Using blockchain and commodity tokenization opens up a great space to attract investors. Green, sustainable gold-backed tokens, produced by companies that are proven to tackle the climate crisis can revolutionize the mining chain —and democratize investment. The same is possible with carbon credit and carbon offsets tokens, which mining companies can issue.
Different companies in different countries are already using this business model. Now, it's time for the mining industry to apply it alongside a diligent effort to tackle climate change. If we start to preserve today one million hectares in the Amazon that illegal mining would otherwise destroy in the future, this would be enough, for example, to neutralize the carbon of all the current production of gold in the world.
