As miners around the world know, in December 2015 the historic Conference of Parties 21—better known as COP 21—led to a landmark agreement in Paris, which charts a new course in the global effort to limit climate change. It marks a clear ambition by 196 nations to keep global average temperature well below to 2°C above pre-industrial levels and to further limit the increase to 1.51.5°C sometime between 2050 and 2100.
Now that the excitement has settled down, the hard work of implementation has begun in earnest and will continue through 2020 and beyond. As of July 21, over1 175 countries have signed the Paris Agreement, signaling their intent to kick off national processes for ratification—this was the biggest ever signing of an international agreement.
Since Paris, mining companies have faced greater scrutiny in the form of shareholder resolutions and other pubic retorts. The Carbon Disclosure Project, for example, published a report rating mining companies on their approach to climate change. A coalition of investors have also targeted shareholder resolutions at Rio Tinto, Anglo American and Glencore to encourage greater disclosure on carbon exposure.
Turning implications into opportunities
Looking beyond these responses, the Paris Agreement has many implications for mining companies that represent growth opportunities as well as risks. Most notably, the agreement sends a strong signal to the market, which is likely to unlock billions in investment in low-carbon technologies. Miners that respond to this call to action and take steps now to prepare for a low-carbon future will be ahead of the game.
Accenture categorizes these implications into three main pillars:
Think global, act local. National and regional policies on climate change will strengthen over the next few years. We are likely to see a proliferation of stronger signals for carbon pricing, and more incentives for clean development. Simultaneously, miners need to understand the implications of local climate change, as well as energy regulations and policy, and clarify what it means across their global portfolio. We will also experience greater frequency and intensity of weather-related events and understanding how to climate-proof their supply chain and operations will be key.
Get behind 2°C. An essential step will be to understand potential gaps between current company carbon and energy targets and reaching the 2°C goal, and then identify opportunities to close the gap through various actions. Miners must demonstrate to stakeholders that their carbon trajectory is in line with the global agreement and relevant local policies, as well as understand implications across their value chain (e.g., continuity of supply, demand for commodities etc.). Developing a low-carbon roadmap by applying a scenario-based approach to define actions across short-, medium- and long-term timeframes will help to prioritize action and investment in the right areas.
Leverage low-carbon investment. The Green Climate Fund, a financial body of the United Nations, is helping to administer the $10bn investment per year pledged by developed countries in Paris, to the most vulnerable countries2. Combine this with private funds such as those established by the Gates Foundation to accelerate renewables and it sends a clear signal to future investment flows for low carbon growth. Mining companies should look to understand how to lock-in clean investment, to develop low-carbon technology solutions to better position for the future.
Kick-starting transition with technology and innovation
Other industries, such as the information and communications technology (ICT) sector, have been proactive in identifying opportunities for digital technologies, to enable the transition to the low carbon economy. The Accenture report for the Global E-Sustainability Initiative estimates that applying digital to a range of industries could result in an estimated $11.4 trillion generated by 2030.
Mining companies could also go through an exercise, to identify carbon pressure points across their full value chain (exploration, extraction, processing, transport, customers) and quantify the risks and related opportunities for technology improvements.
In the exploration phase, for example, there are prospects to prevent direct emissions from drilling, equipment and vehicles by using electric and alternative fuel vehicles instead, as well as to use drone-based exploration and 3D mapping. The extraction phase provides opportunities for miners to deploy robotics and artificial intelligence to gain efficiencies. And mining companies can benefit from investments in the on-site generation of renewable energy and digital telematics for the processing phase and distribution phase respectively.
Of course, each mining company is unique, with its own operational footprint and customer markets. That’s why it is vital for miners to consider how the Paris Agreement affects their specific strategy and technology decisions around exploration and their investment choices in the upstream sector, energy efficiencies, non-energy carbon reduction measures and more. It’s also important to define what roles each function, such as operations and marketing, should play to support the transition.
There’s no doubt we’re on the threshold of a low-carbon economy. How will your mining company take advantage of the many opportunities it introduces?
For additional ideas on generating value from climate change, performance management and carbon modeling, see some of our latest thought leadership: Digital Carbon Disruptors: Speeding the journey to low carbon, high value business and Low carbon, high stakes: Do you have the power to transform.