Mining Companies Generate $16B in Emission Costs
(3BL Media/Justmeans) – Mining companies represent the beginning of the value chain for several sectors set to undergo significant change as part of the transition to a low-carbon economy, including utilities, industrials and transport. This transition represents new business opportunities, but also poses risks associated with shifts away from some incumbent commodity use.
A recent CDP report ‘Digging Deep’ analyzing the world’s major mining companies reveals that they are putting up to $16 billion at risk in climate costs by passing down the risk in their value chain. As a result of passing the buck down, miners are exposed to up to 30 times more emissions, equivalent to India’s annual emissions, despite efforts to reduce them in the last six years.
The CDP report shows mining heavyweights remain significantly dependent on fossil fuels. Although they now spend nearly half of their capital expenditure on low-carbon materials, but they still continue to spend over a quarter on fossil fuels. Leading miners are making strategic moves away from coal, but this is offset by twice as much oil and gas production over the last six years.
As the mining sector is heavily dependent on continuing demand for their supply of commodities, it has the potential to be hit hard by China’s proposals for pricing carbon. Carbon pricing has already been introduced in mining countries such as Chile earlier this year, and it is due to go live in South Africa and Canada in 2018.
The research also finds a quarter of mining production, representing up to $50 billion in annual revenue, will be exposed to significant water stress such as drought and shortages by 2030. Major mining regions such as Chile, Australia and South Africa are likely to be the most adversely affected.
The report benchmarks major miners’ performance on climate issues and finds that Vale, Boliden and BHP are the best performing companies on carbon-related metrics relative to peers in the report sample, with Freeport McMoRan, First Quantum Minerals and Vedanta Resources ranking lowest among those who disclose to CDP.
Paul Simpson, CEO of CDP, said that the mining sector must take stock and not risk being left behind in the global transition towards a low-carbon economy. Tarek Soliman, Senior Analyst, Investor Research at CDP said that some mining companies are doing more than others to ready themselves for a transition, and investors will want to know what the potential implications are for their portfolios.